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I had a strange dream the other day.
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I dreamed I was a fly on the wall at a swayamvar in 1973.
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Now a swayamvar is a practice in which a bunch of men, all dressed up and objectified, line
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up in a hall while a woman walks among them with a garland in her hand.
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She picks one of these men as her marital partner and puts a garland around him.
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Now this swayamvar is an ancient tradition but this was a modern swayamvar.
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The girl was allowed to ask questions.
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So the girl was walking up to each man and asking him just one question.
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What did he do for a living?
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The first contender was a thin boy with thick glasses wearing a dhoti kurta.
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What do you do for a living?
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He said, I am doing my PhD in aeronautics.
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She shrugged and went to the next guy.
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The next chap, his hair slicked back in a centre parting, wearing a bed churidar kurta
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with the jacket of a safari suit, said, I am an IAS officer.
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The garland twitched in her fingers but she walked away.
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The next person in line was a tall geeky tambram in a vesti.
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She asked him the same question.
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He replied, I am a software engineer.
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See this is 1973 and you may wonder what that is but wait 30 years and I will be the hottest
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She very rudely showed him a thanga and walked on.
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Finally, she came to a young man wearing a flowery t-shirt and bell bottom pants.
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He had the face of Prem Chopra and the swagger of Amitabh Bachchan.
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She asked him the same question and he replied, I do import export.
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And well the story ends here.
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They lived happily ever after.
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Welcome to the Seen and the Unseen, our weekly podcast on economics, politics and behavioural
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Please welcome your host Amit Bhanwa.
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Welcome to the Seen and the Unseen.
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Import export was quite the buzzword in the 1970s, especially in Bollywood.
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But importers and exporters are in bad shape these days.
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One small reason for that is a topic for this show, the FTP 2015-2020, the foreign trade
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policy 2015-2020, which is supposed to help our importers and exporters but ends up harming
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To discuss this unseen effects, I spoke to Sudhanshu Neema who was my guest on this show
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last week as well when we spoke about Obamacare.
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Here's how our conversation went.
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Welcome back to the show Sudhanshu.
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It's very nice to be here again.
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Sudhanshu, the FTP 2015-2020, the foreign trade policy, a very impressive document made
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with the best intentions meant to help our exporters and to protect our farmers.
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Everything about it sounds good.
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Tell me a little bit more about it in terms of what its intentions were and tell me what
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its unseen effects are.
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So the intention behind the trade policy was to promote exports of India so that government
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can own foreign currency.
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Now I don't see the point of owning that we already have $400 billion of foreign currency
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and I don't see why the government is getting greedy and collecting more foreign currency.
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So that's one part of it.
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Secondly, the government wanted to promote exports so that people would be manufacturing
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in India, creating jobs and then exporting their goods and services outside India.
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So that's Prime Minister's vision of making in India and then selling it outside the country.
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And then there was, when it comes to import policy, our intention is to protect domestic
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producers, essentially farmers, sometimes there are other industries which need protection.
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The government has defined those industries and say that, okay, we will not allow import
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on this industries because of, you know, this, this, this reasons.
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So they want to protect some of the domestic producers and they subsidize the exporters
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with the view to create manufacturing and jobs in India.
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Now those are the intended effects of the foreign trade policy.
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But what actually happens is not what you will see on the paper or what the government
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What has started happening now, since the government gives export credit to people who
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export goods and services, this credit is given in form of a tax benefit.
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Now this tax benefit has to be funded by taxpayers.
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Usually people like you and me should pay taxes so exporters can export their goods
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and services to foreign countries.
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Now often these foreign countries are rich countries.
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So we are actually subsidizing goods and services going to, for example, US or Germany.
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Now that sounds completely ridiculous to me.
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Why should a third world country subsidize the people living in a first world country?
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To make the exporters competitive, they are given this tax credit, which is basically
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being obviously funded by you and me.
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So what is happening is it's a redistribution of wealth from the normal poor taxpayer like
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us to first the exporter who therefore can price his goods cheaper, which therefore helps
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the people who are buying from him and makes him attractive to them.
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And therefore at another level, it ends up being a redistribution of wealth from the
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poor of a poor third world country, India, to the rich of a first world nation.
