Great historical progress always happens after major disasters. I believe it’s a high time we start taking these words by President Xi Jinping seriously.
It’s been more than a year since the Coronavirus outbreak which has shot the world in its foot. The chapter on self-reliance has been well taught to the world by this pandemic. Pandemic has exposed the world’s dependence on China. Disruption in the global supply chain had severely impacted world economics. Thus, countries across the globe are focussing on boosting their domestic production capabilities to be able to absorb the supply chain shocks. Governments have started bringing out big gunshots not to go to war, but in the form of special measures, relief packages to save the domestic economy.
‘21st century is going to be India’s century. But for this to happen, Self-Reliance is important.’ This was Prime Minister Narendra Modi’s clarion call for Atmanirbhar Bharat. Its first mention came as Atmanirbhar Bharat Abhiyan or Self-Reliant India Mission during the announcement of a pandemic related economic package worth US$260 billion on May 12, 2020. Finance Minister Nirmala Sitharaman clarified that the relief package is in line with the PM’s vision of a self-reliant India. The recent border skirmishes with China furthered triggered India’s quest to be self-reliant. PM seized this opportunity to give a clarion call to the industry to become self-reliant. He stressed minimising dependence on the other nations and prepare for a competitive supply chain. To make Indian producers competitive in the global market, he has laid down a strong pitch to localise and incentivise our industry, reducing the supply chain conquest. Because our recovery from the shock depend on our ability to protect the industries. It didn’t aim to be protectionist in nature or cutting off from the rest of the world.
Make in India to Make for the world
The spirit of self-reliant India was evident from the fact that from zero production of PPE before March 2020, India produced two lakhs PPE kits daily by May 2020. By July, we ramped up our PPE production capacity and started exporting 23 lakhs of PPE kits to the US, UK, Slovenia, and UAE. This industry in India has become worth 7,000 crores in two months, the second largest after China. It will be worth US$60 million by 2025. All of that happened in less than 60 days. The story is not much different for sanitisers and masks. The tribal women of Chhattisgarh used the Mahua flower to brew alcohol which forms the base of hand sanitisers. When India was scrambling to get the supplies of Hand sanitisers, these women didn’t give up. They understood the real meaning of vocal for local. History is proof to it that whenever a country hits rock-bottom, it is the people who bring it back to life. Being the world’s pharmacy, India had supplied paracetamol and hydroxychloroquine to over 120 countries, out of which 40 have been given free. India manufactures 70 per cent of the world’s supply of hydroxychloroquine and we exported 15 million pills to the US last year. The Made in India vaccine was a remarkable example of self-pride and Self-reliant India.
In electronics, we have huge demand, but we lack infrastructure, investment, research, and skilled labour. India wants to Make in India, not just assemble in India. In the next five years, India wants to give incentives worth Rs. 40,000 crores to companies making and exporting mobiles from India. IT is a long-term plan. But it is really important to focus on innovation right now. The incremental ban on around 200 apps in trenches was followed by the commerce ministry’s decision to make it mandatory for the ‘Country of Origin’ of the government’s marketplace. In the same line, we also had the Atmanirbhar Bharat App innovation Challenge to hunt Indian talent. It was initiated to provide stimulus to Make in India and Atmanirbhar Bharat initiatives. But in the IT sector, we need govt interventions because it’s not just about building apps. It will be going to boost innovation and ingenuity. But we need upstream and downstream dependencies to be fixed, we need cloud infrastructure, data localisation, data centres to be placed in India. We need hardware. In 2014, we have only two mobile manufacturing units in India, by 2019 we’ve more than 268 which has led to 95 per cent of mobiles sold in the country being produced domestically. We are producing so many mobiles but the designs come from outside. We don’t own our phone designs. So, we need our intellectual pipeline to change. App ban and App Innovation challenge are good steps but they are to be backed by serious investments and technology development. We need to own our digital space. The security of 1.4 bn people is paramount to us. We need to be able to fortify that.
