Former RBI deputy Governor Viral Acharya on Monday (September 2, 2024)called for reduction of tariffs and dismantling of conglomerates even as he urged the government to refrain from protectionist policies to allow competition so that “Indian tigers” could emerge as global players and Indian consumers could get products at competitive prices.

Mr. Acharya suggested the graceful reduction of concentration (of businesses and wealth) in the hands of big conglomerates, which were benefiting from the tariff barriers and making super profits by not investing to meet global competition.

“India should shake up large conglomerates and unleash competition by allowing overseas companies to invest in domestic manufacturing,” he said, adding tariff protection had stifled innovation.

Mr. Acharya, a CV Starr Professor of Economics at New York University Stern School of Business, was addressing an event organised by Elera Capital in Mumbai.

“The protection given to the Indian corporates by way of high tariff has stifled innovation in manufacturing and incompetency survive hurting the consumers interest,” he said.

Stressing de-tariffing in India, Dr. Acharya said trade barriers in India were one of the highest and ranked fourth behind Egypt, Sudan and Venezuela. He said India with an average tariff of 20 which has gone up from 17% in the last few years, should be at par with China and Korea to allow its companies to be global players. 

“Indian corporates are on a cozy position where they do not have to innovate or create a global brand as they are comfortable making good profit by tapping into the domestic markets under a well-protected business environment, he said.

“The protectionist environment is clearly visible in electric vehicle space where the country wants the domestic companies to establish themselves first by getting the right technology,” he said adding tariff on some of the agriculture produce should be bought down to pass on the benefit to consumers. 

Highlighting that industrial concentration with top 5 conglomerates is capturing large part of the market he said competition in the industrial space had become less intense due to concentration of industries by large corporates.

“The higher margins of these domestic tigers are higher they become the darlings of stock market,” he added.

Calling for privatisation of public sector banks, insurance companies, power finance companies and PSUs he said, “A lot of banks are today doing asset management and not doing banking and opening branches. We do not want such government owned banks.”

He also said measures should be initiated to boost consumption in the rural areas as consumption growth in urban India would not support overall growth of the economy. 

To a question on the government’s decision to invest in Vodafone Idea and save it from going bankrupt, he said, “It would have been a better decision to let telecom company fail and new players to emerge. We should allow our companies to fall.”