Covid and China: The ‘C-factors’ in India’s Road to ‘Atmanirbharta’

The Economic Times, November 16, 2020

By Shakti Sinha and Sarthak Shukla

In early 1980s, Deng Xiaoping, China’s paramount leader of the time, predicted the future of Asia’s growth story using a metaphor. He compared Asia’s growth to a jet plane which was about to take off, with China and India being its two engines. Almost 40 years later, the two engines are unable to cooperate, let alone take a flight together.

Heightened military tensions, severed diplomatic dialogues and broken Global Value Chains (GVCs) amidst a global pandemic have made a lasting dent on India-China ties. The aggressive actions by the PLA in Ladakh and strategic retaliation by India through imposing import tariffs and fostering collaboration with Quad partners has created an unusual political-economic challenge for India. This challenge is different from others in the past as for the first time since 1980, economic implications are being sought out for non-economic pain points.

The mantra of “Atmanirbhar Bharat” seeks to find answers to such paradoxical questions. Can we decouple Indian economy from China’s, given the potential challenges it poses for national security, regional peace and political stability? How can domestic economic ambitions of inclusive growth and ‘sustainable development for all’ be achieved in such a context? How do we align our efforts to challenge the manufacturing process of China while interacting in a hyper-globalised world?

Before seeking answers to these questions, it is necessary to decipher the essence of Atmanirbharta. Given the complex nature of the issue at hand, concerted efforts on all fronts are the need of the hour for ensuring that it does not become either an old wine in new bottle for the ‘Make in India’ campaign, or a narrative for protectionism. It is also crucial to counter the narratives of ‘imports are bad, exports are good’ propounded by many, in order to ensure that intended objectives are realised in our quest to an ‘Atmanirbhar Bharat’.

This implies that the roadmap for achieving national economic ambitions require efforts that boost economic prospects domestically as well as enable global competitiveness of India’sdomestic produce. It is only when this inward-looking and outward-looking discourse go hand in hand that a truly resilient India will emerge.

Let’s explore some of the steps that can enable this process.

Firstly, sustained geo-political and diplomatic efforts to preserve the national sovereignty and ethical rubric of India as a democratic republic needs to be continued and catalysed. Strengthening the Quad (India-US-Australia-Japan) is one such area where India has been fared well, with the recent announcement of having Australia’s participation in the Malabar exercise being a welcome step. This should be complemented by closely monitoring and capitalising on some worldwide developments like US-China trade war, conflicts in the South China Sea, fragmentation of the European Union and new emerging manufacturing hubs in Asia and Africa.

Secondly, a sector-wise strategy to ‘build back better’ post-lockdown would be a critical stepping stone. Such a strategy should be devised by keeping certain indicators in mind. One, labour intensive sectors that caters to a large section of population should be prioritised. Two, these sectors should produce goods at the price parity at which most Indians can buy them. Thus, a demand-assessment of consumers’ willingness and ability to pay for such goods should be the precursor for determining investment and capacity expansion plans in these sectors. Some of these low hanging fruits include affordable clothing, critical engineering goods, low-cost housing, healthcare, education, agriculture and agro-processing.

India’s trade statistics shows how deeply our manufacturing sector, particularly raw material base, is dependent on Chinese imports. Among top products that we rely significantly on China include input materials like boilers and electrical machinery that are a major asset for many industries, fabrics and dyeing extracts that are critical for our textile industry and fertilisers for agriculture. From semiconductor devices to even basic commodities like toys, games and sports-related goods, our reliance on Chinese imports is extremely high.

This brings us to the third facet of ‘Atmanirbharta’ which is forging strategic and economic ties with nations other than China that can provide for development needs of India. These include regions like South America, Africa, Middle-East, South-East Asia and Australasia. The Australia-India-Japan supply-chain resilience initiative is one of the steps in this regards. Forging such ties would require adherence to basic fundamentals of a healthy trade relationship including reciprocity of economic gains, welfare of consumers and growth of industries and intermediaries. Financial support, knowledge transfers and technology support from partners would help achieve shared goals.

Finally, a key cog in the wheel of ‘Atmanirbhar Bharat’ would be the ‘trust factor’ where India enjoys competitive advantage. Investors across the globe, in manufacturing and services, are increasingly relying on India for setting up corporate offices or data centres. The recently announced withdrawal of significant amount of investments from Chinese territory to other nations including India should be built upon. . Therefore, a key component to effectively counter the trade deficit of around $48 billion would be capitalising on the trust-deficit of the Chinese image globally.

To do justice to the outlined steps, dedicated institutional and governance capacity enhancement would also be required. Thus, to counter the ‘C-factor’, India needs to not just portray itself as a trustworthy destination, but also showcase actual evidence regarding its capability to deliver and sustain the global trust that it enjoys.

From ease of opening a business to ease of running and exiting from it, while ensuring that enterprises and workers are qualitatively and quantitatively flourishing, is the go-to-strategy that would potentially put India back on the wheels of Asia’s economic growth story.

Shakti Sinha, Director, Atal Bihari Vajpayee Institute of Policy Research and International Studies, MS University, Vadodara; and Sarthak Shukla, Assistant Policy Analyst, CUTS International.

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