Indian industries, particularly those in the manufacturing sector, are facing serious odds for some time now. A large part of the blame for this is put on China. Trade deficit between the two countries is growing in an alarming manner. India has a whopping $36 billion trade deficit vis-à-vis China – imports remaining at $51billion and exports at $15billion only. Apart from talks, not much seems to be happening to improve this scenario.
Other than oil and gold, the third largest part of India’s overall imports is of electronic products. Electronic goods come cheap from China, as compared to products from other parts of the world including Indian products. Despite claims of an electronic revolution taking place in India, the nation imports about 65 per cent of its electronic product requirements, and the bulk of this comes from China. According to data, India imported $31billion of such items in 2013-14. Projections are that if the present growth trend continues, India would require electronic hardware of the order of $400billion by 2020, while domestic production could rise only to a level of $104billion. The deficit would be of $296billion. In electronics, mobile phones form the main import segment with almost everyone in the country having an ear to it by now.
A way out is import substitution, wherein local manufacturers are given proper support and a reform be effected of the duty structure, so that duties on imported items could be raised within levels acceptable to World Trade Organisation. Industry leaders are pressing the Narendra Damodardass Modi government to effect suitable changes in regulations that would give a fillip to the domestic manufacturing sector as a whole. Unfortunately, the Modi government is only limited to creating slogans such as ‘Make in India’ while efforts in that direction have had no effect whatsoever.
For this, the government will first have to have a proper policy framework. Differences are perceptible at the top — between the Prime Minister and RBI Governor Raghuram Rajan, for instance. Modi advocates a policy of ‘Make In India’, wherein mass production of goods will lead to increased exports, as China has been doing. Rajan’s stress, instead, is on ‘Make For India’, meaning goods produced in India should be distributed for use within India, rather than adopting the Chinese model of pushing exports. His argument is that if the world economy suffers, the impact would be on those who manufacture and supply products to others. India has a burgeoning middle class, perhaps the largest of the middle class segment for any country, to which global business giants are seeking to sell their wares. That means when others are eyeing us as a potential market, there is absolutely no need for Indian manufactures to cater to unstable international markets.
While the people of India and the government they have brought upon themselves are only concentrating on which major business house shall corner the nation’s natural resources, India’s internal small and medium enterprises are dying a slow and painful death. This is the sector which employs a larger number of people compared to big industries. The per capita investment is also much lower for a small scale operation as compared to an Adani power plant or a Posco steel plant. With a rudderless nation unaware of its future, India today stands threatened not only by sea-borne jihadists from Pakistan but also by its very own mismanagement that could easily cripple the fragile economy of this hugely populated and highly debt-ridden nation.
