REDUCING INDIA’S IMPORT DEPENDENCE

This Article is written by MONAL VERMA (A 5th year BA. LL.B. student from Pt. Ravishankar Shukla University, Raipur, Chhattisgarh)

Table of Contents

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INTRODUCTION

While addressing the nation on May 12^th 2020, Prime Minister Narendra Modi brought up the importance of local manufacturing and consumption of locally produced goods, expressing that Indians needed to become “vocal for local”. He implied that the government and the public authorities would need to undertake major reforms in order for the Indian industry to play a major role in the global supply chain.

Earlier in the pre-1991 era also, India strived to achieve self-reliance and import substitution. While it resulted in a diversified economic base for substantial heavy industries such as steel, coal, petroleum refinery, etc, India fell slow on the uptake on quality, technology and productivity. Economists accredited these shortcomings to the then industrial and trade policies, particularly high tariffs, industrial licensing, physical barriers to import of goods, and imperative economic policies. However, the PM clarified that the current idea of self-reliance is not about a re-visitation to import substitution or autarkic isolationism, rather aimed at a quantum jump to the economic potential of the country by strengthening infrastructure using modern technologies and enriching human resources, creating robust supply chains.

SECTORS HEAVILY DEPENDENT ON IMPORT

As per the market and consumer data firm STATISTA, in 2020-21, the top 10 commodities imported by India were:

Crude petroleum
Gold
Petroleum products
Coal, coke and briquettes
Pearl, precious and semi-precious stones
Electronic components
Telecom instruments
Organic chemicals
Industrial machinery
Electric machinery and equipment

As stated by the Confederation of Indian Industry, around 88% of the components used by the mobile handsets industry are imported from countries like China, the USA and South Korea. Over 60% of the medical devices are imported as well.

SECTORS PARTIALLY DEPENDENT ON IMPORT

India’s pharmaceutical industry has the capability of making finished formulations and has domestic manufacturers of several vital ingredients used to make them. However, the industry imports some pivotal ingredients for antibiotics and vitamins which are currently not manufactured in India. Domestic firms are trying to make these key ingredients, known as fermentation-based APIs which still might take a few years.India imported around INR 249 billion worth of vital ingredients in the financial year of 2019, which accounted for approximately 40% of the overall domestic consumption.

Medical devices like ventilators are also reliable on imports of several critical components like solenoid valves and pressure sensors.

To a large extent, the electric vehicles industry is dependent, on Chinese imports for chemicals used to make cathodes and battery cells.

According to The Confederation of Indian Industry, when China initiated its first lockdown of Wuhan during the covid-19 pandemic, nearly 20% of India’s dyes and dyestuff industry production was hit due to a disruption in raw material.

SELF-RELIANT SECTORS HAVING MINIMAL DEPENDENCY ON IMPORT

India is not dependent on imports for textile components like yarn. The country does have the capacity to domestically manufacture products like mercury thermometers, hypodermic needles, hot water bottles, wheelchairs and patient monitoring display units.

ISSUES WITH SCALING UP PRODUCTION IN IMPORT-DEPENDENT SECTORS

The manufacture of some of the vital products that are imported by India such as displays, semiconductors, and other very capital-intensive electrical equipment may be far-fetched as manufacturing these equipment requires large, stable sources of electricity and clean water. A very high degree of certainty of policy is also needed as these require high upfront investments. If certain policy measures are taken, Indian industries can perhaps begin producing less sophisticated components as they face must higher cost in inputs and much higher logistics costs than Chinese industries.

STAPLE UNDERLYING ISSUES WITH BECOMING SELF-RELIANT

Market Distortion: In 1991, India opened itself to the global market through its LPG (liberalisation, privatisation and globalisation) reforms, but stayed hesitant in giving the market model full liberation. This may be discerned in market distorting subsidies and other restrictive policies, chiefly in Agriculture.

Weak Manufacturing: From its target of achieving manufacturing sector contribution of 25% of the GDP, India is far behind. The manufacturing is only at about 17% of GDP and the Make in India initiative hasn’t reached its intended goal yet.

Dependence on China: For imports related to electronics, solar equipment, pharmaceutical (Active pharmaceutical ingredients) and Capital goods, India is dependent on China. Breaking away from dependence on China would not be easy without developing domestic capacity for manufacturing in these areas.

Federal Issue: On ease of doing business, Information asymmetry with respect to Central and State governments can act as a roadblock. This is peculiarly important in sectors like healthcare, manufacturing and agriculture.

