Reserve Bank of India Governor Urjit Patel has cautioned the major world economies against protectionism. He said that using trade instruments for protectionism may take a nation on a trajectory different from that of growth. Patel was speaking at the third Kotak Family Distinguished Lecture at the Columbia University's School of International and Public Affairs. Patel's response came at a time when countries like United States and Australia have tightened their visa policies to ensure their home-grown giants don't outsource instead hire local talents.
However, Urjit Patel has a question for such countries. He said: "Where would Apple be, where would Cisco be, where would IBM be if they were not sourcing the best products and talent from across the world. And if policies come in the way of that, then the big wealth creators in a country that advocates protectionism are ultimately affected." "I don't think that we have heard the last word on US policy talk about this because there is a push back internationally that the world has benefited from an open trading system," the RBI chief added.
US President Donald Trump's election campaign had revolved around 'Buy American and Hire American'. And, protectionist views got even stronger in European countries when Britain voted for 'Brexit' last year. The US President last week signed an executive order to review H-1B visa policy. Doanld Trump thinks that IT companies have robbed American jobs by 'abusing' their H-1B visa policy. Trump wants to review the whole H-1B programme and promote local hiring to reduce the unemployment. However, his move has irked many top Indian officials who have strongly voiced their concerns.
A day after US President signed an executive order to review H-1B visa policy, India's Commerce Minister Nirmala Sitharaman reminded Donald Trump that not just Indian companies in the US, several big US companies are in India too. "They are also here, they are earning their margins, they are earning their profits which goes to the US economy," Sithraman said. It was reported that India could respond to the US move to restrict H-1B visas by capping the royalty payout by American companies in India to their parent firms. The move, if implemented, risks escalating into a full-blown trade war that could harm the otherwise warm relationship between Indian and the US. Finance Minister Arun Jaitley warned against protectionism and said that it will hurt the global economy and welfare of people.
