Modi’s ‘Atmanirbhar Bharat’ has Downside Risks Too; will India Take Pre-liberalisation Stand Again?

While Prime Minister Narendra Modi’s Atmanirbhar Bharat Abhiyan aims at making India self-reliant in trade and businesses, it has many downside risks too. In trying to achieve economic and security goals, the policy has a conflicting dynamic, The Economist Intelligence Unit said in a research report. For example, the report said, Modi’s policy aims to reduce domestic market access to imports, but at the same time open the economy and export to the rest of the world. There will be a more sustained and overt push towards protecting domestic industries under the self-reliance initiative, echoing India’s pre-liberalisation stance before 1991, the report added.

Such a stance may have a recoil effect on India’s foreign trade too. The EIU said that a more protectionist trade stance and any increase in tariff rates for imports may lead to punitive tariffs or the revocation of trade benefits from its partners. One such incident was seen when the US revoked India’s access to its market under the generalised system of preferences (GSP), citing high Indian import tariffs.

Self-reliance, or self-goal?

Further, Narendra Modi’s self-reliance push may eventually hurt his own reforms agenda. The possibility that the government may not follow through on the broader reform agenda while raising tariff and implementing non-tariff barriers, is believed to be another risk with the self-reliance initiative, the report said. If the government does not undertake the opening of various sectors to private enterprises, ease overbearing regulation, and privatise loss-making PSUs, India’s manufacturing sector will become further uncompetitive. Also, this would make future governments averse to opening up the economy again, it said.

Economic growth pangs continue

Meanwhile, the real GDP growth has been falling for three consecutive years, slowing to 4.2 per cent in last fiscal year 2019-20. The ongoing pandemic pushed the economy to a steep landslide of a 23.9 per cent contraction in the first quarter of the current fiscal. This was the steepest economic contraction among any G20 economy over that period.

While the economy was already struggling with a low number of jobs and thus finding employment for the nearly 50 lakh workers entering the labour force annually was difficult, the job situation in the country is poised to face severe damage due to the pandemic. India’s low state capacity, poor healthcare infrastructure, and highly populated urban centres have left it particularly affected by the pandemic, which has weighed further on the economy, the EIU report added.