The Roadblocks-
So, we need to accept that this Atmanirbhar scheme is not 100 per cent problem-free. Arvind Subramanian, former chief economic advisor to GOI in the recent past cast his doubts on two parameters, India’s domestic demand and the credibility of Inward-Looking Policy that are the potential roadblocks to the realisation of this vision. We have planned things well, but we lose momentum in the execution stage. India has the capabilities but we need vast policy changes on the ground. India ranks 63rd in Ease of Doing Business. Just to open a decent restaurant in India, it requires 11 licenses. India does not have a very business-friendly atmosphere. Because of the prolonged US-China trade war, 56 companies shifted out of China last year out of which only 3 headed towards India. Winners, in this case, were Vietnam, Taiwan, Thailand, and even Bangladesh. Credit goes to lack of infrastructure, high cost of transport, expensive land, poor warehousing facilities, irregular and expensive power, complicated labour laws. But none of them have large markets like India. Vietnam has taken advantage of the Free trade agreement; it exports clothes to Europe with zero custom duty. India pays 9.6 per cent. So, India must make sure that we don’t lose out to other countries which are waiting right next door to snatch these opportunities emerging out of anti-china sentiments. Inflated numbers will not work. What will work is a practical roadmap.
India lately discovered that we have a mammoth trade deficit of US$50 billion with China which means our total imports from China are five times more than our export. China is one of our largest trade partners. Data from the last five years indicates China’s over growing economic footprints in India. India pays 2,548 crores to China for the slipper that we wear. We pay 6,248 crores to China for the chair that we are sitting on right now. TikTok made Rs. 3.4 crore on revenue of Rs. 43.7 crore in its first year of operation in India. PUBG used to earn 4.9 crore rupees every month. India’s 33 per cent population is under 15. Our toy market is 7500 crore rupees and almost 75 per cent of the toys come from China. India makes 22 per cent of the world’s generic medicine but 70 per cent of its raw material (API) comes from China. To date, we can’t make a simple Vitamin tablet from scratch. As Ashok V Desai, former chief economist, GOI said, the Manufacture of ideas and products has fallen far behind the invention of slogans. This needs to change.
Modi’s government began with the Make in India movement some time ago but that didn’t work due to the lack of a comprehensive policy framework to back it. But now he has set in motion a series of policy measures that will make India Atmanirbhar. The PLI scheme under the initiative has been a welcome move by the government. The focal point of this scheme is not only to give a substantial boost to the manufacturers but in the long run sectors such as R&D, Science and Tech, electronics, Agriculture, Pharma, Infrastructure are also likely to grow in this scheme. Samsung has already set up its entire mobile handset plants from China to India. They are in the process of relocating High-end colour television. An entire German footwear business has shifted from china to India. So, this PLI scheme has been structured well if we create this type of momentum, growth will happen.
As Ratan Tata mentioned, the barriers are coming down. And the one way to look at it is that it’s being driven by the hardships we are facing in the market place by the pandemic. In such a case, the smokestack industry finds it difficult to change the entire supply chain. We can improve on it but it’s by and large tweaking as compared to what’s happening in the digital area. But it is trying to wriggle out of the logistics challenge. No doubt it’s a long road ahead for the domestic industry and the entrepreneurs are still trying hard to ensure a smooth transition.
Atmanirbharta in defence
When we look at PM Modi’s call at self-reliance in defence, it has two targets. 1. To enhance indigenous procurement for the armed forces and 2. To enhance defence exports to US$5 bn by 2025. Towards that end, the MoD follows up with an announcement on banning the import of 101 defence items. It is perceived as a transformational step in making self-reliance. But the imports of critical subsystems cannot be banned. When it comes to national security, every sovereign nation wants strategic autonomy and you want to have all the wherewithal of manufacturing yourself. But in a globalized world, it’s not an easy task. We’ve been making serious and sustained efforts to be self-reliant in defence since the 1950s, but those were very limited successes. But the current policy initiative for self-reliance in defence is a highly ambitious one. There is no shortcut to this ambition.
