Make in India: Will Swadeshi 2.0 Help India Outperform China?
After COVID, will India remain an emerging economy, or will it emerge Atmanirbhar and more?
Swadeshi – that clarion call for self-reliance – first heard in 1905, asking Indians to boycott British products and embrace the home-grown, is making a comeback it seems, in the wake of the COVID-19 pandemic. Only this time, the object of protest is China. Open WhatsApp or Instagram today, and a video or a meme asking to ‘Say No to Chinese Goods’ or ‘Buy Indian, Be Indian’, is likely to pop up.
Growing outrage over China's perceived complicity in the spread of COVID-19 has given rise to this ‘Boycott China’ ethos in India, echoing a groundswell of similar anger in other countries. The trade war started by the US against China two years ago seems to be globalising in the wake of the pandemic, as countries undertake a slew of anti-China measures that range from re-shoring businesses from China, creating alternative production chains, to stemming Chinese investments.
Japan's retraction of its businesses from China, the Indian government's revision of its FDI policy in the aftermath of the People’s Bank of China raising its stake in HDFC, the US Senate's bill to delist Chinese companies from American stock exchanges, are examples. Of course, China is responding with retaliatory tactics, as is only to be expected.
Speed With Which COVID Has Spread Is Due to Travel & Trade – Outcomes of Globalisation
As fear and mistrust grow, not just of China, but about globalisation as well, countries are starting to look inward. As walls come up, the question arises: How should India chart its course to navigate both pitfalls and opportunities presented by the current situation? More pertinently, can the calls for ‘Swadeshi’ and ‘Atmanirbharta’ – the Government of India's post COVID-19 strategy – work to India’s advantage?
By most accounts, globalisation was already in retreat, particularly since the financial crisis of 2008, when ‘Occupy Wall Street’ became the rallying cry of anti-globalists protesting the bailout of big business.
Anti-globalisation has always been a loose coalition of grievances – its main unifying force being a broad agenda against runaway capitalism, free markets, big business and climate change.
Its legions encompass climate justice warriors, economic justice and labour advocates, as well as cultural hawks and anti-immigration groups, all intent on showcasing globalisation's fissures, that belie its utopian promise of greater wealth and benefits for all through trade. This is not surprising, given globalisation's alleged role in climate change, and in creating glaring voids and inequities, not just between emerging nations and developed nations in the west, but also in developed economies' middle classes hollowed out by automation, off-shoring or immigration.
Brexit, and the rise of anti-immigration /anti-globalisation forces from Brazil to Turkey, can also be viewed through this prism. Even the speed with which the COVID-19 virus traversed the globe is attributed to travel and trade – two outcomes of globalisation.
Post-Pandemic Reactions Are Arrows Shot Into Globalisation’s Headwinds
The biggest irony today is that joining this chorus of plaints against globalisation and its handmaidens – immigration and offshoring – is its chief architect and purveyor – the US. So it seems that the post-pandemic reactions are just arrows shot into globalisation's headwinds that had already started blowing.
In this context, are the calls for Swadeshi to be heeded? Swadeshi against colonial Britain was essentially about ‘Make in India’, for Indians. It called for domestic production and consumption, but in a world that was not quite as interconnected. The country then, like others, was not enmeshed in a global system of finance, credit ratings and chain production; where an earthquake in Asia could trigger a business crisis on the other end of the world, or where countries' financial solvency was determined by international agencies.
Today, economies are so entwined, that it is hard to come up with a finished product, other than perhaps agricultural, that has a singular origin.
Today, even a consumer-led Swadeshi movement, without State sanction, may run into limits. Much of the raised standard of living that a vast number of Indians have experienced in the last couple of decades comes from the easy availability of cheap consumer goods, mainly from China. Access to these products – from phones to footwear – is the only opening to a perceived richer, better life.
Will they now be willing to forego what the Chinese juggernaut has brought them?
Why the Proposition of Boycotting China Is Complicated
For Indians in the higher strata too, domestic production will have to match global standards and variety, which they are now used to. Will those choices have to be forfeited? Will jingoism and outrage riding on a ‘Buy Indian’ jingle be enough? At best, it may work for a short while. But for the longer term it is unlikely unless domestic production steps up for substitutes in price, quality and branding.
Import substitution is easier said than done. The proposition of boycotting China is even more complicated.
