The winds of change have been sweeping across the economy ever since prime minister Narendra Modi has taken charge of power. One of the significant announcement by Modi on May 12 was the policy of Atmanirbhar Bharat (self-reliant India)
Prime Minister Narendra Modi urged Indians to work towards an ‘Atmanirbhar’ Bharat or self-reliant India and said the country should strive towards bringing down its import bill and consume more locally manufactured products. This initiative by the center is seen as a significant move in India’s history. The policy of Atmanirbhar Bharat is expected to induce waves of change across different sectors of the economy.
Atmanirbhar Bharat (Self-reliant India) is the vision of the Prime Minister of India, Narendra Modi of making India a self-reliant nation. It involves a special economic and comprehensive package of Rs 20 lakh crores which is equivalent to 10% of India’s GDP.
Interestingly Government kickstarted the Atmanirbhar policy after the Galwaan issue. Forcing the government to move to (an informal) boycott China, banning popular Chinese apps like Tik Tok and CamScanner, and so on.
The Five pillars of Atmanirbhar Bharat focus on:
- Economy: We need an economy that doesn’t bring incremental changes but makes quantum jumps.
- Infrastructure: We need infrastructure that will become the identity of modern India.
- System: We need a system that is no longer based on the rules and rituals of the past but one that actualizes the dreams of the 21st century. This system needs to be technology-based.
- Vibrant Demography: We are the world’s biggest democracy. Vibrant demography is our strength. It is the source of energy for our efforts to make India self-reliant.
- Demand: The cycle of demand and supply in our economy is an asset. We need to utilize this power.
Atmanirbhar Bharat: The key takeaways
The measures (reforms to amend ECA, APMC, Contract framing, etc) announced for the agricultural and allied sectors are particularly transformative.
These reforms are steps towards the One Nation One Market objective and help India become the food factory of the world.
These would finally help in achieving the goal of a self-sustainable rural economy. Also, the MGNREGA infusion of Rs 40,000 crore may help in alleviating the distress of migrants when they return to their villages.
Policy measures related to companies
The Government has provided certain relaxation to the companies with respect to the compliances. The time for holding board meetings has been extended by 60 days till September 30, 2020. Extraordinary General Meetings will be allowed to be conducted through video conference with e-voting or simplified voting facilities.
Measures related to NBFCs/HFCs/MFIs
The Government has introduced INR 30,000 crores special liquidity scheme. The investments under this scheme will be in both primary as well as secondary market transactions in investment-grade debt paper of NBFCs/HFCs/MFIs. Under the scheme, the securities will be fully guaranteed by the Government of India.
The Government has introduced INR 45,000 crores partial credit guarantee scheme 2.0 for NBFCs/HFCs/MFIs having low credit rating and require liquidity to do fresh lending to MSMEs and Individuals. Under the scheme, the first 20% loss will be borne by the Government of India.
The newly launched PM e-Vidya program for multi-mode access to digital online education provides a uniform learning platform for the whole nation, which shall enable schools and universities to stream courses online without further loss of teaching hours.
Public expenditure on health will be increased by investing in grass-root health institutions and ramping up health and wellness centers in rural and urban areas
Atmanirbhar Bharat - Global impacts
Though the Atmanirbhar policy rolled out as a form of stimulus package It eyes in making India self-reliant in all fields. The policy aims to substitute Chinese products and thereby creating new opportunities for Indian businesses.
The Indian government hasn’t explicitly announced a boycott, but by all accounts, states and public sector companies have been reportedly asked to desist from issuing new contracts to Chinese companies. The railways have reportedly canceled a signaling project that was given to a Chinese company in 2016. And, according to reports, the government has also asked e-commerce companies to display the country of origin for the products they sell.
Bilateral trade between the countries, already down by 15% since the 2018 financial year, could take a further hit as India mulls extra tariffs and anti-dumping duties on Chinese imports. But, experts warn, it’s easier said than done to convert such boycott rhetoric into reality.
PUB-G Ban - big push for the Indian online gaming industry?
With the government banning Player Unknown Battle Grounds (PUB-G) one of India’s most popular online battle royale games by Tencent has opened up a new opportunity to the indigenous game developers. Many companies have come to fill up the space left out by PUB-G.
Some of the most popular Desi alternatives being Black survival, ScarFall, and most recent announcement FAU-G backed by superstar Akshay Kumar. These moves if implemented properly, can make India the gaming hub of the world. Indian app developers have also developed Desi alternatives for popular Chinese apps like zoom and CamScanner.
If this situation continues India will be free from Chinese dominance in smartphone apps within 4-5years. But the challenge is that we don’t have big infrastructural facilities as they have in China.
Is there really a substitute for China?
The first reason is China is India’s second-largest trading partner after the US. And two, it accounts for nearly 12% of India’s imports across sectors such as chemicals, automotive components, consumer electronics, and pharmaceuticals. It may be difficult to substitute these imports. Although India has announced a new policy to become more self-reliant in drugs, the challenge is that will take time.
Challenges faced by India in making a self-reliant India
- India’s dependence on Chinese brands: India’s booming smartphone sector also heavily depends on cheap Chinese phones made by Oppo, Xiaomi, and others with the lion’s share of the local market. Most consumer electronics makers say they’ll be paralyzed if they can’t import crucial intermediate goods from China.
- Chinese money funds Indian unicorns: India and China have also become increasingly integrated in recent years. Chinese money, for instance, has penetrated India’s technology sector, with companies like Alibaba and Tencent strategically pumping in billions of dollars into Indian startups such as Zomato, Paytm, Big Basket, and Ola. This has led to Chinese giants deeply “embedding themselves” in India’s socio-economic and technology ecosystem, This can pose a huge challenge to mission Atmanirbhar Bharat.
- Chinese prominence in startups: Many startups are fueled by Chinese investors in recent times. The move can adversely affect India’s start-up arena. The Chinese investors have invested over 30$bn India. Finding an alternative investor will be a herculean task for the startups.
Atmanirbhar Bharat - The opportunities ahead
The policy has opened up a huge space for Indian businesses, especially for MSMEs (Micro, Small, and Medium Enterprises). The MSME sector is the most vibrant and dynamic industrial sector contributing about 40 percent to the GDP and significantly to the exports of the country. Multiple policies and decisions taken by the government imply that MSME,s will be the key driver of economic revival.
The idea behind ‘Make in India’ is about decentralized localism that takes pride in indigenous brands, emphasizes resilience and adaptability, and encourages local capacity-building and employability. This will encourage the idea of making in India for the MSME industry and help amplify their presence across sectors. This can be a huge step in making India a self-reliant nation. As there is ample scope for the MSME sector to identify areas for local production of goods right from raw material to the finished product.
Making for India - The Mantra to overcome the crisis?
Estimates indicate that a third of the Chinese imports comprise of low-tech goods that were earlier made by Indians, or are still being made locally but in smaller quantities due to higher costs leading to a decrease in demand. With the current push for ‘Make in India’, MSMEs can utilize the economies of scale and place these products at competitive costs thus increasing the demand for locally produced goods.
Many Indian firms like Wipro and HCL have come forward to provide a Desi substitute for Chinese goods. Efforts in this direction will prove to be a fillip for the hundreds of small and medium firms, which have suffered due to a decrease in demand. This localization of ‘building locally’ what we want at a lower cost can help India to be the global leader in the world economy.