Formerly relegated to history as a factoid from the Indian Independence Movement, the drive for Swadeshi goods has been invigorated in the last year due to the relentless spectre of geopolitical and geoeconomic challenges. In fact, Prime Minister Modi used the occasions of both his birthday and his pre-Navratri address to the nation to reiterate the need for Indians to support ‘Made in India’ products to boost self-reliance and domestic growth – a sign of how critically important this issue has become.
While some commentators have argued that this is simply a return to the failed Import Substitution Industrialisation model that India practiced before the 1991 reforms – and that India should continue to open its domestic markets and follow the East Asian model of Export-Oriented Industrialisation – this analysis glosses over the fact that circumstances have significantly changed today.
Why the push for Swadeshi products?
I put forth 3 reasons for why the Swadeshi drive is necessary and can be beneficial, if well-executed.
Firstly, the ‘overseas premium’ amongst Indian consumers seems to be growing especially large, particularly in urban areas and the self-described ‘middle’ and ‘upper’ classes. The presumption that foreign products and experiences must be high-quality (and that Indian products and experiences are necessarily inferior) is unfounded and damaging – but increasingly deep-rooted.
Consider, for example, the phenomenon of people dressing up and choosing big occasions (festivals, gatherings, dates) to patronize Western fast-food chains like McDonalds, Subway or KFC. It goes without saying that these people would not do the same for the roadside chaat or vada pao outlet. Yet, both these food forms are functionally identical, and Western fast-food is not treated with remotely the same reverence in Western nations. In this context, if the nudge from Prime Minister Modi encourages some consumers to swing the other way and prioritise domestic products, it can help Indian producers compete on a more level playing field and rebalance the market.
Secondly, while valid concerns exist about whether a push for domestic production can lead to consumers being stuck with poorer quality goods, this is much less likely today. In the 1970s/80s and 90s, there was little regulatory standardisation between countries, and contracts were opaque. It was far easier for governments to hand out contracts and licences to favoured parties sitting in Delhi, without this news reaching those in Odisha or Nagaland. More importantly, the modern phenomenon of social media and overseas travel hardly existed – meaning that Indian consumers had no basis for comparison as to whether Indian cars were well-designed or whether it was normal to wait 6 months to get a landline connection.
The situation is vastly different today. Increased regulatory standardisation, quality control and more globally-integrated supply chains mean that there are more checks-and-balances on Indian product quality. For instance, India ranks 10th overall on the Global Quality Infrastructure Index – and ranks 5th and 8th globally on the Accreditation and Standardisation sub-indices, respectively. This reflects the strength of the Indian systems for quality accreditation and standardisation. Moreover, social media and the Internet have allowed a new product/feature released anywhere within the world to reach Indian consumers within days. These shape the expectations of Indian consumers in the domestic market and push domestic producers to improve quality.
Thirdly, there is no standardised ‘right’ economic policy – and economic policy must be a function of national strategic interests rather than the other way round. At a time when global trade is being weaponised, and countries are turning away from globalisation, it is unclear whether the old model of supersized export-led industrialisation will still provide India with the stupendous returns that East Asia benefitted from. If the dominant powers wish to disentangle economic integration and mutual dependence, then countries must prepare for that world by building selective trade links and prioritising self-sufficiency to protect their sovereignty. Current efforts to agree/update Free Trade Agreements with like-minded countries and promote Swadeshi goods are important preparatory steps in this regard.
The Challenge: How do we know what is truly Swadeshi?
Despite the potential benefits of Swadeshi goods, Indian consumers looking to buy and support the local economy face a critical challenge: How does one know what is truly Swadeshi?
After all, the “Product of India” or “Made in India” tag does not appear on all products (such as fruits and vegetables) and when it does, it is not always clear to consumers what this means.
- Has the item been merely packed in India using imported ingredients or was it truly made locally?
- Does “Made in India” mean Indian labour and manufacturing has been involved in many key parts of the supply chain, or has it only been assembled in India
- If made locally, what proportion of the ingredients/components are indeed Indian-made – or are companies importing, say, 95 per cent of the ingredients/components and ‘value-adding’ 5 per cent to apply the label?
For instance, a laddoo manufacturer could make laddoos using only imported wheat, ghee, sugar, nuts and so on – but apply a “Product of India” label since the ‘nature of the product’ has been transformed in India. Is it better to purchase such a product versus a completely imported one? Clearly, yes. Yet, the consumption multiplier will be significantly diminished because the wheat, nut, sugarcane farmers and dairy producers who will benefit from your purchase sit overseas and not in India. This will not boost Indian economic growth or employment as much as would be ideal.
