A Webinar on ‘From Make in India to Assemble in India to Atmanirbhar Bharat: Contradictions of Trade Policy,’ was presented by Professor C. Veeramani, Indira Gandhi Institute of Development Research, Mumbai, over CISCO Webex Meetings on Friday, the 16th of October, 2020, at 3.30 pm. Professor Sunil Mani, Director & Professor RBI Chair, CDS was the moderator of the webinar.
Abstract: The purpose of the webinar is to discuss certain contradictions between the Government’s pronounced objective of achieving rapid export growth and some of the trade policy initiatives. The trade policy orientation of the present government can be viewed through the lenses of (i) make in India initiative; (ii) the decision to opt out of Regional Comprehensive Economic Partnership (RCEP); (iii) the objective of “assembling in India for the world” as outlined in Economic Survey 2019-20; and (iv) launch of “Atmanirbhar Bharat Abhiyan” or self-reliant India movement. An important question that arises in this context is: Is the overall strategy of the government based on import substitution or global integration or a combination of the two? While certain elements of the policies –significant increase of import tariff rates and the decision to opt out of RCEP – are consistent with the import substitution strategy, liberalization of FDI in different sectors is a part of global integration strategy. A liberal FDI regime along with restrictive trade regime may stimulate tariff jumping (domestic market seeking) FDI inflows without any positive effect on export growth. It is well known that import tariffs act as tax on exports, particularly so in a world of global value chains (GVCs). A number of studies show that participation GVCs would result in higher value added and employment within the country. Increasing of trade barriers, purportedly to promote domestic industries, is not a wise strategy in the context of changing global geopolitics that offers new opportunities for India. Potential realignment of GVCs provides an opportunity for India to replace China as the major assembly hub for manufactured exports, which can create millions of jobs for low skilled labor in the country. But the mere existence of these opportunities does not guarantee that they will materialize. India will miss the bus if protectionist policies are adopted at this juncture. On the contrary, the country should reduce customs duties to provide easy access to imported inputs, correct the problem of inverted tariff structure in several industries, and undertake further reforms to improve ease of doing business.The goal of Atmanirbhar Bharat can only be achieved by improving domestic productivity and not by creating restrictions on competition from abroad.