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Slowdown of Indian Economy :

Time to be Protectionist?

GROUP: 9

ABHINAV ARYA (2011007)

ADARSH RAJ BARONIA (2011013)ADITI GUPTA (2011014)

ARJIT AGARWAL (2011045)

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An Economic Idea of India

Strengths

sustained growth at 6.4 for overa decade (but recent slowdown)

strong export potential, current

a/c deficit low healthy forex reserves

low external debt

deepening financial sector

knowledge base advantage,

demographic surge

Weaknesses

fiscal deficit high, debt gdp ratio

high

fiscal situation of states worse

inadequate infrastructure, huge

funding need

unsatisfactory investment climate

rising gap between rich and poor

states

dependence on oil imports,

monsoons

slowing of reforms, coalition

compulsions

social indicators below worldaverage

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Real GDP growth of India

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

4.4% 3.9% 4.6% 6.9% 8.1% 9.2% 9.7% 9.9% 6.4% 6.8% 10.4% 6.9%

GDP - composition by sectorAgriculture: 18.1%Industry: 26.3%

Services: 55.6% (2011 estimate)

(Data released on February 2012)

Source : Global Finance

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Reasons for slowdown :

1. High Inflation

2. Slow Reform Movement Stalling Growth Prospects!

3. Earnings Slowdown Impacted by higher Operatingcosts!

4. Current Account Deficit Signs of Growing Concern!

5. Industrial Growth A bit too volatile to Digest!

6. Rising Interest Rates Renders Working Conditions

Costly!

7. Fiscal Deficit The Unbudgeted woes!8. FII Selling Moving back to the West!

9. Global woes India still not decoupled yet!

10. Corruption Anna Hazare effect

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Protectionismrepresents any attempt by a government to impose

restrictions on trade in goods and services between

countries:

0 Tariffs - import taxes.

0 Quotas - quantitative limits on the level of imports allowed.

0 Voluntary Export Restraint Arrangements where two countries

make an agreement to limit the volume of their exports to one another

over an agreed period of time.

0 Embargoes - a total ban on imported goods.

0 Intellectual property laws (patents and copyrights).

0 Export subsidies - a payment to encourage domestic production by

lowering their costs.

0 Import licensing - governments grants importers the license to import

goods.

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Economic justifications for protectionism

0

Infant Industry Argument

0Protection a reaction against import dumping

0 The nature of Dumping

0 Export subsidies and dumping in developing countries

0 Protection against dumping : Anti Dumping

0Externalities, Market Failure and Import

Controls

0Danger of over specialization

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Economic Arguments against

Protectionism0Hurts consumers

0Market distortion:

0 Higher prices for consumers

0 Reduction in market access for producers

0Loss of economic welfare

0Regressive effect on the distribution of income

0Production inefficiencies0Little protection for employment

0Negative multiplier effects

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The diagram below shows the welfare consequences of imposing an

import tariff

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0 http://articles.timesofindia.indiatimes.com/2011-09-

25/india/30200404_1_economic-crisis-global-

economy-protectionism

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