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And rich of India as well, because those are the ones who will produce and they make all
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They don't, since they get tax credits, they don't have to pay taxes on that, on whatever
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And we have to pay taxes because if they don't pay taxes, somebody has to fund the government,
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And Indian government does so much of things that somebody has to fund a lot of them.
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I think a small digression here to point something out, a lot of people say that, hey, only 3%
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of Indians pay taxes or whatever, but that's income tax they're talking about.
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100% of Indians pay taxes.
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So even if your maid servant is buying a bag of salt or someone who might be begging at
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a traffic signal is buying a little bit of soap, even they are paying taxes because all
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of those items are taxed.
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And taxes hurt the poor far more than they hurt the middle class like us.
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And that's one part, the taxes.
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And there's other things like if your manufacturers are incentivized to sell goods to foreign
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countries, they don't want to sell it to Indians, right?
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Like, let's say I'm producing high quality tea, I'll sell it to US.
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Why should I sell it here?
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Because if I make money or any profit, I'll have to pay taxes.
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Plus it's much harder to do business here than to doing business in Europe.
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So here's what happens.
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Let's say you're a tea manufacturer and I'm a consumer.
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First of all, the first crime is that I am being forced to subsidize you to manufacture
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cheap so you can sell it for cheaper.
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And the second crime is that because therefore you're incentivized to sell your tea outside
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and export it, the supply of tea within India therefore gets restricted and becomes more
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So I'm being taxed doubly.
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So you are first paying higher costs for your tea and second, you're paying some Americans
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some money indirectly to buy cheaper tea.
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So that's the one side of it.
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Now let's come to import policy.
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When it comes to import, in the name of protecting certain manufacturers, mostly farmers, the
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government has put a ban on most agricultural products or they put a quota, call it whatever
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They sometimes will put a ban, sometimes they'll put a quota, sometimes they'll say, we will
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import only from these countries and not those countries.
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So they have lots of policies.
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They have more than 7,000 categories of goods on which there are different layers of taxes.
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So what the government is trying to do, the intention is to protect farmers because if
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we can buy cheaper food from foreign countries, our farmers will theoretically lose money.
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But that's not how it works.
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There's other side to it, right?
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There are consumers, there are people who consume food and they deserve to buy cheaper
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There are millions of very poor people in India who are not into farming, who are urban
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poor, who live in slums, they do not have enough money to buy food and if they can buy
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cheaper rice or cheaper wheat, we should be able to provide it to them.
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It's just we are killing people with these policies and when it comes to farmers, these
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policies that have been in place for not just this 2015 to 20 policy, we have had these
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similar policies since independence, these policies have kept the farmers poor because
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farmers now don't diversify, they depend on the government, they know that whatever
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they produce will get them results because if nothing happens, the government will buy
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it or put a ban on import of that commodity.
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So now farmers don't invest in developing techniques or increasing their farm yield
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because they have become dependent on this government assistance.
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So firstly, you have higher cost to all consumers and then farmers remaining poor and trapped
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in this vicious circle of poverty and then there is a third effect.
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This impedes our economic growth because let's say I can buy rice for much cheaper cost,
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I save some money and this money would go in buying other goods and services.
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So those people also lose out.
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So for example, let's say I save a thousand rupees a year in buying rice, I will use this
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thousand to let's say buy a new pair of shoes.
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So this shoemaker will also get this money and he will also make profit and pay taxes
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So it's a huge cost on the whole society.
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So what all these import tariffs basically do is number one, the price of goods go up
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because the market is not as wide as it would otherwise be if you were to allow cheap imports.
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Number two, they incentivize a farmer to just keep making the same thing that they're making
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because they are protected by this law and you have minimum support prices and so on
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and so forth and the market pressures that would make them maybe diversify their crops
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or maybe look for innovate in search of higher productivity, that movement, that growth never
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And that locks them in a poverty cycle.
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So they become dependent on government's handouts.
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Now we have recently seen farmers asking for loan waivers, agitating in Madhya Pradesh,
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in Rajasthan, in Maharashtra, in UP and the governments are paying 50,000 crore, 25,000
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crore rupees as a loan waiver.
