Resolve for self-reliance: Opportunities and Challenges

During the last three decades of globalisation, the protection of domestic industry was considered as a crime. It was being said that free trade is the panacea of all economic problems. The rationale given was that hindrance to the free-trade would make our industries inefficient, as lack of competition will hinder efficiency and would impact competitiveness. Due to the Corona crisis, the thinking of policymakers in India and the world has been changing drastically. Prime Minister Narendra Modi has said that the most important lesson the country has learnt in this corona crisis is that we have to become Atma-Nirbhar (self-reliant).

Prime Minister’s call of ‘Vocal for Local’ (indigenous) has become people’s call now. To make our country self-reliant, or ‘Atmanirbhar’, we would need to make requisite efforts. For this, the people’s representatives, technocrats, leaders of industry and trade, social activists; all will have to make concerted efforts. We know that India has been a country of diversities. Every province, every district of our country, and even every village has its own speciality. Each region is known for one or more types of skills, agricultural product(s) or one or more industrial clusters. Generally, more than one type of characteristics exists in the same district. In the absence of incentives over the years, some areas have been losing their distinct identities related to their industries, skills and agriculture produce. Every district of our country produces a variety of excellent agricultural products. Unfortunately, due to lack of an appropriate system of incentives, storage and marketing, many of these products are facing the danger of extinction. Sometimes, despite having domestic capabilities in the efficient production of these products, the country has even to import them.

So far as manufacturing is concerned, various districts of the country are known for modern and traditional industries. There are places like Ludhiana which is famous for woollen hosiery and bicycle industry, Tirupur for cotton hosiery, Agra for shoe and iron forging, Badouhi for carpets, Banaras and Kanjeevaram for sarees and many others which are world-famous. Chinese dumping and neglect of the government, red tape, inspector raj, lack of finance, lack of access to new technology, etc. are some of the reasons that have led to the decline of these clusters.

Due to the obsession towards globalisation and the dominance of multinational companies, these industries witnessed a significant decline. When we are talking about self-reliance, efforts are also needed to preserve and enhance the value of these local products as per their specialisation. Along with the efforts of the Central and State Governments towards protection and promotion of local industries, if the people’s representatives, industry and trade leaders, social activists etc., make efforts, then these enterprises will naturally get a new lease of life. Learning lesson from the pandemic, if the country revives and promotes its manufacturing, which has deteriorated due to distorted policy framework and unfair competition from China, and then it will increase employment and income in the country and improve the standard of living of the people.

Some people believe that in this era of globalisation, we are so much connected with the rest of the world, that our efforts to become self-reliant can prove to be regressive and suicidal. Such people fail to appreciate that resolve to self-reliance is not about stopping imports from China or elsewhere altogether, but to gradually reduce dependence on countries China and building domestic industries as per our needs and resources.

Due to the apathy of Governments in the past towards dumping of Chinese goods, our industry got destroyed. However, we have to rebuild our industry, and we need to ready ourselves to find alternatives. We must not forget that most of the imports from China are those that are either produced or could be produced in the country which includes steel, chemicals, machinery, vehicles, fertilisers, pesticides etc. There are many imports, which do not even require high technology. Such zero technology products can easily be produced in the country in a short span of time. This process can reduce mindless imports from China.

Though, it’s true that the goal of self-reliance is not a cakewalk and its fraught with many hurdles. However, it is not impossible. Several critics try to reject the idea of self-reliance on two counts: First, they term this approach to be impractical due to massive dependence on other countries, especially China; and argue that this kind of policy may cost heavily due to closure of industries dependent on components and raw material coming from China and/or due to increase in cost, as we will have to opt for costlier alternatives. Second, they argue that this kind of approach to self-reliance will push us back to Nehruvian days of protectionism meaning thereby high cost and inefficient industries. In other words, it will make the industry uncompetitive. The conclusion they draw with their arguments is that under the circumstances self-reliance is impossible without hurting the economy.

However, they fail to appreciate that policy of self-reliance by encouraging production in the country cannot be equated with protectionism. It is, of course, true that, for new industries to flourish, the import duty on goods coming from abroad will have to be increased a bit; to discourage dumping, anti-dumping duties and in some cases safeguard duties may also be needed; standards are also required to prevent inferior foreign goods, and alongside a host of other non-tariff barriers will have to be imposed. Those who call these measures as protectionist must understand that the US imposes more than 6500 non-tariff barriers, China imposes more than 3,500 such barriers. In comparison, India imposes only nearly 350 such barriers.

