India’s New Self-Reliance: What Does Modi Mean?
On Tuesday, May 12, Indian Prime Minister Narendra Modi delivered a primetime address to the nation on the coronavirus (Hindi text released here, and English here). With India in a national lockdown since March 25, many awaited his word on the country’s next steps. Modi announced a much-needed second relief package of around $266 billion, which he said would bring the government’s overall stimulus to around 10 percent of the country’s GDP, including the previously released package back in March, and central bank liquidity measures.
This relief, with details to be announced later by the finance minister, represents a significant expansion over the first relief package of March 26 that allocated around $23 billion, or 0.8 percent of GDP, to cash transfers and food rations for the poor. In the intervening weeks it has become painfully clear how India’s safety net—even with technological advances like Aadhaar, the national biometric ID linked to bank accounts—has gaping holes.
The stories of migrant laborers with no work and no way to pay rent in big cities, trudging hundreds of kilometers back to their villages, have brought attention to issues like interstate portability of ration cards, for example. And with the first relief tranche targeted at the poor, businesses—doing their best to stay afloat in an economy that had stopped moving—found themselves adrift. As a result, the Indian government has been preparing for weeks a second package that would address relief for business owners.
In his May 12 speech Modi presented this new package as one that would address the needs of businesses as well as workers, and would furthermore enable India to become more self-reliant. This new program, dubbed “Atmanirbhar Bharat Abhiyan” (Self-reliant India Scheme) would, according to Modi’s speech, cover five pillars: “economy, infrastructure, technology-driven system, vibrant demography and demand” and would involve “land, labor, liquidity, and laws.” He gave the example that India’s production of personal protective equipment (PPE) earlier in the pandemic was limited, but now more than 200,000 PPE kits and N95 masks are made in India daily.
In the absence of further details—Finance Minister Nirmala Sitharaman is supposed to provide more clarity on May 13—it’s hard to assess what this plan will mean. Will it be a further boost to the Make in India scheme with more incentives? As I have written earlier, Make in India harnessed a standing Indian plan to increase the manufacturing sector’s contribution to the economy. Unfortunately, this laudable goal (one supported by successive Indian governments) has simply not resulted in significant change. In fact, manufacturing’s share has actually fallen.
Modi spoke about better integration in global supply chains. This is a similarly laudable goal. Without further details, it too is hard to assess. In recent years, the Indian government’s approach to trade has become more—not less—protectionist, with tariff increases targeting imports that the Indian government sees as too competitive with domestic industry. Will the new self-reliance put up more barriers? In his speech, Modi appeared to say that was not the goal—that this version would not be “exclusionary or isolationist”—but the past six years have shown that the Modi economic philosophy is not premised on free-trade instincts.
Coronavirus and the understandable lockdown that the Indian government has implemented have severely hurt the Indian economy—as lockdowns have done all over the world. With unemployment hovering around 23 percent (per Center for Monitoring Indian Economy), and banks and ratings firms revising their forecasts for the Indian economy at recession-level figures, the details of what the new self-reliance scheme will entail are eagerly awaited.