The recent brouhaha over the concept of ‘self-reliance’ brings back memories of the 1970s and one particular slogan that was popular back then. Along with the myriad set of messages about the joys of family planning and male contraception, those who were around in the 1970s would remember this slogan – ‘Be Indian, Buy Indian’.
This was a slogan that was imprinted on walls, buses and poster and hoardings across Indian cities. This slogan was particularly popular during the dark days of the Emergency in the mid-1970s.
But this ‘ideology’ vanished from the political and economic lexicon of the country by the 1980s.
After being in deep freeze for more than three decades, self reliance has made a rather triumphant return now. The pandemic-ravaged world has woken up to the vulnerabilities of being dependent on China’s global supply-chains.
Decisive shift
India, which started taking baby steps to reduce dependence on Chinese imports in early May, made a more decisive shift after the border clash in the Galwan Valley which tragically resulted in the deaths of Indian soldiers. The immediate move was to ban 59 Chinese apps including the immensely popular TikTok.
Even before the border clashes, the Modi government had made approval for Chinese investments mandatory. It also put in place a policy to ward off ‘predatory’ Chinese takeovers of India companies. The border clash gave the government the political heft to move further down the path of self-reliance.
The government now has given a range of incentives to Indian industry to make products that were so far being imported from China. It is giving Rs 10,000 crore for the pharma sector and Rs 40,000 crore for the electronics sector as incentives over five years to develop domestic manufacturing capabilities. This incentive scheme is expected to wean industry away from Chinese imports especially in Advanced Pharmaceutical Ingredients (APIs). These are performance-linked incentives so industry will have to achieve certain milestones to avail themselves of the scheme.
This has brought cheer to the industry but now comes the hard part. Industry has to roll up its sleeves and get down to business and make a concerted attempt to reduce reliance on China.
Self-reliance and BJP - natural allies
Though the concept of self-reliance went out of vogue soon after the 1991 reforms were ushered in, it didn’t quite vanish from the policy agenda. Sections of the BJP and the RSS always harboured a deep suspicion towards foreign investment. For many in the BJP and RSS, developing a strong domestic industry with little reliance on the outside world was a strong component of their version of nationalism. The Swadeshi Jagran Manch, affiliated to the RSS, is well known for its antipathy towards anything foreign. It has gone on record saying that “FDI has done more bad for the economy than good.”
The RSS affiliated-trade union Bharatiya Mazdoor Sangh’s views on the economy, especially on foreign investments are remarkably similar to the Left parties. The RSS’s economic views are cheekily described as “Communism plus cow” by columnist Gautam Mehta.
Also the BJP’s traditional support base in the North and Central India came from small traders and businessmen – the kirana store owners being an important segment. Which is why even the Vajpayee regime, despite pushing the reforms agenda, especially in cutting import tariff and disinvesting from public sector companies, could not liberalise rules on foreign investments in the retail sector, thanks to the vehement opposition of kirana store owners.
Incrementalist too
Some commentators rather naively assumed that when Narendra Modi became Prime Minister in 2014, he would unleash far-reaching economic reforms which they felt were being stalled during the UPA regime.
But to their disappointment Modi turned out be just as much as an ‘incrementalist’ on the reforms front as his predecessors.
The Modi government on one hand went about cutting red tape and boosting India’s ranking on ‘Ease of Doing Business’ with the hope of inviting foreign investments (remember ‘Make in India’?). But on the other hand its constant tweaking of e-commerce investment rules at the behest of the BJP-leaning Confederation of All-India Traders (CAIT), shows that the party couldn’t quite shake-off its core misgivings towards foreign investments at least in some sectors.
Self-reliance - then and now
Despite the BJP’s ambivalent stance on foreign investments and reforms its conception of self-reliance differs significantly from the Nehruvian version which was popular in the 1950s.
In the Nehruvian version of self-reliance, the public sector played a crucial role in developing domestic industrial capacity especially in heavy industry. Foreign investments in the Nehruvian model were shunned and high tariff walls insulated the domestic industry from foreign competition. Though India industry groaned under onerous regulations during this era, many businessmen learned to ‘game’ the licence-quota’ Raj and thrive. Also insulated from foreign competition, Indian industry was handed the huge domestic consumer market on a platter.
But the current version of self-reliance has made foreign investment an important component despite the current regime’s ambivalence to it. The way the Modi government went about inviting foreign companies looking to relocate from China in the aftermath of the pandemic is proof of this.
Also another significant divergence from the earlier model is the Modi government’s commitment towards selling government stake in public sector companies, which no longer occupy the “commanding heights” of the economy. By easing credit for industry, especially the MSME sector, the government now sees itself as a facilitator of business rather than being an economic player producing goods and services.
In a world that is turning inwards, it is hardly surprising to see the Modi government take this course. But will the ‘Modi model’ or Atmanirbhar Bharat succeed where the earlier version failed, is the Rs 20-lakh-crore question.