It has to be understood that the protectionism before the new economic policy of 1991, especially during Nehruvian era, led to inefficient industrialisation because, during that period, extremely high import duties (100 per cent to 600 per cent) were levied in India, which could be said to be a hindrance to efficiency. The era of high import tariffs has already ended after the WTO came into existence. India is already bound by the WTO regime. But there are provisions and flexibilities in the WTO as well, through which we can promote our industries and protect them from the unequal competition. Fascination towards unbridled globalisation of the last three decades and the obsession of our policymakers towards free trade has led to extreme lowering down of import tariffs much below the WTO bound rates. Whereas WTO rules allow India to have an average import duty of up to 40 per cent, our average import duty is less than even 10 per cent. Under these provisions, the Government of India increased import duties on some items including electronics, mobile phones, consumer goods, etc. from 10 per cent to 20 per cent and this helped reducing imports significantly. In the last two years between 2017-18 and 2019-20, India’s trade deficit with China has come down from $ 63.2 billion to $ 48.6 billion. Apart from anti-dumping duties, countervailing duties, we can also impose non-tariff barriers and encourage Indian industries by implementing standards. Such actions cannot be equated with pre-1991 protectionism. Almost all countries impose tariff and non-tariff barriers for the protection and promotion of their industries, so why can’t India do the same. India’s unilateral free trade will prove suicidal when other countries are increasing import duties in the name of a trade war.

Therefore, critics have to understand that the continuous decline of industries due to cheap Chinese imports was not in the country’s interest. Why a steadily increasing trade deficit does not distract critics, is beyond comprehension. The need of the hour is that efforts should be made to stop imports, primarily with incentives to our industries. And after that, by making products of international standards, we can fulfil not only the requirements of the country but also give impetus to our exports to foreign countries. As every country is protecting its industries, so we cannot equate measures adopted under the WTO provisions with protectionism. This effort of self-reliance by the country can play a vital role in raising income and employment in the country.

Prime Minister, in his Independence Day speech, has said that self-reliance is not a word, it is a national resolve. We need to make efforts at levels to actualise this resolve. PM said that country could no longer remain an exporter of raw materials and importer of finished goods. To make the country capable of producing for the world, we need to make all-out efforts. Apart from curbing unequal competition from imports, by way of raising tariffs, anti-dumping and countervailing duties, non-tariff measures including standards; we need to make efforts to create an ecosystem to develop the domestic industry. We understand that in the post-independence period our economic and industrial development has been badly affected by excessive regulations,

Bureaucratic hurdles, red-tape, inspector raj, the socialist mindset of conducting commercial activities and strangulation of our entrepreneurs. In the era of new economic policy, though the rhetoric was of lifting regulations, red tape, encouraging private enterprise, in reality, government policy remained concentrated to only import liberalisation, allowing MNCs in the name of FDI, amending domestic laws to facilitate foreign companies. Obsession for free trade and import liberalisation (especially from China) resulted in destroying our industries, rather than making our industries efficient. FDI also did not help in the transfer of new technology. Instead, in the name of technology, the outflow of foreign exchange increased manifold by way of royalty and technical fees.

Time has now come to encourage domestic efforts to increase indigenous production. These efforts are already visible. For increasing production of active pharmaceutical ingredients (APIs), a production linked incentives (PLI) package of more than rupees 11 thousand crores has been rolled out. For electronics and mobile phones, PLI package of more than forty-two thousand crores Rupees has been given. Nation has witnessed, how our industry both big and small, responded to the Corona challenge by producing PPE kits, N95 masks, ventilators and many other types of equipment. We supplied HCQ tablets to the world. Pharma industry is already geared up to produce Corona vaccine.

 

Under these circumstances, the government’s budgetary push is essential but not sufficient. We need to change the mindset of the bureaucracy, regulatory bodies, government’s machinery, judiciary and media. We need to get rid of rules and regulations designed to foster the socialist system. We need to allow our young entrepreneurs (startups) to freely work to flourish their new ideas to bring in new technology and generate wealth. Modi government’s push to startups, stand up needs to be taken to the next level. Dream of ‘Make in India’ has to be realised by encouraging Indian youth entrepreneurs. We know that India missed the bus of first, second and third industrial revolutions. It is time for the fourth industrial revolution, which is the digital revolution. Given the massive size of the Indian economy and tremendous market opportunities, global giants are trying to exploit the potentials in their favour. Many people think that we are undergoing a threat of digital colonisation also. We need to seize this opportunity and make our country Atmanirbhar digitally as well. Corona though came as a pandemic, a threat and a challenge; our country has resolved to convert the same into an opportunity. Let’s all work together towards the same and take our country out of foreign economic dominance, unemployment, poverty, deprivation and stigma of underdevelopment.