India's Covid crisis rivived an import substitution policy that can be seen as prepartion for re-entry in the global game
Before the covid-19 pandemic, one tended to see the reformist government of India under Prime Minister Narendra Damodardas Modi as the new business-friendly face of the subcontinent that many hoped would have smiliar impact as the efforts Deng Xiaoping who opened up China in the 1990s.
But the Wuhan flu changed all that. Instead of an India that ready to compete in the world in global trade as most everyone expected, having the heft to rival, China, instead it retreated into its traditional shell of protectionist import substitution, which went by the popular name of "Swadeshi", an expression of defiant self-reliance.
To be fair many countries did the same as they quarantined themselves into various degrees of lockdown. India for domestic political reasons found it convenient to blame China for the coronavirus outbreak as did the US. It joined the world clamour against the Middle Kingdom, which conveniently was acting badly in other diplomatic ways, making itself vulnerable to worldwide criticism on many levels.
President Xi Jingping had seized the Spratley Islands, in the South China Seas, ignored the Hague court ruling on the matter, made himself president for life, opened Muslim re-education camps, slapped on tariffs on Australian barley and beef because Canbera advocated a World Health Organisation inquiry into the causes of the covid crisis, not to mention increasing interference in Hong Kong's internal affairs.
Thus, India turned to "Swadeshi", a word from Sanskrit that means "own self" and "country". Swadeshi – a call for self-reliance – first heard in 1905, than calling on Indians to boycott British products and embrace the home-grown. In a difference context more than a century on it has since made a comeback, says an essay on the BloombergQuint portal in Mumbai.
"Only this time, the object of protest is China. Open WhatsApp or Instagram, and a video or a meme asking to ‘Say No to Chinese Goods’ or ‘Buy Indian, Be Indian’, is likely to pop up. Growing outrage over China's perceived complicity in the spread of covid-19 has given rise to this ‘Boycott China’ ethos in India, echoing a groundswell of similar anger in other countries," say BloombergQuint analysts.
This, of course, has added new ferocity to the Sino-American trade war started by the US against China two years ago. It seems to be globalising in the wake of the pandemic, as countries take anti-China measures that range from re-shoring businesses from China, creating alternative supply chains, to stemming Chinese investments.
As fear and mistrust grow, not just of China, but about globalisation itself, countries are starting to look inward. As walls come up, the question arises: How should India chart its course to navigate both pitfalls and opportunities presented by the current situation? Can the calls for Swadeshi and "Atmanirbharta" – the Government of India's post covid-19 strategy – work to its advantage?
By most accounts, globalisation was already in retreat, particularly since the financial crisis of 2008, when "Occupy Wall Street" became the rallying cry of anti-globalists protesting the bailout of big business. Anti-globalisation has always been a loose coalition of grievances – its main unifying force being a broad agenda against runaway capitalism, free markets, big business and climate change.
Its protesting legions encompass climate warriors, economic justice and labour advocates, as well as cultural hawks and anti-immigration groups, all intent on showcasing globalisation's faults that undermine its utopian promise of greater prosperity for all through free trade. This is not surprising, given globalisation's alleged role in creating glaring voids and inequities, not just between emerging nations and developed nations in the west, but also in developed economies' working classes hollowed out by automation and the off-shoring of their jobs.
Brexit, and the rise of anti-immigration /anti-globalisation forces from Brazil to Turkey, can also be viewed through this prism. Even the speed with which the covid-19 virus traversed the world is attributed to travel and trade – two outcomes of globalisation.
When news surfaced that Vietnam and Indonesia, not India, were being considered as alternatives to China, there was not much surprise. Realistic observers have always known that India had a long way to go in being a serious contender for this spot. The Government of India's stated response to all this – Atmanirbharta or self-reliance – seems calibrated to take these factors into account. Officials are taking care to point out that insularity or isolation is not the goal.
Import substitution has been positioned as more than a mere recovery response to covid-19; it includes some long-pending reforms, especially in the farm sector. But there is a gap between the government's intent and its ability to realise programme objectives. For example, the announcement of the creation of an Indian sovereign fund – it is yet to see the light of day. This, and other lost in translation episodes need serious attention for India to be both self-reliant and a global player.
The Finance Ministry made several announcements opening hitherto closed areas to the private sector, along with privatisation of key public sector companies. While this may be a welcome move to increase efficiencies and bolster the private sector role, one BloombergQuint analyst cautioned "India also needs to see that its plan for encouraging private domestic producers does not breed oligarchs, creating a situation akin to Russia, because only a handful of corporations or tycoons with deep pockets have been left with enough funds to invest in such a privatisation opportunity, post-pandemic".
Import substitution has seldom achieved economic objectives its proponents forecase - even if such rosey outcomes imagined can even be categoritised as objectives. The real intent of their implementation has not be economic, but political, or as one old hand once said, "to encourage the young and to placate the old".
India is an old hand at this, but it also knows from long experience the ups and down of economic life and can take a long-term philosophic view while at the same time enacting short-term political measures noisily announced as popular "Atmanirbharta" and "Swadeshi" programmes, which strike an ever popular anti-colonial chord in traditional constituencies so vital at election time.
While still a long-term losers' game, justified in time of war when all are expected to make sacrfices for the greater good, import substitution remains a sound preparation for the post-covid-19 period as we gradully realise that it was much ado about not very much. And that the supposed curative measures taken in response to the disease had a far greater negative impact than the disease itself. After which India will likely get back in the globalisation game, an as more and more re-shoring from China occurs, India will take its share and restore greater balance to the intra-Asia trade.