BY SADANAND DHUME
Will we look back on 2020 as the year India formally ended its nearly 30-year-long romance with globalisation? With the coronavirus continuing its grim march across the planet, India appears ready to turn once again to “self-reliance” as its national credo. Going by past experience, this would be a terrible mistake.
“The state of the world today teaches us that a self-reliant India (atma-nirbhar Bharat) is the only path,” said Prime Minister Narendra Modi in a televised national address on May 12 that outlined his government’s response to the ongoing pandemic. “Our responsibility to make the 21st century the century of India will be fulfilled by the pledge of self-reliant India.”
Though the PM clarified that his call for self-reliance should not be mistaken for “self-centric arrangements”, this is cold comfort for those who remember the suffocating drabness of pre-liberalisation India. Bluntly put, the rhetoric of self-reliance could easily slide into the familiar territory of closed-mindedness, cronyism and mediocrity.
Nonetheless, it’s easy to see why some people find the idea appealing. Like many other government promises, its strength lies in its apparent obviousness. When Modi laid out his vision of 100 smart cities, nobody said they would rather live in dumb cities. You can’t really counter the gauzy dream of “digital India” by making the case for “analog India”. Similarly, who could possibly prefer weak-kneed dependence to the prospect of robust self-reliance?
It helps that the embrace of the homegrown carries a long pedigree in Indian politics. In Katherine Frank’s biography of Indira Gandhi, the author recounts the Nehru family’s dramatic renunciation of imported goods under the influence of Gandhi. Indira’s first memory recalled a bonfire in the family home of “richly-coloured satins, silks, chiffons, hand-tailored Savile Row suits and starched shirts”. You could argue that Indian independence was won by a party that believed in going “vocal for local”.
The Covid-19 pandemic has accentuated the virtues of self-reliance. In his speech, Modi spoke of India quickly developing the capacity to produce 2,00,000 masks and 2,00,000 PPE kits a day. The unspoken implication: Unlike many countries, India would not depend on China to protect itself from a virus that originated in that country.
Even before the onset of the pandemic, globalisation was in trouble. Pundits widely interpreted the 2016 election of Donald Trump in the United States and the British decision to exit the European Union the same year as signs of a populist wave sweeping much of the world. Trump and Boris Johnson, like Brazil’s Jair Bolsonaro, Hungary’s Viktor Orban and Turkey’s Recep Erdogan, symbolise the revolt of rooted “somewheres” against rootless “anywheres”.
Modi and home minister Amit Shah represent the same phenomenon in India. English-speaking elites now wield less power than they have at any point in independent Indian history. Arguably it’s still too early to define the details of Modi’s brand of self-reliance. His talk of integrating India into global supply chains leaves open the prospect that in the end the rhetoric may be more radical than the reality.
Nonetheless, based on past experience, it’s hardly unreasonable to worry. Over the past three years, the Modi government has reversed nearly three decades of trade liberalisation by raising tariffs on a range of goods. Last year’s decision to walk away from the Regional Comprehensive Economic Partnership (RCEP) sent a signal that India was not ready to subject its companies to the salutary effects of global competition. The ultimate losers: Well-run Indian firms and the Indian consumer.
The language of self-reliance also creates new worries for foreign investors at a time of great global uncertainty. Will India allow multinationals to compete fairly with domestic companies, or will it attempt to boost the latter at the cost of the former? Clarifications of intent notwithstanding, what kind of business environment does the rhetoric of self-reliance create?
How can we be certain that over-enthusiastic officials (in cahoots with domestic businesses) won’t unfairly discriminate against foreign firms? Would Walmart have made its $16 billion purchase of Flipkart two years ago had it foreseen a possible nativist turn for India?
We have seen this movie before. Until the advent of economic reforms in 1991, socialist India boasted one of the most closed economies in Asia. When Pepsi re-entered the country in 1990, after a nearly three-decade absence, it had to use the prefix “lehar” (wave) as part of its brand name. An apocryphal story suggested that Prime Minister VP Singh himself had to green light this decision. Barely a decade and a half earlier, India had forced out Coca-Cola and IBM.
For the average Indian, the self-reliant decades before liberalisation were synonymous with shoddy products made by businesses whose success depended more on access to government than on providing better goods and services to consumers. If you had the right contacts, you could jump the queue for a clunky scooter and sell it at a markup.
Few countries have benefited as much from openness as India. Had it shelved the policies that accompanied an obsession with self-reliance in 1971, rather than in 1991, it’s quite possible that today India, not China, would be Asia’s largest economy. Policy makers can’t go back and correct past mistakes, but the least they can do is try not to repeat them.
Sadanand Dhume is a resident fellow at the American Enterprise Institute.