What we need is self-reliance, not boycott

Bhaskar Majumder

Self-reliance is not elimination of imports or self-isolation. It is confidence building through production at home, economically speaking. This is nothing new for this was what we pledged in India’s Plans partially forgotten – particularly in 1956 that India would reduce import-availability ratio that could be achieved with reducing imports and increasing imports. Let my readers not be confused.

Let me bypass minor points and come straight to India’s China reaction, 2020. There is nothing wrong in collision if each one aspires to remain respectively tiger and dragon. Had it been a duopoly in collusion, it would have been welcome for the formation of Asian Giant or bipolar Asia – that is not to be in near future. If that is so, one has to invent how best the neighbours can do.

Now Economics. It is an age of global division of labour. There is hardly any product in higher-order industrial production system that is either capital-intensive or labour-intensive for one component of the single product as planned is produced in South Korea, one part in China, one part in Myanmar and assembled in India. Some components were produced with competitive advantage in labour and some components in competitive advantage of software or technology. What the technique of production ultimately will be? It seems better not to respond in a single unique number.

Once the input-output analysis in its simple form in an open economy is understood, and policy-makers understand it well for they construct input-output matrix for India’s Plans, it is obvious that for cost efficiency or competitive advantage one has either to internally produce the component or import it. It does not contradict pledge for nationalism-patriotism. The question is about international trade relations.

At the level of the firm the above is obvious for the goal of the firm is well-defined. It is not so obvious at the level of the sovereign state and state is not the summation of firms. India imported high-yielding varieties of seeds from Mexico that was associated with the Green Revolution end-1960s to the threat of food crises. Nobody objected to it. India may go for import of better quality Jute from Bangladesh or marine products from Sri Lanka or bamboo from Nepal. These hopefully will pose no problems. The problem is with China for China looks big or is really big.

I bought some clothes in Paris for my daughters residing in India without knowing those were China-made – that was globalization of market. It was in 2004. Now it is a different China and a different India 2020. India’s $120-billion auto industry sources 8.0 to 20.0 per cent of its annual requirements from China at present. An anti-China slogan or boycott of China-made products could be detrimental to the fortunes of an industry that is highly dependent on China given the competitive advantage it offers in terms of cost and speed. From the firm point of view, in spite of a 10.0 per cent duty and higher logistic costs, sourcing from China is cost-saving than procuring internally that on an average leads to a saving of 12.0 to 15.0 per cent for the firm. It seems all on a sudden import duty cannot be hiked to 50.0 per cent when it is China product. Possibility of import substitution or altering country direction in trade will be a long-drawn strategy and cannot be done today. Bajaj Auto and its suppliers source components worth Rs 10,000 million from China. As the company opined, multiple sources of supply were always welcome but it needed to be discovered. As opined, withdrawing from China may hurt the firm in India more than it hurts the firm in China or the country China. Sundram Fasteners, part of the TVS Group, opined that its Chinese venture continued to be profitable and that it did not like to change trade partner following Indo-China border conflicts, 2020. The TVS group has been operating in China for the past 15 years and understood the China market. Local Chinese customers now recognise 'Sundram' as a reliable supplier. The facility was running profitably and the firm sunk capital for the operations in China.

I am not engaged in studies on international trade at the moment but what I feel is from the  common man’s perspective the utilities like food security, local manual rural employment, and production of public utilities in the main like electricity-gas-water supply-petrol-diesel-kerosene does not require China-support. India had been in trade links with China around consumer durables mainly and products that lubricate produce other products that are in inter-industry trade. So where is the anxiety? I felt baffled when I found videos sent by some patriots through WhatsApp showing the Diya (indigenous lamp) in a well furnished house being accepted by a smiling lady throwing away some products earlier put on table apparently China-made while the AC box in the room was visible. This is hardly patriotism – but that is to be told to the innocent people. Gurudev (Ravindranath Tagore) told all these long back, indeed.

I understand that patriotism is not for preservation – it has to get reflected in language or actions. But it cannot be like provocations or killing. India is a land of peace – land of Buddha-Chaitanya-Gandhi. That does not mean that India lost its right of self-defence. That self-defence has to come from self-reliance and not from Reliance. Engaging military from the north-end of the state of Gujarat and ending with the Mizoram south-end covering states like Himachal Pradesh, Uttarakhand, Arunachal Pradesh, West Bengal, Assam, Sikkim and UTs of earlier J& K may be too cost-intensive to bear. 

It is not like British India where the leadership asked to boycott British goods. It is independent India based on the motto of self-reliance. What we the people of India need is a soft diplomatic relations with the neighbours. At the moment we are engaged with all the countries that border India in inverted U-shape that may cost India more relative to the hostile neighbours. There is a model in Oligopoly – called Price Leadership model – where the leader fixes the price and maximizes own profit without caring for the followers (small firms). The small firms stop supplying the demand not fulfilled by the dominant leader. This dislodges the leader also from its profit-maximizing position.

If India can produce all the components of the products at a cost per unit that is market-competitive, nothing can be a better solution. But that is not to be in the foreseeable future. What India needs on political-economic front is positivity – extend the production possibility frontier with R&D, engage manpower on the internal production track, and develop consumer-confidence in India-made products. All these are long-term. There is no short-cut to success – it is to be success of 1300 million people.

What a state needs to be strong is facts that are real – this may include hiding some of those facts from the hostile neighbours with full respect for the neighbours. The relation needs to be sweeter the more hostile the relation is from the neighbours. Hostility is not like lightning – it got conceived and nurtured. In internal crises that cannot be exported, it is safe to build confidence internally. Most of the people in India have no first-hand experience of Mao China or post-1978 China. However, they enjoyed Diwali long back with lighting from China, knowingly and unknowingly! Consumers in Kolkata always searched for shoe prepared at China firms – internally of course. Kolkata may be an aberration, but what had been with the consumers in the rest of India – they bought Agarbattis, chappals, CFL that were China products. I bought key rings and ear rings in Thailand for my family in India that were China products. China was not built in a day. The state of India knows it. The less the innocent people are dragged into China syndrome, the better. The state may acquire internal legitimacy without China. This has got no contradiction with continuing trade with China though may be at a decelerating speed.

Accusing the hostile neighbour only shows confidence-deficit. Let us now develop confidence-led reliance, and not reliance-led confidence. There lies the roadmap for India that is Bharat.       

Bhaskar Majumder, Professor of Economics, G. B. Pant Social Science Institute, Allahabad - 211019

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Jun 26, 2020

Prof. Bhaskar Majumder

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