Having said that, there is also no doubt that the ruling party needs to do some hard thinking on its policy of protection. The eight per cent additional duty is actually closer to eleven to twelve per cent, since it is to be levied on the assessed amount plus the normal customs duty. Add to that the over 5 per cent depreciation in the value of the rupee since the BJP assumed power, and the quantum of protection is steep indeed. To be sure, there is merit in the government's argument that domestic industry needs a level playing field. Nor does it really matter if corporates are protected this fiscal--the pernicious effects of protection are felt only in the long run. But the government has always stated that protection is necessary not just to serve the interests of competition-shy businessmen, but in order to equip Indian corporates to take on the world in a competitive environment. For that to happen, the government needs to apply its mind about a calibrated decreasein tariffs over the medium-term.

Countries such as Japan and South Korea ensured that their industries became competitive by exposure to the export markets. These countries had comparatively small domestic markets, and the gameplan was successful. For India, however, the pull of our immense domestic market would mean that such a strategy cannot be used. In its stead, therefore, we need government policies which would goad corporates into becoming more competitive, and a long-term plan of reducing protection needs to be put in place.