Vijay Kumar Gaba: Atamnirbhar

Tuesday, May 18, 2021

Self-reliance is not limited to managing the current account

Self-Reliance (Atamnirbharta) has been one of the key policy objective of Indian government, especially during the second term of the incumbent prime minister. It is clarified that self-reliance does not connotes self-centred systems; rather it encompasses a concern for the whole world’s happiness, cooperation and peace.

The stated aim is to make the country and its citizens independent and self-reliant in all senses. The five primary focus area identified to achieve the objective of self-reliance are —

Economy — Quantum jumps in various growth parameters, not just incremental changes.

Infrastructure — Building infrastructure that represents modern India.

Systems — Making systems technology driven.

Demography — Making the population vibrant.

Demand — Realizing full potential of the power of demand.

A number of programs, schemes and incentives have been announced in past one year under the umbrella of Self-Reliant India, encompassing support to a variety of sectors like agriculture, MSME, manufacturing, housing, infrastructure building, and exports, etc.

From various documents and public speeches by the prime minister and his cabinet colleagues, it appears that the idea of self-reliance is still at the stage of developing a conceptual framework; even though a slew of schemes and incentives have already been placed under this umbrella. Defining this idea in terms of a robust conceptual framework may actually take few more years, given the extraordinary circumstances presented by the Covid19 pandemic, which may result in result in reprioritization of fiscal and monetary policy objectives.

There is little debate on the point that digitalization has to be at the core of any economic development and modernization plan for future. In this context, I find it pertinent to highlight some of the data from ‘Digital Economy Compass 2020”, published by statista group. The report, inter alia, highlights some of the key global markets and consumption trends that may sustain in post Covid19 world. It also mentions the key players in each evolving market segment.

The services like healthcare, fitness, learning, entertainment, gaming, 3D printing, contact tracing (bio metrics, travel, GPS, demographics, talent hunt, etc.), communication, financial services (payment gateway, money transfer, transactions), collaborative software development, cloud hosting, cybersecurity, business and manufacturing process automation have acquired larger part of the markets (consumption, investment, and development etc.)

Manufacturing processes are being increasingly dominated by artificial intelligence, robotics, internet of things, etc. Development of 5G ecosystem is another major area of growth in global economy. Blockchain technology has made a prominent place in global commerce ecosystem.

Global trade is overwhelmingly dominated by ecommerce. Last year Chinese ecoomerce giant Alibaba alone logged a total merchandise trade that exceeded GDP of all but 14 top nations in the world.

Work from home trend is likely to sustain for longer than presently expected. This is leading to higher demand for products and services like home automation, food delivery, gaming, streaming of music and video, home management services, fitness, e-dating, shared mobility etc.

All these trends are essentially leading to materially higher demand for electronic devices (phones, tablets, laptops, servers etc.) and semiconductor chips to be embedded in various appliances (washing machines, cars, alarm systems, automatic machines, smart TV, refrigerators etc.)

Software is essentially the fulcrum that supports this entire global digital ecosystem. There is a variety of software development services like enterprise software, system infrastructure software, application development, and productivity enhancement software, etc.

The point to note is that presently Indian capabilities in these spheres are limited. Only 4-5 Indian companies appear on global podium, but their participation is mostly limited to software services. In most other areas our capabilities and size are limited in global context. The government programs and schemes (e.g., production linked incentive for mobile manufacturing) are presently focusing on low end value addition (mostly component assembly and contract manufacturing). If India has to become self-reliant in the modern world, the focus has to be on joining the top league in global digital ecosystem. Manufacturing mobile phones and chemicals may help in little more than managing the current account.

Tuesday, June 30, 2020

Self Reliance is not about ultra Nationalism

In an interview with the Manchester Guardian in 1965, the then foreign minister of Pakistan Zulfikar Ali Bhutto famously said, “If India builds the bomb, we will eat grass or leaves, even go hungry, but we will get one of our own. We have no alternative.”

The world has seen how Pakistan has built the nuclear bomb and what cost its citizens have paid for the toy that will perhaps never be unboxed. It may be argued that the nuclear arsenal build by Pakistan and India has created a strong enough deterrence for any war between the two countries. Regardless, we had a war in Kargil (1999) and significant rise in the violence in the Kashmir Valley and along the line of control (LoC) since both countries declared themselves to be the nuclear powers in 1998. India has struck twice deep into PoK and changed the status quo materially in J&K in past 5 years. Many soldiers and civilian die every year on the both sides of LoC; and Pakistan economy is surviving on the IMF support. Bhutto did not realize that hungry people would need food to survive, which nuclear weapon cannot provide.

Similar is the sentiment in India these days. The politicians are exhorting people to shun Chinese goods; and people appear ready to forgo consumption of goods with Chinese connection. "Self Reliance" is the war cry against China.

Being self reliant in my view is the best economic policy. But, "self reliance" could have entirely different connotations. Even within the government there appears no consensus over the form and degree of "self reliance" we are talking about in present day context. Listening to and reading about the views of various functionaries of the government, politicians in power, and people supporting "boycott China" movement on social media and streets, I find the following popular perceptions of "self reliance" -

(i) Use only Made in India products.

(ii) Become a manufacturing powerhouse like the South East Asian economies did in 1990s; and produce for the global economies. In the process we should encourage the global corporations to either relocate their manufacturing facilities from China to India; or source their global requirements from the manufacturers in India.

(iii) Become trade surplus economy; especially in manufactured and agriculture products, reversing the colonial model of development, i.e., supplier of raw material and importer of manufactured items.

(iv) Ban "unnecessary" imports from China, e.g., toys, decorative items, furniture etc.

(v) Become "self reliant" in defence production.

(vi) Ban all investments by Chinese investors in Indian businesses.

However, a deeper probe reveals that most people have no objection to the investments from and trade with Japan, Korea, UK, European Union, Canada, Russia, Australia, Gulf Countries, Latin American and African countries. Insofar as the USA is concerned, the feelings are mixed and ambivalent. Most of the people however do not mind deeper economic relations with the USA, provided the USA offers little more favorable terms in terms of VISA and taxation.

So basically, when we say "self reliance" and "trade barriers" we are primarily talking about limiting trade with the "enemies" China and Pakistan" and restricting the movement of labor from Bangladesh.

The worst part is that very few people leading the "boycott China" movement from the front, do not have even basic knowledge of the contours of India's trade with China. They hardly realize that the so called "non essential" items imported from China are a miniscule part of the total trade, but may be accountable for the employment and affordable consumption of millions of lower middle class and poor people in India. ....to continue