Learning to be self-reliant

In addressing sarpanches on the occasion of National Panchayati Raj Day on April 24, PM Modi declared that the biggest lesson which the Covid-19 pandemic had taught the country was the need for self-reliance. Without it, he said, it would be difficult to even face such problems. He said villages at their own level, have to be self-sufficient for their basic necessities, districts at their level, states have to manage their primary needs on their own, and in this way, the entire nation should become self-reliant. For our own needs, he added, we should never feel the need to turn to anyone — this has become absolutely clear.

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Such a major articulation of an altered policy orientation has not received the attention it deserves. Some may feel that this is a rhetorical statement, more with political intent rather than signalling a shift in strategy. It should be noted that trends towards a more insular economy have been in evidence for the past few years.

The PM’s statement is aligned to and reinforces that trend. The pandemic has put a premium on self-reliance as critical supplies from source countries are interrupted. Global supply chains have been disrupted. In the trade-off between efficiency and reliability, the latter now has greater weightage. We are looking at a global economy which shall emerge from this crisis much more fragmented, less globalised with diminished flows of trade and capital. For India, the major drivers of growth will, therefore, have to come from its domestic economy, even though the external economy will remain indispensable to meet our needs in critical sectors such as energy. Even before this crisis, it had become clear that it was simply not possible for India to replicate China’s export and investment-led growth. However, India has assets in terms of the size of its market which can generate economies of scale. It still has a potential demographic dividend in its young population and has displayed the capacity for innovation. Therefore, an economic strategy more reliant on domestic drivers is credible. In fact, in the post Covid-19 landscape, there may be no alternative. In this sense, PM Modi was reflecting the compulsions imposed by the new reality. However, this shift in orientation requires careful strategising, identifying sectors in which self-reliance is dictated by security concerns, those where the country possesses human and material resources which could be leveraged and those where the external sector will continue to be significant. In respect of the last mentioned, there could be opportunities for collaborative ventures with entities in friendly countries, thereby spreading the risks and achieving efficiency gains. A road map for a self-reliant economy needs to be spelt out, so that gains in reliability are weighed against the risk of dependence on foreign supplies. In some areas such as defence, there will have to be a renewed effort to encourage production in India, overcoming the roadblocks which inhibit progress.

It should be understood that foreign trade will continue to play an indispensible role in India’s development. Without growing and vibrant exports, one will not be able to meet the growing requirements for essential imports. India will still need foreign investment and technology inflows to power its growth and modernise its economy. Self-reliance should be understood in relative terms. It must not descend into economic autarky.

We must also take into account the foreign policy consequences for India. A more modest presence in the global economy will imply a more modest foreign policy.

PM Modi’s prescription of self-reliance at every level of governance, from the panchayat to the Union government also bears analysis. Unlike the external economy, would there not be a spreading of risks if the national economy was well integrated and there was a free flow of goods, services and people across the length and breadth of the land? This assumes a high degree of trust between the Centre and the states and further between the states and localities. Creating self-sufficient communities at our present level of development may end up driving us back to a subsistence economy and stalling growth. It is the responsibility of the Union and state governments to ensure that there is efficient distribution of basic necessities and key services such as health and education at all levels. This cannot be a responsibility to be devolved on lower levels of government without adequate resources devolved to them. The danger is that restrictions on the movement of goods and people necessitated by the pandemic may stay in place in the mistaken notion that this will foster self-reliance. Economic security requires a more integrated national economy rather than a conglomeration of self-sufficient communities.

Self-reliance in terms of more empowered states of the federation and local governing entities such as municipalities and panchayats would be welcome. But this requires a more decentralised state rather than an increasingly centralised one. In a vast country like India, decentralisation is the only way in which governance can be aligned to local needs and aspirations. It has been our experience that the Centre takes on too many tasks of governance without being able to deliver. One fears that enhanced centralisation, which has become necessary in dealing with the pandemic, may persist, thereby turning self-reliance to mere rhetoric. In their joint paper published in December 2018, Raghuram Rajan, Gita Gopinath and Sajjid Chinoy recommended ‘more decentralisation, with more powers and funding delegated to the states and perhaps more importantly within the states to municipalities and panchayats.’ This will promote more self-reliant states. The objective should be this notion of self-reliance and not self-sufficiency.