India moves towards Swadeshi during Covid times

 

In the past few days, the new in-word in India is ‘Atmanirbhar.’  Indian Prime Minister Narendra Modi mentioned the term ‘Atmanirbhar’ meaning ‘self-reliance’ more than nineteen times while announcing the stimulus package to deal with the economic slump in the wake of Covid-19 in India. In his 30- minute long televised address on 12 May 2020, PM Modi pitched for ‘swadeshi’ model of economic development and urged people to go ”vocal for local ”.

Coronavirus started as a medical crisis but soon turned into an economic crisis and brought the global economy to its knees. India is under lockdown since 25 March 2020, – Although government has allowed some relaxations to carry limited economic activities from 4 May 2020. The prolonged lockdown has caused disruptions in the supply chain and has led to demand destruction in the economy. The worst affected are those industries which are hugely dependent on imports for manufacturing like Pharmaceutical Industry and Electronics Industry. The complete shutdown of the economy revealed the fault lines of India’s manufacturing sector. It brought the realisation that India is heavily dependent of imports.

India has learnt a valuable lesson from this Covid-19 Pandemic. There is an urgency to lower the heavy dependency on imports in critical sectors like Pharmaceuticals, Medical Equipment, Diagnostic Kits, Telecom Gears ,Electronic components and major defence equipment.

The World Health Organization (WHO) declared coronavirus disease a ‘Public Health Emergency Of International Concern’ on 30 January, 2020. Even a month later, there was no production of Personal Protection Equipment (PPE) Kits in India. All demands were met through imports.

The Indian healthcare sector which is expected to reach US$ 280 billion by 2020 is hugely dependent on imports of critical medical equipment. The US alone accounts for 25-30% of India’s medical device imports. Indian Pharmaceutical Industry enjoys an important position at the global stage. India is the largest exporter of generic drugs. Indian Pharmaceutical industry supplies 80% of drugs used to combat AIDS globally and fulfils 40% of generic drugs demand in the US. Despite having global recognition and being a US $50 billion industry in 2020, Covid-19 Pandemic has clearly highlighted the pitfalls of Indian Pharma.

India imports approx. 90% of Active Pharmaceutical Ingredients (APIs) used to make antibiotic drugs. China alone contributes about 70% of India’s API imports. 

However, this sector took a complete U –turn during this pandemic within few months. From importing PPEs, India started producing 2 lakh (200,000) PPEs daily. Currently, India is exporting the same to other countries.  Thus, one can argue that India has the capability to go completely ‘swadeshi’ in this sector in the coming days.

In Telecom sector, India imports almost 90% of its gear needs. According to “The Telecom Regulatory Authority of India” (TRAI), India imported US$21.8 billion of telecom instruments and exported only US$1.2 billion in Financial Year 2018. The same trend is visible in electronics industry. In electronics sector, India’s export was only US$2.1 billion while imports stood at nearly US $ 7 billion in Financial Year 2018. This highlights two major issues. Firstly, huge imports of critical telecom gears raises serious internal security implications for India. There is a clear dependency on China to meet these demands. Secondly, due to constant importing of the equipment, there is a lack of thrust in Research and Development in these areas. A push towards domestic innovation would lead to further generation on employment, attract better minds and become completely self-sufficient.

India was the world’s largest importer of major arms between 2012-16 and accounted for 13 % of the global total. India is still at the second place in the global arms importer list. Most of the critical defence systems in India are of foreign origin. Despite the efforts of ‘self-reliance’ and ‘indigenisation’ – massive imports in defence sector reiterate the facts that India has not been able to build it’s domestic defence industrial base.

National Security Advisor (NSA) Ajit Doval has warned the government that Chinese dependence on APIs can be a national security threat. The issue of heavy dependency on imports for critical items was raised by policy advisors and Governmental Committees from time to time.

The global Covid-19 pandemic and the lockdown that India imposed on March 25, 2020 has caused an unprecedented economic crisis. The economic meltdown due to covid-19 crisis is much larger as compared to the 1991 or even to the 2008-2009 economic meltdown. Because of zero revenue due to the prolonged national lockdown aimed to stop the spread of Covid-19 virus , there were no business operations carried out by MSME sector. Goldman Sachs has predicted that India’s GDP may shrink by an annualized 45% in the June Quarter.

To mitigate the huge losses caused by Covid-19 Crisis and to provide relief to the stressed domestic industries, the Government of India announced the economic stimulus package of INR 20 lakh crore, which is equivalent to 10% of India’s GDP. PM Modi stressed on making India self-reliant by boosting demand, economy and by optimal use of demography and infrastructure. He also stressed at the urgent requirement of reforms with respect to land, labour, laws and liquidity.

Small businesses, salaried workers, discoms and non-bank lenders have been given governmental support through funding, credit facilities and loans.  The provisions for MSME included collateral free loans of INR 3 Lakh Crores that will enable 45 lakh units to resume business. All the global tenders up to INR 200 Crore is now disallowed for central government contracts. The Government tried to set up an incentive structure to usher a new era of growth with incentives of cheap loans, fewer compliance standards and tax benefits.

The focus on agriculture sector was through infrastructure development, agriculture market reforms, and agricultural produce price and quality assurance. INR 1 Lakh Crore has been set up for strengthening farm gate infrastructure like cold storage chains and post harvest storage facilities. A fund of INR 500 crore was set up to help bee-keepers. INR 15,000 Crore has been facilitated towards development in dairy infrastructure and investments in cattle feeds.

For the first time, government has introduced commercial mining of coal to reduce the import of substitutable coals and to increase India’s self-reliance in coal production.

Just a day after Prime Minister’s call for swadeshi, Indian Home Ministry announced that all the canteens of the Central Armed Police Forces (CAPF) will sell only domestically manufactured goods from 1 June 2020.

Only time will tell the success of India’s self-reliant mission but it is certain that post covid-19 Indian economy will favour domestic industries more than ever before. This will push an alternate narrative of Globalisation in India and other countries wherein new global orders would emerge backed by a strong and self-reliant domestic economy.

Note: The views expressed here are those of the author and do not necessarily reflect the views/positions of the Political Chronicler

Ravi Raj

Ravi Raj is a student at School of Liberal Education, Galgotias University. He is pursuing Economics as his specialisation. He keenly follows news on Indian Economy, Financial Markets and Business Economics.

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