New Delhi: Former Niti Aayog vice chairman Arvind Panagariya has said that the recent import tariff hikes by the US and retaliation by China and Europen Union have placed the future of the multilateral trading system at serious risk.

He also said that there is nothing wrong in Indians depositing money in banks abroad as long as they have paid their taxes on it.

On the ongoing global tariff wars, Panagariya praised the Indian government for not imposing retaliatory tariff on US products as it could impose bigger injury on the nation.

"There is no doubt that recent tariffs by the United States and retaliation by China, EU and other countries have placed the future of the multilateral trading system at serious risk.

"For the first time, I feel that we may descend into the kind of protectionism the global economy experienced during the inter-war years. We in India need to stay course, however," he told PTI in an interview.

Currently a professor of economics at Columbia University, Panagariya said India should not indulge in the protectionism. He resigned as Niti Aayog VC last year to return to academics.

"I admire our government for keeping away from any retaliatory tariffs of our own...any retaliation we do will inflict bigger injury on us than did the US steel and aluminum tariffs," he opined.

He argued that India can escape the injury from the US tariffs by selling the country's steel and aluminum to other countries or using it ourselves.

"But we cannot escape the injury from our own retaliatory tariffs," he insisted.

On March 9, US President Donald Trump imposed heavy tariffs on imported steel and aluminium items following which China and EU hit back by imposing retaliatory tariffs against the American products.

India has said the duty imposed by the US has affected steel exports by USD 198.6 million and aluminium shipments by USD 42.4 million.

India has also dragged the US to the World Trade Organisation's (WTO) dispute settlement mechanism over the imposition of import duties on steel and aluminium.

India exports steel and aluminium products worth about USD 1.5 billion to the US every year.

Exports to the US in 2016-17 stood at USD 42.21 billion, while imports were USD 22.3 billion.

Replying to a question on rising deposits of Indians in Swiss banks by about 50 per cent after demonetisation in November 2016, Panagariya said there is nothing wrong with the deposits rising as long as they are legal.

He pointed out that at the peak in 2006, Indians deposited USD 6.46 billion in Swiss accounts.

In 2017, this amount was USD 1.02 billion and even in 2013, the amount was USD 2.03 billion.

"So the rise in 2017 notwithstanding, deposits in Swiss accounts are very much on a declining trend," Panagariya asserted.

"Holding deposits abroad by Indians is not a crime as long as they pay taxes due and deposit funds abroad through legal channels," he added.