Understanding Atmanirbhar Bharat

In the midst of the crisis, the government has coined the term Atmanirbhar, what it essentially means. In the first term, the NDA government came up with the slogan Make in India' and now Atmanirbhar'. Whether both the terms give the same meaning it appears so. The government in the last budget reduced corporate taxes and made them similar to progressive countries in SouthEast Asia. Unemployment has reached a very high level and the government was asked to explain about this in the last parliamentary election. Though India has overturned the policy of protectionism in 1991 but the employment generation came to a halt when the foreign investment began to saturate and it is borne out from the economics that as the growth keeps increasing, it accomplishes employment but in Indian situation, the growth is saturated at 7.5% means getting more than that was tougher. Why the growth has saturated at the highest of 7.5% and China grew at 12% for 12 years must have some reason. China was touted as a Non-market economy because its financial sector is not in tune with the tenets of globalization and then, it is a leading manufacturing hub supplying goods to every known country because of the healthy labor conditions. Unemployment is not worrisome. Foreign institutional investment unlike in India which is needed to meet the capital needs of the large companies is almost nil in China. Resources are generated within the country due to full support of the communist government. Perhaps, this is the reason that the US under Trump has challenged the maneuvering by China and hence, sucking out the wealth of the US. WTO for the time being is dysfunctional in the face of Covid-19 and the highhandedness of the US in appointing the judges in appellate body.

While the problem of demand and supply disruptions are the same every year and the crisis always gives a lesson, India has very carefully considered the heightening crisis of unemployment in the country. India has a lot of capacity in the manufacturing sector and it can be grown to any amount. The altering of the MSME definition and concessions given on the corporate tax during the last one year and juxtaposing PLI is done with a thought to ramp up the production in the manufacturing sector. But it would have been again not satisfying to trade specialists who consider the import tariff as minimal as possible to be good for promoting the trade to the advantage of employment and current account surplus. The government appears to have gone on a different road. Since, roughly 6.5 crores MSME are in existence in India and only a few thousands are employing 2-3 hundreds employees and rest are too small in size to be capable of attracting any incentive and support. The PLI being given in 13 sector industries are attracting foreign direct investment which will enjoy the reduced corporate taxes as well and at the same time, bring stability in employment generation. The protection to domestic industries was the idea when Arun Jaitley for the first time in 2017 announced raising the tariff on some 50 odd products but it was not in consonance with the policy the Government came up later in this budget whereby FM has indicated that custom duty on 400+ products is to tampered by October, 21. The idea is novel this time but it has been done to do away with inverted duty structure. The consumers will have less advantage of buying the goods of their choice from abroad and producers will have more advantage of buying the raw material and components so that foreign investors should be reassured that there would not be a big challenge to the production done within the country. This way, the government should not be obviating the rules of WTO of providing export incentives but these are the Production linked incentives and at the same time, raising the scale of production. As the PLI is committed for 5 years as it entails huge fiscal cost but it is being picked up to settle the cries of unemployment.

Atmanirbhar Bharat does not mean that the dependence on import is reduced and every good is produced within the country. Import and export are the integral parts of a good economy. Over the period of time, when economies of scale begin to develop which are lacking in the present environment and labor reforms which are being undertaken along with boost to skill generation, the PLI would be withdrawn and cost competitive advantage would lead to export. It is the expanded meaning of Atmanirbhar Bharat which would not be criticized as Protectionist as well as ignoring exports, but it has to come in the long run with enforced policy.

Written By:- Dr. R.K. ARYA, Professor, Faculty of Commerce and Business Studies, MRIIRS Faridabad