AVAILABLE OPPORTUNITIES

Shifting of Global Manufacturing away from China: The major concerns of mostly all the multinational companies are about concentration risk of businesses in China. And hence, the rage towards moving sourcing away from China will continue. It is possible for India to attract these investments and emerge as the next global manufacturing hub.

Ageing Global Population: Most developed countries lack the workforce to produce all that they need in their own countries, as per the demographics. India’s demographic dividend may creditably bridge the need for young human resources for the world.

Huge Domestic Demand: India is blessed with vast natural resources, a large farming community, dynamic industrial setup (sectors like Automobiles and Information technology) a huge demographic advantage and a set of entrepreneurial path-breakers.

In this context, for becoming self-reliant and stimulating demand, India has almost all the input as well as output factors needed.

WAY-FORWARD

Promotion of Local: Being “vocal for local” is the motto of Atma-Nirbhar Bharat Abhiyan. People need to internalise the concept of valuing local products and artifacts and supporting them.

Favourable Policy: Competition enhances efficiency and innovation. Even so, capitalism weakens local competitiveness and often diverts resources away from technologically innovative and more efficient companies. Therefore, policies should aim to eschew crony capitalism and enhance domestic competition.

Support Control of Critical Value Chains: Until India has control over domestic and global supply chains, it cannot become self-reliant.

Strengthening Public Procurement: A more levelled playing field for suppliers has already been created by steps like compulsory e-tendering and the creation of the Government Electronic Marketplace. These procedures should be further strengthened by accelerating the time for completion of the “quote to cash” cycle of public procurement.

Focusing on Comparative Advantage: India can focus on one area where it can attract and differentiate domestic and global investors and emerge as a leader.The next big thing for India can be robotics, 3D manufacturing& automation.India’s leading edge on IT, provides a platform to become a leader in this space at the global level, as these technologies are the confluence of manufacturing and IT.

“ATMA-NIRBHAR BHARAT ABHIYAN / SELF-RELIANT INDIA INITIATIVE” for reducing import dependency

Self-Reliant India initiative or the Atma-Nirbhar Bharat Abhiyan is the vision of new India conceived by Prime Minister of India Shri Narendra Modi. The PM raised a clarion call to the country on 12 May 2020, with the launch of the Atma-Nirbhar Bharat Abhiyan (Self-Reliant India initiative) and declared a Special monetary and comprehensive package of INR 20 lakh crores, which is equivalent to 10% of India’s GDP and will benefit various segments including cottage industry, Micro, Small and Medium Enterprises (MSMEs), labourers, middle class, and industries, among others.

The motive of which is to make India and its citizens self-reliant and independent in all aspects. The five main pillars of Atma-Nirbhar Bharat Abhiyan, as stated by the PM are Economy, Vibrant Demography, Infrastructure, System, and Demand. This initiative of the government aims at making India self-reliant by creating an eco-system that allows Indian companies to become highly competitive at the global stage.

CONCLUSION

In order to reduce India’s import dependency on other nations, India has to become Self-reliant. This means that India has to produce the goods for its consumption on its own. Steps have been taken by India over the years for reducing this dependency on imports. However, there still are and will be for many more years, certain commodities such as, Crude petroleum, Petroleum products, Industrial machinery, Organic chemicals, etc, for which India will be dependent on other countries. China, USA, UAE, Saudi Arabia, Iraq, Hong Kong, Switzerland, South Korea, Indonesia and Singapore are the top ten countries India imports from, out of which China takes the lion share by being the biggest exporter to India.

With a view to combat India’s import dependency, Prime Minister Narendra Modi introduced Atma-Nirbhar Bharat Abhiyan and announced a special pecuniary and comprehensive package of INR 20 lakh crores, which is equivalent to 10% of India’s GDP, allowing Indian organizations with opportunity and resources to be highly competitive at the global stage.

Reducing import dependency does not mean turning the country inwards or into an isolationist nation, but embracing the world by transforming it into a stronger, self-reliant nation. Reducing dependency on imports doesn’t mean shutting down doors to globalization but growing with the world. A self-reliant, resilient, and dynamic India will have much more to offer to the world.

REFERENCES

Bhartiya Janta Party, 2020. PM Shri Narendra Modi’s address to the nation | 12 May 2020. Available at: <https://www.youtube.com/watch?v=I21h9LFjLM8>

Cogoport.com. 2021. Top 10 India Imports and Import Sources. [online] Available at: <https://www.cogoport.com/blogs/top-10-india-imports-and-import-sources> [Accessed 12 October 2021].