True meaning of Atmanirbharta

Rajiv Kumar | Updated on: Sep 23, 2022
India must make a concerted effort to push up its manufacturing share

India must make a concerted effort to push up its manufacturing share | Photo Credit: VIJAY VERMA

World beaters: Rather than turn protectionist, India should strive to assume a dominant role in the global economy

In a seminal work by Angus Maddison that tracked economic growth of nations between 0 and 2000 AD, published by OECD in 2001, India’s share of worldwide GDP in the 1st century AD was estimated at 32.9 per cent. A millennium later, in 11th century AD, India continued to be the biggest economy with a share of 28.9 per cent in global GDP.

Over the next seven centuries, prior to the beginning of colonial rule, India’s share in global GDP declined to 16 per cent, which was still higher than India’s share in world population.

With the onset of colonial rule and its concomitant wealth drain, India’s share in world GDP was reduced to a mere 4 per cent by 1950. Today, India’s share in world output remains at 4 per cent in nominal terms while its share in world population has increased to 18 per cent and rising.

Our share in global manufacturing, which was also more than 20 per cent prior to the deindustrialisation under colonial rule plummeted to 2 per cent by 1947. By 2019, we have managed to increase it only to 3.1 per cent.

Given the above context, we would like to define Atmanirbharta, in terms of restoring India’s share in world GDP and in global manufacturing to at least the same level as it was prior to the beginning of colonial rule. Therefore, we must set ourselves the target of achieving at least a 16 per cent share in global GDP and a 20 per cent share in global manufacturing for true Atmanirbharta.

Open economy

True Atmanirbharta must be understood as restoring India’s position in the world economy and locating our efforts in the context of an open and globalising economy. Otherwise, we face the strong downside risk of equating Atmanirbharta with self-sufficiency to be achieved in a closed economy. This was tried in the past over successive decades and proved disastrous.

The current evolving context of increasing fragmentation of global markets in the aftermath of the Ukrainian conflict and consequent fears of rising protectionism in a few countries, should not result in another bout of export pessimism. India cannot achieve its goals of reaching upper middle-income economy status without ramping up its exports and encouraging higher inflows of foreign investment and technology.

Moreover, India’s mammoth population does not directly translate into a large economy with high levels of purchasing power. Every country attempting to successfully make the transition from a low-income economy to an upper middle income economy has had to expand its exports of both goods and services.

Further, successfully ramping up our exports will ensure that our businesses remain globally competitive and provide the best quality goods and services to our domestic consumers. Achieving global scales of production, improving our services quality to world standards and promoting goal-oriented R&D are efforts that will yield the desired goal of a higher share in global trade and manufacturing. It will also generate high quality employment. Historically, India has been a trading nation. Indian traders travelled with their much-demanded goods to West Asia and East Africa, Cambodia, Indonesia, Myanmar, Levant, and Europe at various periods from 2nd century BCE until colonisation. Indians prospered when India was a leader in global trade.

However, colonial rule forcibly put a stop to that prosperity and forced us to become a supplier of raw materials and indentured labour. Consequently, our share in world exports declined to a mere 2.53 per cent in 1947. This resulted in dramatically rising levels of poverty, frequent famines, and a population that was merely at survival levels with a per capita annual income of a mere ₹11,570 in 1950.

Due to the liberalisation of the nineties, the share of trade in global trade flows went up from 2.1 per cent in 1950 to 2.7 per cent by 2010. Since then, however, India’s share in global merchandise trade has stagnated at less than 2 per cent.

However, its share in services, buoyed by IT-enabled software services, has increased from 0.5 per cent in 1995 to 3.5 per cent in 2019. We will require a huge concerted effort from all stakeholders to restore India’s share in global trade to pre-colonial levels. In that context, the following suggestions may merit attention.

State export policies

First, instead of preparing a pan-India Exim policy, which is akin to Brussels producing an export policy for the entire European Union, each State should be encouraged to design and implement its own export promotion policy. These should have clearly stated timebound goals and selection of priority export sectors. This will bring about a much-needed focus on exports in every State and help generate quality employment.

Second, it is neither necessary nor even practical to aim only for hi-tech exports with high levels of value addition. As several countries have demonstrated, exports of minerals and agro-products, and low-tech products like toys and garments or services such as medical, education and mass tourism are as valuable in generating good quality employment and raising per capita incomes.

Third, export industries should get their energy and other inputs at world comparable prices. They should not be expected to subsidise household consumption by being charged higher tariffs for their energy, logistics and raw material inputs.

Fourth, it is important that the RBI ensures a neutrality of exchange rate between exports and imports. Exports should not be penalised by an over-valued exchange rate.

In essence, Atmanirbharta should be seen as a means for regaining India’s share in the global economy while simultaneously improving the quality of life for the common Indian.

The writer is the former Vice-Chairman of NITI Aayog and Chairman of Pahle India Foundation

Published on September 23, 2022
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