• M74 Editorial Team

The Rise of a Self-Reliant India: Implications and Effects

By Swapnil Manglorkar

What is Atmanirbhar Bharat Abhiyan?

‘Atmanirbhar Bharat Abhiyan’ (in Hindi), or ‘Self-Reliant India’ (in English), is a term coined by the Prime Minister of India, Narendra Modi, during an address he made to the nation on 12 May 2020 to announce the government’s COVID-19 relief package, which amounted to nearly 10% of the country’s gross domestic product (GDP).

On 15 June, Indian and Chinese troops clashed in the steep terrain of the mountainous Galwan Valley. The Galwan Valley is located in Eastern Ladakh, along the Line of Actual Control (LAC) that separates the Indian and Chinese-held sectors. The reasons for the clash are officially unknown, but likely stem from the ambiguous border there, which remains a flashpoint from the 1962 India-China War.

Following this skirmish, the Prime Minister strengthened his views of Atmanirbhar Bharat and boasted during his Independence Day speech on 15 August how India was already becoming more self-reliant in the wake of COVID-19. For example, he shared how the country went from producing virtually zero personal protective equipment (PPE) kits at the start of the pandemic (because all of them were imported, mainly from China) to generating an average of 150,000 of these kits per day. Modi went on to characterize the present moment as an opportunity for India to adapt its economy and society in order to thrive in the post-COVID world, wherein self-reliance or being ‘Vocal for Local’ would be vital.

Initiatives for Self-Reliance

Many public and private initiatives followed Modi’s remarks, including:

1. In July, Reliance Jio (a major Indian company) unveiled its design for the ‘Made-In India 5G Network,’ a national 5G network that will be built ‘from scratch’ and ‘can be ready for field deployment next year.’ This is an indication that India is strengthening its base in telecoms, and beginning to catch up to China in terms of high-tech manufacturing. China and India are both emerging markets and have changed their status-quos from technology importers to technology exporters since the beginning of the 21st century. China, for now, has an edge over India—but that is likely to shift due to initiatives like Jio’s and the rapid growth of India’s middle class that will further fuel the domestic technology market.

2. This summer, the Indian Institute of Technology Alumni Council created a $2.8-billion ‘social initiative fund’ to support the national mission of self-reliance. How specifically this money (once it is fully raised) will be disbursed remains to be seen, but it has been reported that it will be used to support a variety of domestic initiatives ranging from healthcare projects (namely, COVID-related) to startups with social impacts.

3. In August, Defence Minister Rajnath Singh announced a ban on imports of 101 items, which would occur in a staged manner over a period of five years. The Defence Minister says this decision will offer a ‘great opportunity’ to the Indian defence industry to manufacture domestically using their own designs and materials, or by adapting technologies that were originally developed by the Indian Defence Research and Development Organisation for the Armed Forces.

4. The government of India is making it compulsory for all e-commerce platforms operating within India to include the ‘Country of Origin’ on the products’ labels, so that way the customers (end users) have a better understanding of where the products they are buying come from. Since Indians generally seem to support the Vocal for Local movement, the government assumes that many Indians will make the effort to find and purchase items that have India listed as the Country of Origin.

5. Lastly, the government of India banned 59 Chinese mobile applications (most notably, TikTok and WeChat) in July, and an additional 118 (including PUBG) in September, citing privacy and security concerns. It is anticipated that these actions will provide a boost to Indian brands on app stores and social media.

Does Self-Reliance Mean Cutting Off From the Rest of the World?

Definitely not. It just means focusing more on products made in India, and giving importance to domestic research and development (R&D). This emphasis will ensure that India develops into a hub of cost-effective and high-quality products, which will generate interest for Indian goods in new markets worldwide. As a consequence, the Vocal for Local campaign will improve India’s image at a time when COVID-19 is inhibiting the country’s role on the global stage.

Between March and April alone, 122 million jobs were lost and 37.5 million university students had their educations delayed due to the government’s ‘total lockdown’ of India’s 1.3 billion people for 3 weeks (from 25 March to 14 April).

Since then, weak manufacturing, weaker domestic demand, and COVID-induced global supply chain breakdowns have applied further brakes to India’s economic vehicle. A major driver of these problems is India’s reliance on imported goods, many of which can be easily manufactured if proper funding and support are given by the government.

Reinvesting in India’s manufacturing capabilities via the self-reliance initiatives mentioned earlier (among others) will help bring back the jobs lost and create new ones, which will boost incomes and consumer spending. Hence, the self-reliance movement will jumpstart India's economy, thereby allowing India to productively re-engage with the rest of the world.

How Will International Trade Be Affected: Will Foreign Companies Still Look to India?

Well, for starters, foreign exporters may be intimidated by India’s stringent new Vocal for Local norms that are meant to maximize the use of Indian-made goods. However, owing to the diverse and humongous population of India (which will be the world’s largest by 2027), there will always be room for foreign products and commodities—especially those that are unable to be made in India or that are not widely available in India yet.

Meanwhile, China is no longer the ideal place for foreign firms to make, source, or design their products. COVID-19 that began in Wuhan, Beijing’s tightening grip on power (especially in Hong Kong), and China’s declining ties with several major economies (including India) underscore this new reality. Many foreign firms that currently manufacture in China are coming to realize that having their goods ‘Made in India’ would generate more revenue for them—as they would have preferential access to the Indian market, their customs duties would be significantly reduced, and their operations would generally be more stable than they are in China.

Finally, India will continue to lead the world in business process outsourcing (BPO), which already attracts a great deal of foreign investment and clients. Since many of the world’s top BPO companies are based in India or have facilities there, the government’s Vocal for Local initiatives will help these companies become even more visible and possibly offer them direct support.

Next Steps

The Vocal for Local policy is undoubtedly a huge step that will bring vast changes to the Indian economy, especially in the longer term. This is because there will be steady growth in domestic trade, manufacturing, and R&D—all of which will gradually increase employment and consumer spending.

As stated earlier, many of India’s goods are imported. Replacing them with domestic alternatives will be a daunting task—largely because there are relatively few manufacturers in India (compared to China, for instance). However, the initiatives taken by the Indian government and private sector so far are already boosting local factories and encouraging the creation of new ones.

It has been reported that at least 200 companies from the United States are looking to move their manufacturing bases from China to India, due to the mounting US-China Trade War (which has been worsened by COVID). As previously mentioned, there are and will be many companies from other countries looking to do the same. Accordingly, the government of India must continue to increase the manufacturing capacities of various sectors and accelerate reforms to attract foreign investment.

Also of utmost importance are quality and cost. Both of these aspects are critical to success in a competitive global market. Meanwhile, other factors (like logistics, operations, and lead time) are vital to decreasing the Cost of Goods Sold (COGS), which can happen if India’s industries focus on upgrading local supply chains. If the quality, cost, and other factors are up to the mark, then the products made in India (by domestic and foreign firms alike) will not only prevail in the national market, but also go on to have an international reach. Hence, Vocal for Local represents a great opportunity for India to change its global image for the better in this time of crisis.

Swapnil Manglorkar is an intern at M74 and a supply chain enthusiast from Mumbai, India. He is passionate about technological changes going on in the world and eager to learn more every day.

The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.