‘Atmanirbhar Bharat should not merely be a classical import substitution policy’

India’s external sector is expected to face considerable headwinds as the global economy is on a downward trajectory. This is especially because prospects of India’s merchandise exports look grim, as negative growth was recorded in the July to November . More worrisome is the slowing down of manufacturing exports, implying that sectors contributing higher value added have been relatively more affected.

India has not been able to exploit the additional market access opportunities offered through the tariff preferences in the FTAs. This is principally on account of two factors. First, in the contemporary world, it is not merely the levels of tariffs that determine market access. Non-tariff measures, especially product/process standards, have become increasingly important. This means that lowering of tariffs via FTAs is no guarantee for higher market access. In fact, Indian businesses will have to conform to the exacting product/process standards market access so as to increase exports. 

Second, Indian businesses must become more price-competitive to increase their presence in the partner countries’ markets. Ways need to be found to improve the competitiveness of Indian producers.

There is yet no clear evidence that the PLI scheme has benefited manufacturing exports in general. Of course, some industries have been successful. For instance, producers of mobiles have been able to increase exports, while imports of solar photovoltaic modules have declined due to enhanced domestic production.

Atmanirbhar Bharat should not merely be a classical import substitution policy that focusses just on increasing domestic production; the emphasis should be on producing globally competitive products domestically. Further, domestic production must be dovetailed with a strong innovation system, one which enables domestic producers to remain competitive.