Economic Highlights

New Delhi, 29 August 2014

Lost Indian Pride

AID INDIGENOUS PRODUCTION

By Shivaji Sarkar

It was 1980. Two friends of mine, a German and Japanese were on a visit to Delhi. I took them to a consumer fair being held at the Pragati Maidan, the national exhibition ground. After visiting various stalls manufacturing needles, shaving blades, cosmetics, sewing machines, machineries for domestic use and light machineries, they asked: “Don’t you (India) import anything?”

It was a pride moment for this Indian. Two foreigners whose countries depended heavily on imports were dazzled by our manufacturing. The nation had developed a strong base. Soon after, there was news that India-made Ashok stainless blades were being exported to some European countries, including Switzerland.

Indeed, India was proud of its indigenous products and industry, something that Prime Minister Narendra Modi wants to recreate. His Independence Day message to give boost to manufacturing and have pride in “made in India” has been the dream of every freedom fighter and at least the first generation rulers. Reviving manufacturing requires many efforts, policy changes, strengthening the rupee and curbing inflation.

The year 1980 was the epitome. India had started producing steel, power generation equipment and the Bhabha Atomic Research Centre (BARC) was developing a super computer for its nuclear research, reactors and power plant, Indian Space Research Organisation (ISRO) doing wonders despite the US ban, post-Pokharan-I nuclear test. Even foreign collaboration, i.e. how FDI was described in the early years, with the Soviet Union for steel, Japanese company Nissan for defence production, German company Benz for commercial vehicles, Italian two-wheeler producer Piaggio and many others in various fields was not an anathema.

India became a major producer of television sets and transistors in post-1982 Asiad. It might have been then called screw-driver technology as most parts initially were imported and later indigenized. Even exports of TVs had begun in a small way. The underlying concept was to create a strong manufacturing base in the country. And Modi has echoed the same sentiment.

But during the past over three decades, India faces the problem of surrendering whatever it had achieved to a culture of imports or production by foreign companies. Remember, the country had diverse aerated drinks. Each region had its own brand. But all of it has been lost to the predatory moves of two US companies, which sadly no one stopped.

Worse and unfortunately that became the model. From the mid-1980s through 1990s and 2000-10, the country may have earned a few dimes in FDI but lost out on its pride and strong base. Its indigenous manufacturers lost on many or rather all areas. A few vestiges that remain such as heavy vehicles manufactured for defence, though many of it with foreign technology, have survived because of sheer protection from market competition.

Undeniably, India is having problems in the revival of its manufacturing, which has almost reached its nadir. It no longer produces refrigerators, TVs, electrical goods, toys, crackers and many more items, which it used to produce regionally. Even Khadi products and the famous Murshidabad silk are facing severe erosion because of imitations being imported from China and South Korea.

Much of all this could be attributed to the way the country acquiesced or succumbed to the World Trade Organisation (WTO) pressures in signing different agreements in the name of multi-lateralism. It opened up the flood gates. Remember, Chinese goods, be it toys, mobile phones, fancy items, electrical and electronics goods or even crackers were being smuggled in earlier. Now, post-WTO they are being imported along with other goods.

Unless the nation strives to change the WTO rules and create tariff barriers, for which a small beginning was made this July, it would not be easy to stop imports of unnecessary goods, which the country has been producing itself. For instance, the Chinese goods have a cost advantage and even after being imported these are eliminating indigenous products, which have become expensive as the country is in the midst of runaway inflation, a concern expressed even by Moody’s. Inflation is increasing costs of lifestyle, labour and living (LLL) and transportation. And it makes manufacturing uncompetitive. 

Even higher salaries and wages have not led the youth to the markets as most of them don’t have disposable extra income or savings. Whatever there is in hand is finished in buying food, the prices of which have shot up by 44 per cent. Additionally, Indian inflation is high even from the global standpoint, says Moody’s. Unless we check it and get out of the syndrome that “price rise is a phenomenon” much of the efforts the nation is keen on making would be completely lost.

For example, Sivakasi cracker manufacturing comes to a halt as the manufacturers prefer to import it. So it is with most other products. Then again, cheap Chinese watches have ruined the pride of the nation, public sector HMT. In the US, hand-wound watches cost around $ 2000 (Rs 1.20 lakh) but India has not tried to enter that market to compete with the world watchmakers. The public sector is not a bad word. It has, after all, given an edge to this country. 

Importantly, the HMT watches and similar other products need to be revived to bolster the impression that India can produce quality products. It may mark the beginning of building the brand India dream of Modi.

But this has also to come with efforts to strengthen the rupee and the domestic market. Recall that fledgling dollar was at Rs 25.79 at the beginning of liberalization, in 1991. It hovers over Rs 60 now! What have the much-touted reforms then given to this country? The Modi Government should try to bring the rupee back to at least the level of 1991. The notion that a weaker rupee boosts exports is incorrect.

Instead, a stronger rupee can bring down the cost of living and inflation. It requires a policy change – a break away from what is called ‘Manmohanomics’. The country needs a ‘Modified’ economy junking most of the World Bank-IMF “reforms” prescriptions to not only revive the domestic economy but also lead the world economy to new heights. It is not an easy task but people have hopes in the new NDA leadership. They want Modi to lead the country through policy changes, boost morale of Indian entrepreneurs, revive small and medium entrepreneurship and make agriculture the base of his economy.

It also needs to decouple dollar-based petroleum prices. The 30-plus per cent of petroleum and gas produced in the country has to be priced in rupee. Then only the first step to strengthen the rupee would be taken.

India was and has the capability to become a global manufacturing hub provided rules are simplified, cost of living is affordable and entrepreneurs and not officials are looked at with pride. In sum, it calls for ushering in a new economy with new domestic-oriented policies.--INFA

(Copyright, India News and Feature Alliance)