News By/Courtesy: Gunjan Dayal | 26 Jun 2020 20:31pm IST

HIGHLIGHTS

  • Modi has raked up calls to improve local manufacturing.
  • China is India's largest source of imports, with last year's purchases of electronic devices, nuclear reactors, and organic chemicals totaling nearly $70 billion.
  • The economy is in a state of collapse.

PM Narendra Modi wants India to become more self-reliant, but it won't be easy if the experience over the past few years is anything to go by. Faced with disruptions in China's supply of raw materials due to the pandemic and millions of job losses following a nationwide lockout, Modi has raked up calls to improve local manufacturing and reduce India's reliance on imports. A shortage of personal protective equipment at the start of the outbreak increased his resolve- and within just two months, India became after China the world's largest maker of PPE kits. That success only emboldened Modi, as he urges Indians to purchase local goods. Now a military standoff with China adds fuel to those calls. After a deadly confrontation this month between soldiers from both countries along a disputed Himalayan frontier, Indian political leaders have called for a boycott of Chinese goods and even higher tariffs on neighboring items. Historically reluctant to snub cheap Chinese imports, traders have now come up with a list of 3,000 items including toys, watches, and plastic products that can easily be replaced by local manufacturing. With his Make in India initiative, Modi previously tried to improve domestic manufacturing but this had limited success. Through this program, the government vowed to cut red tape and aid businesses in the country setting up shops. The goal was to increase manufacturing share in the economy from 15 percent in 2014 to 25 percent by 2020. But stringent local content regulations in that program backfired by raising production costs for firms, while domestic demand declined during a prolonged recession in the economy, the share of the manufacturing sector remained nearly stagnant at around 15%. Given the downturn in the dominant services sector, Modi has little choice but to concentrate on the manufacturing-the primary driver of employment growth. With the economy on track for its first full-year contraction in four decades, authorities see industrial growth as the key to job creation for some 1 million young people who enter the workforce every month. India has introduced new steps to encourage self-reliance, including prohibiting foreign firms from bidding for government contracts up to a value of Rs 200 crore and offering free collateral loans to small businesses accounting for around 48 percent of India's exports of goods. Analysts believe the new steps would do nothing to improve productivity for local firms. "These are all medium-term strategies India already had. Now it is taking a little bit of political color," said NR Bhanumurthy, vice-chancellor of Bengaluru Dr. BR Ambedkar School of Economics. "If you want to deal with China you need to be very competitive. That’s not an overnight job." The politically influential Swadeshi Jagran Manch, a BJP-aligned group, was at the forefront of pushing Indians to reduce their importation dependency. But that's easier said than done. China is India's largest source of imports, with last year's purchases of electronic devices, nuclear reactors, and organic chemicals totaling nearly $70 billion. Beijing enjoys a trade surplus with New Delhi of some $50 billion. Modi is also aiming to attract investment as businesses around the world look to re-evaluate their supply chains and diversify their operations in China. India has been trying to woo investors since the US-China trade war, but many favored places like Vietnam, Thailand, and the Philippines instead, given concerns about India’s archaic land and labor laws. While India is simplifying labor laws and has cut corporate tax rates to match Asian peers, challenges remain in the form of cumbersome rules on land acquisition, foreign exchange controls, and lethargic bureaucracy. Companies including South Korea's top steelmaker, Posco, have given up on their investment plans for India, owing to frustrating land acquisition delays. The result is that, despite being a net exporter of iron ore, India imports 6.69 million tons of finished steel. Words alone won’t be enough to attract investors, said Jayati Ghosh, an economics professor at the Jawaharlal Nehru University in New Delhi. “The economy is in a state of collapse,” she said. “if you’re a global company interested in a new location for part of your supply chain, you need excellent infrastructure.

THIS ARTICLE DOES NOT INTEND TO HURT THE SENTIMENTS OF ANY INDIVIDUAL, COMMUNITY, SECT, OR RELIGION ETCETERA. THIS ARTICLE IS BASED PURELY ON THE AUTHOR'S PERSONAL VIEWS AND OPINIONS IN THE EXERCISE OF THE FUNDAMENTAL RIGHT GUARANTEED UNDER ARTICLE 19(1)(A) AND OTHER RELATED LAWS BEING FORCE IN INDIA, FOR THE TIME BEING.

Section Editor: Pushpit Singh | 27 Jun 2020 9:33am IST


Tags : #AtamnirbharIndia

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