Gopal Krishna Agarwal,
Prime
Minister (PM) Narendra Modi, at a recent India-United States (US) business
summit, invited global investors to invest in India. He told them that India
offered a combination of “openness, opportunities and options”; pointed out
that India had undertaken deep structural reforms, improved domestic
manufacturing and was committed to diversified international trade; and spoke
of merging domestic production and consumption with global supply chains.
PM Modi has never shied away from taking tough decisions. The privatisation of the Indian Railways, public sector disinvestments, reducing corporate tax and opening up coal mining to the private sector are measures which may have been unpopular in certain quarters, but are necessary for the long-term health of our economy, particularly in strengthening our manufacturing base.
To achieve the goal of a politically and economically strong India, the Aatmanirbhar Bharat Abhiyan is a 360-degree initiative to make India an economic superpower. The focus is on five pillars of development: Economy, infrastructure, technology, demography and demand. Our targets are the factors of production. These are land, labour, legislation and liquidity, improving their efficiency and reducing the cost to make our industries globally competitive. This is not restricted to manufacturing but targeted at direct benefit transfers to the needy. This has also resulted in demand creation in the economy and helping the vulnerable, particularly farmers, migrant workers, and daily wagers.
The
campaign for self-reliance has little to do with disengagement with China
alone. We discerned the designs of Chinese economic imperialism early on. Our
delinking from China began much early than many would like to believe. It began
with the PM opting out of the Regional Comprehensive Economic Partnership (RCEP).
The Chinese leadership tried hard to pressure India to join RCEP or face
isolation in the grouping’s 16 countries. But the PM stood firm. In 2010, the
United Progressive Alliance (UPA) government signed Free Trade Agreements
(FTAs) with 10 Association of South East Asian Nations (ASEAN) countries, the benefits
of which were reaped by China as well. Reduced custom duties from these
countries were creating an inverted duty structure in our domestic
manufacturing sector, destroying local industries and converting manufacturers
into traders.
Therefore,
in the Union Budget in 2019, the government increased import duties on over 56
items spread across eight classifications. Items such as toys saw an increase
of 60% from 20% earlier. All these efforts were to protect domestic industries
from the onslaught of dumping and competition. Without first strengthening
domestic manufacturing by providing a level playing field, and reducing costs, and increasing the efficiency of factors of production, we cannot open the
floodgates for imports.
The
Chinese leadership had almost managed to get the UPA government to accept RCEP.
There are reports to suggest this. India’s signing of FTAs with ASEAN
countries, without strengthening India’s domestic industries before opening
them to regional and global competition, shows that the country’s interests
were compromised. One important question must be asked. Why did India, which
was a global leader in the pharma sector, gradually concede Active
Pharmaceutical Ingredients (API) production to China? The UPA must answer this.
As of now, with the coronavirus pandemic, the world has
realized the risks of over-dependence on supply chains from one nation. We rose
to the occasion by identifying this as a risk diversion strategy for global
manufacturing companies. It provided India an opportunity to deal domestically
with the challenges thrown up by the coronavirus. Further, the Chinese
aggression at the Line of Actual Control (LAC) at the Galwan Valley forced the
government to immediately impose trade curbs and ban 59 apps from China. This
is being hailed as a timely move, though certain economists and industrialists
have sounded a note of caution on its long-term impact. But their logic seems
based on the line propagated by the Chinese media and China’s government
officials.
Fortunately,
what we import from China is mostly in areas in which India has the domestic
technology to leverage for import substitution. Most of these items do not come
under the essential consumption requirements category and are generally
non-merit goods. Except in pharma, which China dominates through the supply
chain of APIs, it has not been able to penetrate strategic sectors.
India’s manufacturers need to seize this golden opportunity in
sectors such as toys, electrical equipment, electronics, minerals, chemicals,
iron and steel, plastics, furniture, sports goods, musical instruments,
fertilizers, and apps. Earlier, the Ministry of Commerce and Industry had
identified 12 such sectors; these now constitute 20 sectors. And 371 items have
been identified for increasing import duties including non-tariff barriers on
some of them.
If you
look into the comparative advantage theory domestically, we have to focus on
areas such as agriculture, particularly food processing, textiles, affordable
housing, health care, and education, and increase their contribution to India’s
Gross Domestic Product. These sectors can generate large-scale employment and
are looking up. This will be our path to recovery.
Gopal
Krishna Agarwal is the Bharatiya Janata Party’s national spokesperson on
economic affairs
The views expressed are personal
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