VOCAL FOR LOCAL: IMPACT ON INDIAN ECONOMY

 

PM Narendra Modi, in his national address on 12th May 2020, said the covid-19 crisis has taught India the importance of local manufacturing and supply chains. Modi talked about the importance of 'atma-nirbharta' (self-reliance) and announced a Rs 20 lakh crore fiscal relief package. Other measures on the table were tax sops, strict non-tariff barriers to discourage imports and domestic goods procurement.

With Covid-19 majorly affecting business around the world, one must answer a pertinent question: What will be the impact of the 'VocalForLocal' campaign on India's economy?

If you remember closely, this isn't the first time that Modi mooted the revival of swadeshi model. He launched the 'Make in India' campaign in September 2014, barely three months after he received an unprecedented single party majority mandate that junked the Congress welfare ideology. His vision envisaged a 12-14% growth in the manufacturing sector so that its contribution to GDP would rise from less than 20% to about 25% by 2025 and create an additional 100 million jobs by 2022. The objective was to fertilize a favorable environment for FDI investment in 25 specific sectors. The new policy was meant "to transform India into a global design and manufacturing hub". Six years later, the country is stuck in the quagmire of vested interests even though it was meant to move machines, and not minds, from the West and the Far East. 

Over 70% of our service and large industrial sector survive on  technology borrowed from abroad. India may boast of producing global technology companies such as TCS, Wipro and Infosys, but has hardly produced a prestigious and valuable international brand. India's R&D story is also dismal. According to official figures, it spends just around 0.7% on R&D against 2.1% by China, 2.8 by the US and 4.2 by South Korea. While the government spends about Rs 1 lakh crore on R&D, the private sector has contributed less than C6,500 crore. In contrast, Amazon spends over $16 billion, Volkswagen $16 billion and Samsung $9.15 billion. 

The wrong kind of local would be to promote goods that are made in India through tariffs, quotas and new government procurement rules. In several new areas, such as pharmaceuticals, and engineering goods, we have achieved global competitiveness over the last two decades. These have all flourished through international cooperation and input from global customers. 

Sustainable and resilient communities cannot be built on a fiscal and regulatory structure that is highly centralized. The Centre would have to develop to the states and the states to the locally elected representatives. If we adequately fund, support and trust local governments and remain open to absorbing both the knowledge and products that others produce better than us, we can create a society where all, not just a few, matter. If we insist that everything can be 'Made in India' and close borders because a crisis sealed them temporarily, we open ourselves to mediocrity and isolation, continued mass poverty and greater vulnerability to fund pandemics. We have the capacity to refocus on the right local, if only we could agree on the vision.