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Now let's not go into loan waivers.
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That's also very unseen and effects of that.
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And we had an episode on that earlier.
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So this loan waiver costs taxpayers.
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So again, you and I end up paying for this policies in some way or the other.
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First it's higher food, then it's taxes, then it's those farmers not contributing.
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And once their productivity increases, we also benefit from that, right?
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Because our national income grows up, the government revenue goes up, so we get more
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So it's not just losing one part of it or it's the whole bigger picture.
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You lose a lot on a lot of fronts.
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And beside, we lose a lot more in banning agriculture produce from rich country to us
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because America and Canada, most of European Union, they give extremely high amount of
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subsidies to their farmers to produce wheat and rice and other basic agricultural produce.
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We should just buy it from them because it's cheaper, they are subsidizing.
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We should just take money from their taxpayers because coming to us for free and all we need
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to do is nothing basically, we just need to stand at our port, pay some money, take those
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goods in and distribute.
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And what that would then do is that would lead to cost savings among the consumers and
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they would spend that money elsewhere, which would grow the economy in other ways and provide
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And that would also force the farmers to innovate and be productive and maybe find, maybe diversify
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their crops and grow, move into other things.
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And of course, if someone's listening to this podcast for the first time, if you go over
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to seenunseen.in, you'll find in my archives, various episodes where we've spoken about
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agricultural problems and how farmers are just trapped in agriculture because of just
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a variety of regulations and this is just one of them.
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So that's like an absolutely crazy problem.
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But what kind of amuses me and it's a very perverse kind of humor here is that this export
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and this import are different export and import policies do two things.
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Number one, they force us to subsidize rich countries.
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And number two, they stop us from taking their subsidies.
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So poor Indian taxpayers end up paying for American and British consumers.
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And when American taxpayers and British taxpayers are paying for food that could benefit us
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and make it cheaper for us, we turn our back on that.
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That sounds completely crazy.
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Well, to protect farmers and the governments rely on farmers' vote.
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So they keep doing it and without realizing, and even farmers don't realize that every
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year asking for minimum support price or this or that, it keeps them poor.
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They have been poor for 60 years or so and they will remain so if we do not change this
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policies because they have no incentive to get out of farming.
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And since we pay a lot more for these goods, which are produced within the country, first
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because all the higher quality goods are exported out of the country, so we have higher cost
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So consumers don't save all this money.
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If this money was saved, we would expand it elsewhere, essentially buying goods and services
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So they would have an incentive to diversify into different types of crops.
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Once they do that, they would have more productivity.
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They would have more jobs.
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They would have more opportunity.
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And if other crazy laws didn't exist, like the laws which stop you from selling agricultural
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land for non-agricultural purposes, there would just be much fewer farmers, which as
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every country goes, you follow that trajectory where less and less people are in farming,
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but farming is that much more productive and jobs spring up elsewhere and you're stopping
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So the FTP, 2015-2020, what it really does is it forces the poor to subsidize the rich
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and it stops the poor from taking the subsidies that the rich are willingly offering.
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That's absolutely crazy.
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Thank you so much for coming on the show, Sudhanshu.
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It was a very nice experience.
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If you enjoyed listening to The Scene and the Unseen, do hop over to sceneunseen.in
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and check out all our archives.
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You can follow me on Twitter at Amit Varma, A-M-I-T-V-A-R-M-A.
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Guys, exciting news, Indus Walks Media's flagship podcast, Cyrus Says, hosted by my friend
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Cyrus Brocha, completes 200 episodes.
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A big congratulations to Cyrus from me and the guests and the producers of the show for
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entertaining us for over two years now.
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We hope to reach the 200-episode mark ourselves many, many, many weeks from now and Cyrus
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If you haven't already, check out the IVM Podcast website or just download their app.
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On the menu, Scene Unseen, Podcasts, On Course, Cyrus Says, Married in India, Rediscovery
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Project, Empowering Series, Sex Facts, IVM Likes, Simplified, Keeping It Queer, Things
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and Destinations, My Neighbor Sarkar Bagh and The Fine Garage, what else do you want?
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Can you repeat it once?
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You go to IVM Podcast.com and listen to all of this or download their app, it's all
