The Economics behind Atmanirbhar Bharat

There was this essay writing competition conducted by the MHRD wherein the topics were all related to Aatmanirbhar Bharat. I too participated in it, but, the reason I’m again writing a blog on it, is that there was a word limit there. And my idea on Aatmanirbhar Bharat is way more than 500 words. So let’s first understand what this whole concept is.

 Aatmanirbhar Bharat or Self-Reliant India, as the name suggests, is a vision to strengthen our economy by focusing more on local production and making the country self sufficient. ISRO is a great example of how Indians can reach the heights even with minimum resources. It did miracles which big space techs couldn’t imagine of. This is the potential which Indian entrepreneurs have and thus, Aatmanirbhar Bharat is a great platform for them. But, amidst all this, there are some ‘unseen effects’ as well. As Frédéric Bastiat puts it, “Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee (or the unseen effects).” Therefore, to analyse this programme more deeply, we will also take into account the unseen part of it. .Although Finance Minister, Mrs. Nirmala Sitharaman have said that Aatmanirbhar Bharat is not about protectionism and cutting off from the world but, in 2018 budget speech, late Mr. Arun Jaitley, the then finance minister, said, “In this budget, I am making a calibrated departure from the underlying policy in the last two decades, wherein the trend largely was to reduce the customs duty.” From then on we have seen constant rise in import tariffs in every Union Budget. Here too Bastiat’s seen and unseen effects theory comes into action. Let’s take an example of a product which is being sold by a foreign company for Rs. 10 and an Indian company for Rs. 15. Now, when there is a rise of Rs. 10 in import tariffs, then the revised rates of the foreign company will become more than the Indian one i.e. Rs. 20 as compared to Rs. 15. This way, even though, the consumers will be attracted towards the Indian company but, they now pays Rs. 5 extra than before. Since, the income of the consumers have not changed so this means that they have cut cost from some other expenditure and has put that money in buying the product. Therefore the money which could have gone in some other thing is now going to that product. And in economics, we say that “one man’s spending is other man’s income.” Hence, some or the other way, it is affecting the economy of the entire nation.

There’s also a very big myth which almost every one of us believes, ‘imports are bad’. Tim Harford, in his article “A trade deficit with a babysitter” busts this myth. He gives the example of the babysitter which he had hired and says that he is the only one paying that babysitter, in turn, he earns nothing from her, so in this case he is in a huge trade deficit with her. But, that’s certainly not the case. He values her work more than his money whereas the babysitter values his money more than her time and work, that’s why it is a fair trade.

 I see a narrative being set nowadays which is, buy ‘swadeshi’ products. Well, when we do that it hurts us more because it reduces the incentives for a local businessman to produce quality products as he knows that whatever he makes, will be sold in the market. Now, the contradiction lies here. The government wants to promote swadeshi (or local) products and also want them to be a part of the global supply chain. To be a part of global supply chain, one has to compete from companies all around the world and for that you need to have the capability to compete from foreign companies in your own country. If you can’t do that and rely on some protectionist policies then you just can’t be a part of the global supply chain.

Certainly, Atmanirbhar Bharat has many limitations but, what is the way forward? The solution lies in the same idea but with some amendments in our approach. The reason why most of the entrepreneurs in India lag behind is because setting up a business is not that easy in India. Although India has done well on the Ease of Doing Business Rankings but anyone who has studied about the rankings, knows that the procedure to measure countries has plenty of drawbacks. The Economic Survey 2019-20 points out the fact that it takes 36 approvals to open one restaurant in Bengaluru, 26 in Delhi and 22 in Mumbai. Moreover, Delhi and Kolkata also requires ‘Police Eating House License’, which in turn needs 45 documents. At the same time, one needs 12 documents to get a major firework license and 19 documents to get a license for procuring new arms. Considering the fact that Restaurant is one of the most competitive businesses, we need to find out solutions to problems like these. Then, to boost up our exports we need to manufacture products only for abroad. Considering India as a big market is a mistake which every government has committed. No, India is not a very big market. Our GDP (PPP) might be 3rd largest in the world ,but our GDP per capita ranking is 142 in the world (as per the World Bank) and a consumer spends on the basis of money in his pocket, not by his country’s GDP ranking. This is not what successful economies like China did. China has been the leading manufacturer of iPhones but the penetration of iPhones in its own country, for several years, was far less. Evidently, we have a big market for products like two wheelers or small cars but Indian manufacturers are already doing well in those areas. So instead of pushing the buyers for ‘swadeshi’, we should raise the incentives for an industrialist to produce quality product and that would happen if we let them do their job by removing obstacles such as inspector raj and tax terrorism from their path. Approaching Aatmanirbhar Bharat scheme in this direction will, no doubt, make India the next superpower.

2 thoughts on “The Economics behind Atmanirbhar Bharat

  1. The article was well explained. I really liked the fact you wrote it in a perfectly balanced way.How you broke it in bits and pieces to explain about the new narrative of swadeshi is amazing. Keep writing!

    Liked by 1 person

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