Self-reliance after lockdown a long-term goal

Atmanirbharta or self-reliance is the new catchphrase for the Indian economy. It sounds new, but is actually the earliest initiative of economic policymakers after this country attained independence. It flowed from the motto of swadeshi and boycott of colonial foreign goods that was an integral part of the freedom movement. The general public thus had no problem in accepting the ideas of self- reliance and import substitution advocated by Jawaharlal Nehru and his advisors as a critical element of economic policy. It gelled well with the theme of independence, not just from the colonial masters, but from imperialistic powers everywhere. In practice, of course, import substitution became one more element of red tape under the licence raj system that evolved under Nehru and his successors.

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It is with a sense of trepidation that one views the latest clarion call to achieve the goal of atmanirbharta. The last stimulus package was even described as the Atmanirbhar Bharat Abhiyaan. These pronouncements need to be seen in the context of the gradual increase in tariffs on a wide array of products in the last budget as well as dismissive comments made by ministers about investors like Amazon even as they were announcing proposals for a billion dollars worth of investments. At the same time, one of the Finance Ministry’s economic advisers has, in a newspaper article recently, sought to clarify that the vision of a self-reliant India does not imply a return to Nehruvian socialism or licence-permit raj. He argues it is meant to be a ‘decentralised localism’ that takes pride in local brands and encourages local capacity-building and indigenisation. Citing the recent farm sector reforms, he says it implies a need to carry out administrative and legal reforms.

Despite this reassuring clarification, the immediate fallout of the self-reliance mantra was of government procurement agencies quickly trying to cut out foreign suppliers from their lists. Simultaneously, Union Road Transport Minister Nitin Gadkari insists India is formulating an import substitution policy, which has echoes of the past.

While the creation of a local supply chain is a laudable idea and should be pursued vigorously, self-reliance has to be put in the contemporary context of globalisation. Every country cannot make everything in a cost-effective manner. Products to be manufactured here need to be identified with care, ensuring these are competitive not just within the country, but also abroad. In the post-liberalisation era, it was recognised that industries needing perennial tariff protection should be done away with and replaced with others more suited to the environment. For instance, the information technology sector prospered without any governmental support while homegrown food processing brands have fared well against foreign competitors.

The theme of Made in India, another positive concept, can only be relevant if these local industries are able to produce high quality products efficiently. The anxiety of policymakers to expand the manufacturing sector is justified, especially in order to create more jobs, but it needs to be done by creating an enabling environment for industrial growth. The biggest obstacle for doing so is the bureaucracy which clings to red tape like a limpet. This was evidenced during the lockdown when official rules for keeping people indoors were issued repeatedly and that too using complex phraseology. In turn, police personnel were authorised to oppress the masses, especially the underprivileged, just for the offence of walking on the road.

At a time when economic growth has been a meagre 3 per cent for the first quarter of this year and contraction is expected to go up, the best stimulus would be reforms that reduce red tape to a minimum. The other prescriptions include the need to enable easier land acquisition as well as ensuring availability of critical infrastructure like power, better roads and internet connectivity. Flexible labour laws have been talked about for years, but this does not imply that all labour laws should be suspended as was done recently by some state governments. These are the pre-requisites for creating an enabling environment for investors whether domestic or foreign. Instead of merely putting up tariff barriers, it would be wiser to opt for reforms in areas that have an impact on the ground as was done in the farm sector recently with the amendments to the Essential Commodities Act.

One cannot discuss the self-reliance issue without considering perceptions about China. First, there is an impression that companies located in that country are seeking to shift base and that this is a looming opportunity for India. But unless the ease of doing business improves dramatically in the coming year, it is not likely that many will land up here. Second, China has no doubt been dumping many products here at unrealistically low prices. This issue, however, needs to be dealt with by levy of anti-dumping duties, as in the past. Thirdly, a boycott of Chinese products for which there has been a clamour on social media can only have limited and transitory outcomes. It is easy to delete social media apps on phones, but not so easy to cut back on imports of critical products such as pharmaceutical ingredients. And finally, China is not just a supplier, it is also a key buyer of Indian goods. At a time when there is no domestic or global demand for brass products, manufacturers here have been able to sell to that country. Self-reliance needs to look beyond replacing Chinese imported goods to exporting more Indian products to that very large market.

True, self-reliance as an aim is unexceptionable. It is also a medium or long- term goal for the economy at this stage. Right now, however, the country needs a short-term revival. Economic growth had already been in the doldrums before the pandemic, with growth in 2019-20 at an 11-year low of 4.2 per cent. Now, it is set to contract in the current fiscal. This is the time for a stimulus in the short run even while continuing to move on long-term reforms. A weak economy limping after the prolonged lockdown cannot become self-reliant till this is done.