Reaching Atmanirbhar
It is quite evident that 2020-21 is all set to become the most disappointing year for the Indian economy on growth parameters in its independent history thanks to the Covid-19 pandemic. No doubt, the colossal contraction of nearly -24 per cent in the first quarter is expected to be somewhat salvaged in the remaining three quarterly periods but not to the extent that it could pull back the yearly GDP number into positive territory. Most of the projections for the full year share the common string of indicating a high minus single-digit growth at the end of March.
Stumped by the ferocity of the devastation inflicted by Covid-19 which had led to a complete lockdown for over two months initially, the government has been announcing measures (Rs20 lakh crore worth of package announced earlier with soft credit disbursal mostly as a prime strategy) and policy prescriptions which it believes will help in effectively dealing with immediate issues as well as setting a new direction for the economy in the medium to long run. In the latter category (policy for dramatic change in the fortune of the targeted sector) lies the government’s hard push to the agri sector reforms which are now a legislative reality despite opposition in some states.
Prime Minister Narendra Modi’s clarion call of ‘Atmanirbhar Bharat’ or ‘vocal for local’ too seems to be part of the larger game plan. It was spelt out just at the beginning of the crisis and was initially perceived as a great motivational slogan bestowed from the top, with the business stakeholders getting into a sulking mood. The pitch entails reducing India’s dependence on imports for certain critical items, giving a fresh boost to Indian manufacturing (below 20 per cent of the GDP which the Modi government wants to push to at least a quarter mark of the national economy) and also pave the way for reaping incremental benefits in a new global trade order where preference for Chinese supply would increasingly shrink, especially to the developed countries in the West. However, by announcing a Production-Linked Incentives (PLI) scheme for as many as 10 sectors as part of its Diwali gift package to the nation last week, the government has made it clear it has every intention of furthering its Atmanirbhar drive.
The recently announced PLI package covers 10 manufacturing sectors which include automobiles and auto components, capital goods, technology products, textile products, white goods, pharmaceutical drugs, advanced chemistry cells (ACC), food products, telecom and speciality steel. A government release maintained that the approved financial outlay over the five-year period for these 10 sectors will be Rs1,45,980 crore which will be over and above another PLI scheme earlier approved by the government with an outlay of Rs51,311 crore (for electronics manufacturing).
On a broader basis, the outlay announced for different sectors clearly reflects the sectors chosen by the government for an aggressive push in the near to medium run – automobiles and auto components (Rs57,042 crore); pharmaceuticals and drugs (Rs15,000 crore); telecom and networking products (Rs12,195 crore); and food products (Rs10,900 crore).
Even as economists and industry stakeholders have been raising questions on the various measures of the government to deal with the Corona-triggered massive economy crisis, the PLI scheme has by and large been welcomed in most quarters. Going by the response, in choosing the sectors that can grow fast both for domestic as well as international supplies, the government has pragmatically identified the performing as well as promising verticals. For instance, auto-component exports are already a stronghold of the country’s exim trade and this is one segment where India can emerge as a substitute in case importing countries look for alternatives to China.
The selection of the food products vertical for incentive support has been hailed for its apt timing – in certain product categories like rice and sugar, India has emerged as a major supplier in the current year to many countries which were finding it difficult to access these essential items. The point is: as an agri-producing country, India’s chip has just gone up in the international arena which may have a positive rub-off impact for its food products to penetrate many new foreign markets in the coming years.
And considering its own large scale domestic demand, the focus on electronic manufacturing and pharmaceuticals are steps to gradually reduce India’s dependence on China in these domains. As an analyst points out, by announcing the PLI scheme on a larger scale, the government has eventually presented its strategy to carry its grand ‘Atmanirbhar’ plan, going ahead.