Dear Modi Govt, Where’s The Plan For Making India Inc Atmanirbhar?

The ‘atmanirbhar’ slogan would be great had it also come with a bold tariff regime that would protect manufacturers.

Updated02 Jun 2020, 07:21 PM IST
Opinion
5 min read

If the PM has any concrete plan to revive investment, he is keeping it close to his 56-inch chest. His first address to India Inc since the lockdown began was mostly made of homilies and alphabet-play. Captains of Industry might have hearts of gold, but it is highly unlikely that they were pleased that Mr Modi used much of his address to CII to outline all that his government has done for the poor. After all, capitalism is about maximising profits for one’s firm. If the poor get something in the process, then that’s just an added bonus.

The government’s new atmanirbhar slogan would sound great had it also come with a bold tariff regime that would protect Indian manufacturers from cheap imports.

This is a standard way to help domestic industry grow. Of course, that would mean cocking a snook at international trade organisations, just as Trump has done. Given that the PM believes his regime has raised India’s standing in the world, he should have no problem standing up to global trade bullies.

How to Play the Big Manufacturing Game: India Can Take a Leaf Out Of China’s Book

On the other hand, making imports expensive will give Indian companies the leeway to increase their own prices. That is going to cause inflation and cost votes. So, what can PM Modi do to avoid that? He can subsidise manufacturing in India, just like China does.

The PM mentioned that India imports nearly one-third of the air-conditioners that we buy. This is despite the fact that Indian companies have been producing ACs for decades. One way to ensure that every Indian buys a home-made AC is to subsidise their production. This can be done by ensuring better infrastructure and cheaper inputs, such as electricity to AC factories, low-cost credit, equity investments in input suppliers, marketing and distribution subsidies, guaranteed government contracts, and many other things.

This is exactly how China built its manufacturing giants.

In fact, this is how South Korea and Japan built their industries. There would have been no Samsung or LG without the close support the South Korean government gave to the Chaebol. And, there would not have been a single big Japanese brand without the massive backing Japan’s Zaibatsu got from its government. The history of American companies shows how the US government has actively played a role in building and promoting its mega companies, even fighting wars across the world to keep their business interests intact.

In other words, the history of capitalism, despite all free-market myth-making, is actually the history of close ties between governments and big companies.
Snapshot
  • The government’s new atmanirbhar slogan would sound great had it also come with a bold tariff regime that would protect Indian manufacturers from cheap imports.
  • The PM mentioned that India imports nearly one-third of the ACs that we buy.
  • This is despite the fact that we have been producing ACs for decades.
  • One way to ensure that every Indian buys a home-made AC is to subsidise their production.
  • ‘Atmanirbharta’ is not only about producing things. It is about buying them as well.
  • The only way to make India ‘atmanirbhar’ is to ensure that people have money in their pockets to buy relatively expensive Indian products.
  • Till now the PM hasn’t shown any signs that our government has a game plan for making its new swadeshi slogan a reality.

If You Want India to be Atmanirbhar, Give Cash-Transfers To the Needy & Tax-Cuts to the Middle Class

But, atmanirbharta is not only about producing things. It is about buying them as well. Indian citizens might buy India-made goods for sometime out of a feeling of patriotic duty, but given that their earnings are down, they will find it difficult to sustain their swadeshi spirit for long.

So, the only way to make India atmanirbhar is to ensure that people have money in their pockets to buy relatively expensive Indian products.

The immediate way to do it, given that crores have lost their jobs and lakhs have had to take pay-cuts, is to give cash-transfers to the needy and tax-cuts to the middle class.

The long-term way to sustain domestic demand, however, is to ensure that people have well-paying and stable jobs. That means incentivising companies which create jobs. It also means discouraging excessive automation, wherever it is not absolutely essential. It also means reorienting India’s manufacturing priorities for the mass market.

Garment companies need to mass produce low-cost shirts, kurtas, sarees, instead of faux-designer clothes for the affluent.

Why Can’t India Produce In Bulk?

If local ‘Sunday-markets’ in the tenement colonies of our cities can sell ‘Made in Vietnam’ and ‘Made in Bangladesh’ clothes at rock-bottom prices, there’s no reason why we cannot make them in India. If India’s towns are flooded with Chinese-made toys, torches, batteries, locks, luggage, hairdryers, and hundreds of other things that can be easily made in India, there is reason why they cannot be produced in bulk here.

The reason they aren’t is because Indian manufacturers are unable to compete in terms of costs when it comes to the mass-market.

And, that brings us right back to where we started. Without active government subsidies and support, ‘Make in India’ is bound to be a failure. In fact, the only reason we have a robust private sector is because of that much-maligned piece of policy architecture – ‘Nehruvian socialism’. In reality, it was a system of State-capitalism designed to create an infrastructure, and market for private capital.

Falling Back On ‘Old Tricks’ Won’t Help India Inc

Till now the PM hasn’t shown any signs that our government has a game plan for making its new swadeshi slogan a reality. If anything, PM Modi has fallen back on the old bag of tricks that has been used for the past three decades to placate India Inc. The first is labour-reforms, an entirely meaningless concept, given that wage-cost is just about 2-3 percent of total costs in the manufacturing sector. The second is to give private companies access to public resources – coal, mines, forests. Experience shows that nothing comes out of this. Coal mines had been handed out to private steel and power companies since the 1990s. They simply sat on them, without increasing output.

So, for now, Indians will continue to tweet about boycotting Chinese goods, using Chinese phones.

(The author was Senior Managing Editor, NDTV India & NDTV Profit. He now runs the independent YouTube channelDesi Democracy’. He tweets @AunindyoC. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)

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Published: 02 Jun 2020, 07:18 PM IST
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