India's trade with China – in auto parts, pharmaceutical ingredients, essential chemicals, among others – currently precludes this option. This is the inconvenient truth. The recent dismay expressed by Indian startups at the closing of Chinese funding, further reveals the extent of dependence. Even a subtle capital flow restriction, as India attempted after the HDFC equity stake enhancement last month, may have far reaching repercussions.
The Chinese government is not shy about hitting back.
Any government-sanctioned boycott or barrier will invite instant retribution as Australia is experiencing.
Then there is the question of Indian ambition.
The disrupted supply lines and global disenchantment with China has given new impetus to position India as an alternative global value chain destination.
And this is where the original calls for Swadeshi differ fundamentally from the Swadeshi call of today. Swadeshi was about self-reliance and ‘Make in India’, for Indians. Swadeshi 2.0 is about ‘Make in India’ – for India and the world. For Swadeshi 2.0 to happen however, significant reforms in land labour, capital, law and business regulations are needed.
Kickstarting ‘Make in India’: Atmanirbharta Must Go Hand-in-Hand With Swadeshi 2.0
When news surfaced recently that Vietnam and Indonesia, not India, were being considered as alternatives to China, there was not much surprise. Realistic observers have always known that India has a long way to go in being a serious contender for this spot. The Government of India's stated response to all this – Atmanirbharta or self-reliance – seems calibrated to take these factors into account. Officials are taking care to point out that insularity or isolation is not the goal.
‘Atmanirbharta’ has to go hand-in-hand with ‘Swadeshi’ 2.0, as a starting point for ‘Make in India’ and going global.
Atmanirbharta has been positioned as more than a mere recovery response to COVID-19; it includes some long-pending reforms, especially in the farm sector. However, these are not enough; there are still many areas of business policy along with the country's soft and hard infrastructure, and protections and safety nets for workers, that are needed. Plus, more often than not, there is a gap between the government's intent and its ability to push an idea through. A case in point is the announcement over a year ago of an Indian sovereign fund – it is yet to see the light of day. Had it been in place, it could have used the current opportunity to India’s advantage. This, and other ‘lost in translation’ episodes need serious attention for India to be both self-reliant and a global player.
Why India & China May Not Want to Disrupt Trade Ties Right Now
In May itself, the Finance Minister made several announcements opening hitherto closed areas to the private sector, along with privatisation of key public sector companies. While this may be a welcome move to increase efficiencies and bolster the private sector role, India also needs to see that its plan for encouraging private domestic producers does not breed oligarchs, creating a situation akin to Russia, because only a handful of corporations or tycoons with deep pockets have been left with enough funds to invest in such a privatisation opportunity, post-pandemic.
Finally, there is one overarching factor that could actually determine attitudes and outcomes on the ground and in government: India's geopolitical realities vis-a-vis China, with the recent escalation of border skirmishes. It is hoped, as always, that these skirmishes don't escalate into war. Both sides recognise the perils.
But the best protection, ironically, comes from interdependence on trade and investment itself.
Neither side will want to disrupt trade lines if they are significant, especially not now.
Preventing Escalation With China Is The Key to Navigating Winds Of Change
Unlike with Pakistan, where the deaths of soldiers along the Line of Control happens frequently, even one death in a skirmish in Pangong Lake or Galwan Valley can change the game – the groundswell of resentment could easily spill over into a surge. Therefore, preventing escalation, a strategically thought-through interface with China, along with greater engagement with the world – while getting our house in order – may well be the key to navigating these winds of change.
Haruki Murakami in Kafka on the Shore had this to say: “...Once the storm is over, you won’t remember how you made it through... But one thing is certain. When you come out of it, you won’t be the same person who walked in.” That's what this storm is about. Will India remain an emerging economy, or will it use this COVID-19-induced storm to sail head on, and emerge Atmanirbhar and more?
(Radha Roy Biswas is a public policy and advocacy professional by training. She returned to India after 15 years in the US. She consults in her field and devotes some time to writing and teaching.
Manoj Mohanka is a businessman and serial entrepreneur, but is more interested in the affairs of the state rather than the state of affairs. He follows politics and religion closely, and runs a trust to educate Muslim girls from underprivileged families.
This is an opinion piece and the views expressed are the authors’ own. The Quint neither endorses nor is responsible for them.)
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