Page 41 - CMA Journal (Sep-Oct 2025)

Focus Section

Table 3: Protectionism vs. Export Orientation

Aspect Protectionism View Export-Orientation Where NTP 2025-30 Sits / How It Mediates
View
Trade Policy Stance High tariffs, trade Liberalisation involves NTP reduces tariffs, phases out regulatory
barriers, and import reducing barriers and duties, simplifies slabs and leans toward
substitution to opening up to global export orientation but with some protection
protect nascent/local competition. preserved (e.g. gradual phasing, capped
industries. duties) to soften shocks.
Infant Industry / It argues that Emphasises that NTP tempers protection: the automotive
Employment domestic industries exposure to competition sector, like others, will see duties reduced
Protection need shielding compels efficiency, starting mid-policy period, giving local
(tariffs, subsidies) to scale, and innovation. industry some time to adjust. But no new
reach scale and blanket protection; selective, phased
protect jobs. protection rather than permanent.
Balance of Protectionism is Export orientation uses NTP sets modest import growth targets (5-
Payments / Import often used to limit exports and 6%) and expects export growth of 10-14%. So,
Control imports and preserve competitiveness to earn imports are not entirely blocked, but curbed,
foreign reserves. FX and reduce deficits. while export growth is pushed—this is a
hybrid approach.
Incentives & Proponents of Export-oriented views NTP acknowledges market failures: harsh
Market Failures protection point to protection as costly; tariffs on inputs, distortions from RDs/ACDs,
market failures instead, focus on and the cost of intermediates. Reforms are
(missing finance, removing distortions, designed to reduce these distortions so
technology gaps, lowering costs, and domestic firms can compete internationally.
weak linkages). investing in capacity and
Protection helps skills.
overcome these.
Risks of Risk of low Risk of premature NTP seems aware: reforms are gradual;
Protectionism productivity, lack of exposure, maximum duties capped at 15%; sectors likely
innovation, and deindustrialisation, and to be hurt (e.g. protected industries) are given
dependency on adverse distributional lead-time. There is an attempt to combine
protection. outcomes. liberalisation with targeted support.
Sectoral Traditional sectors More dynamic, value- Under NTP, the beneficiaries are likely export-
Implications often benefit from added, export-oriented oriented sectors (engineering, processed
protection (textiles, sectors benefit from free food, pharma, textiles); but also sectors
steel, automotive). input flows and market historically protected (like automotive) will
access. benefit from phased protection removal. This
is transitional.
Source: Author

This is being phased out over specific periods, such as duty design is based on the recognition of gradualism to avoid
cuts that will commence in 2026, or through the phasing jolts, but the policy is less clear about compensatory
out of Regulatory Duties (RDs) and Additional Customs measures like retraining, financial assistance for laid-off
Duties (ACDs) over four to five years. This is a direct workers, or transitional credits for industries affected.
response to one of the primary shortcomings of the earlier
import substitution strategies: once protection becomes More to the point, the NTP recognises that even tariff cuts
open-ended, productivity suffers, and companies lose are not sufficient to achieve competitiveness. The success
innovation. of the policy will depend on the effectiveness of
complementary policies, which include logistic
The policy also focuses on export orientation with inbuilt improvements, energy supply, modernisation of
safety nets, as it is known that liberalisation may present customs, quality of infrastructure, and the skills of the
adjustment costs for some sectors and employees. workforce. Although the NTP mentions some of these
Although it is evident that the NTP is strongly oriented enablers (e.g., the minimisation of input costs and the
towards the export-led growth model, its long-term rectification of structural distortions), its final effects will
success will depend on the effectiveness of the depend on the depth and distribution of resources for
vulnerable sectors during the transition process. The
these facilitating reforms.
ICMA’s Chartered Management Accountant, Sep-Oct 2025 39