Is “Aatmanirbhar Bharat Abhiyaan” anti-globalization?
- In Economics
- 11:35 AM, Apr 10, 2021
- Rishika Nayyar
“Aatmanirbhar Bharat” (Self-reliant India)- the phrase first used in May 2020 to denote the philosophy behind the new economic policy in wake of the pandemic. Since then, it has raised questions globally and locally - Is India turning to economic isolationism, anti-globalization, protectionism??? The questions about and the interest in the philosophy guiding the economic policies of a nation that is expected to be the third-largest economy in a decade are not surprising. Startling, however, is the fact that almost a year forward, the questions still arise as soon as any new policy announcement is made- case in point- revision in customs duty announced as part of the 2021-22 union budget.
A very strong and clear aim underlying “Aatmanirbhar Bharat Abhiyaan” is to make the country an important part of the global supply chains, strengthening the manufacturing sector to make for India and the world. This main objective by itself highlights the ambition to gain a foothold in the global market while holding a strong ground in a large and growing domestic market. How can the ambition to be an important participant of the global supply chains and produce for the world be anti-globalization? Because the import tariffs are being increased? It is true that rising import tariffs are the signs of protectionism, to allow space for the domestic industry to grow in the absence of foreign competition, cheap imports. However, the rise in tariffs this time isn't really protectionist in nature. These higher tariffs - for instance on electronics and auto components are put in place to encourage local manufacturing- “both” by the domestic and foreign firms in India.
Production linked incentive (PLI) is an important scheme designed to ramp up local production in India. Interestingly, attracting foreign direct investment (FDI) is a vital mandate under the scheme, with the red carpet being rolled out for attracting foreign companies to invest in India, in various sectors including Electronics and Automobiles. In such a scenario, raising tariffs on the imports of sectors (especially on components or intermediate goods) covered under the scheme is imperative. This is because in the absence of such tariffs, as has been in the past, FDI in the manufacturing sector just involves foreign companies setting up assembly units where low-cost Indian workers do the job of putting together imported components that are produced elsewhere. The actual manufacturing activity that has the potential of upgrading the skills and capabilities via employee training, vendor development programs, and transfer of production-related know-how and technologies takes place in some other country. The tendency of following this practice would be higher with the PLI scheme in place.
Given that India is a latecomer to the manufacturing sector, the loss of opportunity to learn from foreign firms in the home country impairs the possibility of catching up. This would potentially defeat the central quest for attaining "aatmanirbharta" (self-reliance) and becoming a dispensable part of global supply chains. Hence, instead of being completely protectionist in nature, the rise in tariffs has a distinctly clear economic agenda.
So, the debate on whether or not India is shutting its doors to globalization must take into consideration both its trade and investment elements. The announcements of higher import tariffs are being made alongside the increase in the inward FDI limits under the automatic route (such as in the insurance and defense sectors) and offering attractive packages to encourage foreign firms to invest in other sectors and avail benefits under the PLI scheme. These steps are collectively taken with the ultimate objective of making India an aatmanirbhar nation- for itself and for claiming its rightful spot in the global supply chains. Seen together, the recent policy moves are not consistent with the anti-globalization narrative. In fact, the campaign (abhiyaan), among other policy measures, relies significantly on the elements of globalization, with the ambition to strengthen it.
While the message that India’s “Atmanirbhar campaign” aims to strengthen globalization is being sent out explicitly, it would be reasonable for the government to also become "vocal" about the campaign's "dependency on foreign elements”
Image Source: Hindi Yojana
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