Atmanirbhar Bharat Abhiyan

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WHAT

Atmanirbhar Bharat Programme:

  • The programme was launched by the Prime Minister in May 2020 with an economic stimulus package - worth Rs 20 lakh crores aimed towards achieving self-reliance.
    The announced economic package was 10% of India’s Gross Domestic Product (GDP) in 2019-20.

  • The amount includes packages already announced at the beginning of the lockdown incorporating measures from the RBI and the payouts under the Pradhan Mantri Garib Kalyan Yojana.

  • The package is expected to focus on land, labor, liquidity and laws.

5 pillar on which Atmanibhar Bharat is to be based:

 

India’s self-reliance will be based on five pillars

  1. Economy - an economy that brings Quantum Jump rather than Incremental change.

  2. Infrastructure - an infrastructure that became the identity of modern India.

  3. System - A system that is driven by technology which can fulfill the dreams of the 21st century; a system not based on the policy of the past century.

  4. Demography - Our Vibrant Demography is our strength in the world's largest democracy, our source of energy for self-reliant India.

  5. Demand - The cycle of demand and supply chain in our economy, is the strength that needs to be harnessed to its full potential.


WHO / WHERE

Opportunity Offered by Atmanirbhar Abhiyan:

The programme should be viewed as an extension of the “Make in India” campaign, launched in 2014, as they share the aim of securing manufacturing investments from domestic and international business. The package offered a range of financial support measures for the weaker sections of India’s society, for micro, small and medium sized enterprises (MSMEs), and for the agriculture sector, creating fair market platforms, easing rules for businesses and a range of other solutions to support the economy. The campaign has opened up several sectors for foreign investors, including defence, atomic energy, agriculture, insurance, healthcare and civil aviation.


WHEN

The Prime Minister in his address to the nation on 12.05.2020 announced an economic stimulus package for Rs 20-lakh-crore (estimated at 10% of the GDP), towards building a Atmanirbhar Bharat, or a self-reliant, resilient India. The Package is to cater to various sections including cottage industry, MSMEs, labourers, middle class, industries, among others.

WHY

  • It aims towards cutting down import dependence by focussing on substitution while improving safety compliance and quality goods to gain global market share.

  • The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves creation of a helping hand to the whole world.

  • The Mission focuses on the importance of promoting “local” products.




HOW

As a first step, the government has come out with performance-linked incentive (PLI) schemes for sectors that are extensively import dependent. This should help India build the supply-chain within the country for products that are critical in the future — electronic products (including mobile phones) and active ingredients for the pharmaceutical sectors, to name a few.

It has also extended the scheme to top exporting sectors like textiles which lacks knowledge when it comes to man-made fibres. If economists are to be believed, the PLI scheme is expected to drive India’s manufacturing growth in the next few years.

Indian companies are weighed down by multiple factors that put them in a clear disadvantage vis-a-vis their competitors elsewhere in the world, apart from dependence on imports. They need to be addressed too.

Manufacturing costs:

India is not exactly a low cost production base. It may be cheaper than developed economies but other emerging countries fare better. Take the power cost. It costs 11 cents a unit in India compared to 8 cents in Vietnam and 9 in China.

Labour cost, in real terms, is low but if one has to factor productivity, it falls way below China, Brazil or South Korea. That apart, when it comes to skillset India is ranked a distant 107 in the Global Competitiveness Index compared to China’s 64th rank and South Korea’s 27th rank. Vietnam and Brazil are ranked 93 and 96 respectively. Indian companies are forced to spend more on training its workforce.

Logistics costs:

At 14 per cent of GDP, India’s logistics cost is way above its peers in the developed world (6-8 per cent). What is discomforting is that even this data is skewed. In India logistics cost typically means transportation costs whereas in advanced economies it includes planning, procurement and warehousing on account of very high level of outsourcing. India’s logistics cost is at least 3x compared to developed countries.

Compliance costs:

Indian companies suffer from high regulatory and other compliance costs. Even though the government has been working to reduce this through digitalisation, it remains high and puts them at a disadvantage in the world stage.

Investment in R&D:

Total investment in Research & Development and innovation has been on the decline over the years. It was 0.84 percent of GDP in 2008 and in 2018 it was 0.6 per cent.

Bulk of R&D spending happens in the defence and space sectors. In the private sector it is in the auto and pharmaceutical industries. But here too, much of it is ‘catching-up’ with what others have already developed.

Investment in cutting-edge technologies is clearly missing.

High interest rates:

While India may be enjoying a period of low interest rates, what companies pay to borrow here is relatively much higher than say in the US or Japan. Indian products can compete across the world only if interest costs drop.

Trade policies:

Countries like Bangladesh and Vietnam are signing trade deals to become more competitive and attract investments. India’s record when it comes to such deals is pathetic. The India-EU Free Trade Agreement, after 16 rounds of talks, has been stuck in a logjam for the last seven years. The Comprehensive Economic Co-operation Agreement with Australia is going nowhere after nine rounds of talks over the last eight years.


No easy solutions:

  • These issues have no easy solutions. Reducing power cost would mean forcing State governments to give up cross-subsiding power. It will also call for investment to evacuate coal from the mines quickly and economically.
  • Skilling and reskilling needs a renewed focus. There is a need to identify emerging skill sets and train people. Labour reforms have to be pushed forward to improve productivity.
  • The government should encourage and incentivise outsourcing to reduce logistics costs. Companies that outsource more than just transportation are seeing good results, to better visibility and better utilisation of assets.
  • It must also invest in infrastructure. Turnaround time at Indian ports needs to be reduced sharply from 2.62 days. It is less than a day in China.
  • To reduce interest costs, governments (both Centre and States) have to live within their means and more importantly, eschew populism. It should also ensure that strong companies have unfettered access to cheap funds across the globe. It must adopt a policy of ‘give & take’ to sign trade deals and not get bogged down by domestic lobbies.

Without tackling these issues, India will not be competitive on the global stage. In other words, Atma Nirbharta will remain a pipe dream. If the government is serious in implementing this economic philosophy, it should clearly list out areas which need improvement to make Indian manufacturing competitive. It should also go a step further and announce the quantum of improvement and the timeline to achieve it.

Only then will required policies get framed and executed to bring about the change. Also, such a statement will clear all confusion in the minds of trade partners, investors and others who have been finding it difficult to understand the policy.

Suggestion:

Build a Strategy for the Future:

  • A long term approach that considers regional supply chains and location decision-making is needed to succeed.

India Should Become Increasingly Open to Free and Fair Trade:

  •    India should attract investors due to its strengths rather than by using tariffs as a tool to push international businesses to invest and make in India.

Focus on Developing and Supporting Innovators:

  •    Focus on STEM, digital, creative and critical thinking skills that will build leaders and workers who can innovate and solve problems.

  •   India should also develop an innovator-friendly intellectual property policy and enforcement regime.

Digital and Data:

  • With digital and data services increasingly important in global trade, there is an opportunity for India to fully integrate with other major democratic markets.

  • India should continue to harness and actively invest in the opportunities that Artificial Intelligence, digital technology and data present to achieve its growth potential.

Put Sustainability at the Center of India’s Trade and Investment Strategy:

  • If shaped properly, trading arrangements can help support the poor and protect the environment.

  • Countries and trade blocs are cognisant of this fact and are increasingly integrating sustainability and human rights into their trade agreements and strategies.

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