Admittedly, the recent “Made in India Label Scheme” is an improvement since it sets out minimum domestic value-add percentages to use the label and improves transparency by providing QR Codes. However, it still leaves a lot to be desired as it requires users to undertake the effort to scan each QR to know the details – and lacks an easily identifiable symbol that makes it easy for consumers to understand whether a product is Swadeshi.
How can we solve these problems?
Australia offers a very clear and successful model for how this can be done – particularly for edible goods – which India can adopt and expand upon. There are 2 key elements to the Australian food labelling system:
1. Concise but Informative Labels
There are 4 types of labels under Australian law:
- Grown in Australia: Largely for fresh food (e.g. fruits, dairy, meat) that has been grown in Australia;
- Product of Australia: Contains only Australian ingredients and was processed almost completely in Australia;
- Made in Australia: The last substantial transformation of the food was in Australia e.g. making biscuits from imported ingredients;
- Packed in Australia: If some level of processing or packaging has been done in Australia, that is not sufficient to qualify for a better label;
These labels are present everywhere – from fruits and vegetables at supermarkets to packaged goods. More importantly, they provide key information on the percentage of ingredients that are local (Figure 1), with a scale/ruler provided to allow consumers to quickly visually assess the percentage of local ingredients.
Yet, this system can be further simplified and improved upon. Rather than having 4 categories where consumers are unclear about the differences between them, India could simplify this to just 2 labels: “Made in India with X% Indian ingredients/components” and “Packed or Assembled in India with X% Indian ingredients/components”, depending on the degree of local production. These labels should contain QR Codes that can be scanned by consumers who want more information on production locations and other details (just like the Made in India Label Scheme).
These new labels should be mandatory and apply to products ranging from fresh/processed food to consumer goods to equipment. By explicitly stating the percentage of Indian ingredients/components, consumers can make quick decisions while shopping rather than having to put in significant effort into investigating what proportion of ingredients/components are Swadeshi.
Moreover, forcing companies to reveal how Swadeshi their products are can nudge them towards increasing this percentage – particularly if their competitors seize this chance to advertise their products as being more Indian. This nudge will be similar to how Bharat NCAP car rating system allowed leading car manufacturers to advertise their 5-star rating and features like 6 airbags and ADAS – forcing competitors to adopt this as well, without the government having to resort to airbag mandates.
2. Recognisable Symbols
The Australian label uses the recognisable Kangaroo logo (an iconic Australian animal) in green-and-gold colours (the national colours of Australia). This is presented in a standardised label format that allows consumers/buyers to quickly see that a product has had some Australian involvement during production.
Similarly, India should choose a unique visual label that represents India to consumers and can be seen from afar. This should replace the existing array of labels including “Product of India”, “Made in India” and the “Make in India” lion logo, which confuse consumers as they do not understand the technical differences between these symbols – and cannot be expected to research government press releases and guidelines to figure this out.
The logo can be a peacock feather (representing India’s national bird), the Bengal tiger (national animal) or other Indian symbols like the elephant, Ganga River dolphin, or the lotus. Straightforwardly, it could also be a stylised map of India.
This way, busy consumers who are inclined to buy Swadeshi goods will find it much easier to do so while shopping because they just have to look for a recognisable symbol.
Promoting Swadeshi: Sustained Effort Needed
By creating a standardised labelling system that applies to all types of goods, Indian consumers will be empowered to make better-informed decisions based on the percentage of Indian ingredients/components in a product. This would also leverage the strengths of both simple symbols (for average consumers) and QR Codes (for highly committed shoppers) to aid people in choosing Swadeshi products.
Furthermore, clearly specifying the type and degree of production in India (whether Made or Packed/Assembled) will reduce the scope for corporations to engage in cynical Swadeshi-washing i.e. production systems/processes that allow them to apply a Product of India/Made in India label without really making significant domestic investments or value-add.
This system can be mandatorily rolled out across all products with a particular focus on store chains/supermarkets, eCommerce platforms, and large FMCGs and manufacturers. By ensuring the larger entities comply, the government can ensure trickle-down changes across the economy – and truly promote Swadeshi goods that will boost local employment and the Indian economy rather than magnifying the profits of those overseas.
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