Our country must have a large manufacturing capacity. Défense can only be a subset of that. This cannot happen overnight. Completely indigenising the defence sector is not a cost-effective option at the moment. But India being aspiring to be a great power beyond South Asia, we must have a systematic policy. It must be a subset of our larger manufacturing capacity. Systematic planning, Strategic guidance, and centre-driven leadership that is capable of providing an industrial ecosystem are highly crucial factors. It should all go together. The problem here is our system becomes bureaucratised and they are unable to sustain the animal spirit of the private sector, unable to influence the system excluded on grounds of security. Also, there are occasional concerns of corruption on different scales which is not going to go away so easily because these are merely the symptoms of some of the broader structural issues that we need to address.
FY 2021 and the way ahead
In budget 2021, the FM reiterated the government’s commitment towards building Atmanirbhar Baharat. This came in the form of an expansion at budget aimed at boosting capital expenditure, increased spending, and providing greater employment opportunities. Infrastructure was a primary area of focus as the government looks inwards by putting forward many proposals in the budget viz Public-Private partnership model at the major ports, National infrastructure pipeline, Public transport outlay of 18,000 crores, and deploying metro lite technologies in Tier 2 cities. It also included the allocation of mammoth over 1 lakh crores to build 11,000 km of the national highway corridor. In Manufacturing, FM proposed the creation of seven mega textile parks over three years. It is in addition to the government’s PLI for large-scale electronic manufacturing which strives to make India a global hub for manufacturing and exports. The govt’s capital expenditure for FY22 is 5-54 lakh crores which are 35 per cent higher than last year.
In Investment, we found the increase in FDI from the current 49 per cent to 74 per cent in some companies with some safeguards is promising as it will help grow the sector along with showcasing India’s openness in business to global investors. Secondly, a public sector bank recapitalisation of 20,000 crores has been proposed for FY 21 which seems inadequate to shore up the balance sheets of public sector banks. FM also indicated to a bill to set up a Development Finance Institution (DFI). A professionally managed DFI will be a boon for infrastructure financing. If we want manufacturing to be going up from 17 to 25 per cent of GDP in the next five years, that cannot happen unless our exports also do well. This is a truism. It should be our high priority mission. Currency policy and the exchange rate will also be an important aspect of the story.
The Coronavirus has cost the world approximately 16 trillion dollars. The recession didn’t bear any of the five continents. Global FDI fell 42 per cent. FY 2020 saw insolvencies and closures. FY 2021 is about building back. It’s about not letting China and history repeat themselves. IMF projects the global GDP growth of 5.4 per cent. World Bank believes that the global economy will expand by four per cent. To convert these numbers into reality, countries will have to adapt to the changing economic order. They’ll have to work towards diversifying their supply chains from China and realigning their priorities. The crisis has provided an opportunity for radical reforms. A recent UN report says, India’s FDI grew 13 per cent in FY 2020. Only two major economies of the world saw this trend despite the pandemic. US$54 billion were poured into India last year. A large portion of it has to do with investment in the digital sector, the Pandemic stricken world has pushed many companies and consumers online and this shift in consumer behaviours was more evident in India which is the 2nd largest online market. The same report also mentions, inflows in the US and Europe dropped to a negative bump but in South Asia, FDI rose 10 per cent- US$65 billion. And this growth again was steered buy India.
The necessity comes before practicality. At this stage, every step matters and every step is crucial. We must utilise this opportunity to propel us into 1991 2.0. We must dare to match the ambition with passion. It’s high time for our talk to meet action. We need to get our house in order. It’s never an opportune time but if not now then when? And lastly as Idowu Koyenikan has said: “Your pride for your country should not come after your country becomes great; your country becomes great because of your pride in it.”
-The writer is a student of Political Science in the University of Delhi. The views expressed are personal and do not necessarily reflect the views of Raksha Anirveda
