Atmanirbharta (literal translation – Self-reliance) has become the new buzzword after the speech from the greatest Salesman in the history of India. In very less time, we all have embraced the terms ‘Made in India’ and ‘Vocal about Local’ very well. This has reignited our feeling of nationalism on social media, with many motivational messages/videos to stop Chinese goods in India and become atmanirbhar. For social media, it is very interesting to share as it attracts many views. But it is really important to understand what it means for us. I will try and explain it in the easiest language for any common man!

Current Situation and Data

India currently losses out around $150bn (Rs11 lakh crore) because of higher imports. We produce and export goods and services worth $300bn every year and import goods and services from around the world worth $450bn. That means we are losing $150bn wealth every year. India funds this through the foreign investors who buy shares/bond or set up factories here.

1. Becoming Atmanirbhar by reducing spending. How much do we spend on China?

Let’s look at what India imports with home budget example (I have removed billions and dollars for ease). Let’s say your total spending is Rs1000. Against which you earn only Rs670 (as is the case with India)

A) Out of it, you spend Rs.290 on petrol/coal/crude/plastic for your cars and electricity. To reduce this cost you need to drill oil in your home or generate your electricity. May be solar can help you, but you should know 50% of Solar panels are also imported. Post that you need to run your cars on solar power to become atmanirbhar. Easy? Maybe not.

If you start getting petrol cheaper like now (at least the government is) you might save Rs145 on it next year. But this is short term, it will not be saved forever.

B) You are currently spending Rs190 on their jewellery i.e. gold, diamond etc. It is almost impossible to become atmanirbhar here because you don’t have enough mines at your home. You have two ways either convince your wife and mother to reduce spending or paint your silver into gold and start fooling them. Everyone knows how impossible that is!!

So it seems that you cannot reduce much from your Rs480 expenses. Now you know your income is Rs670 only, so you need to cut your other expenses of Rs 520 to Rs190 to become atmanirbhar. To put in our example, India spends only Rs 165 out of its Rs1000 on China.

So even if today, you stop buying everything for China, can you achieve your goal? In fact, can you become atmanirbhar by cutting spending at all?

India isn’t very rich in natural resources like crude, gold etc. That is the reason we cannot become atmanirbhar in everything we produce. You need to understand that you cannot produce and sell (export) your good without buying raw material (imports).

So that leaves us with the second option. Increase our income from Rs.670 to Rs.1000.

2. How important are we to China? Does China really fund its army from Indian money?

Coming back to the motivational messages on stopping to buy Diwali lights from China, how huge do you think that is for China?

China exports goods worth $2500bn every year and imports worth $1500bn. They are more Marwadi in business then we are. They don’t lose money any single year. India imports goods worth $75bn from China and exports good worth $15bn to China. India is less than 3% and 1% of its exports and imports. On the other hand, for us, China is 17% of our imports and 5% of our exports.

The question is who is more important to whom? Will China be impacted if India stops trading with them?

When these videos say we buy Chinese products and we fund their army, we need to understand even if India stops existing tomorrow, China will not even feel it. But if tomorrow China says stop exporting to India, how will you get new mobile phones or new power plants?

Instead of thinking negatively, we should also aim to reach $1500bn of imports because only then will we be able to reach the $2500bn of exports like China.

3. How China can help us become Atmanirbhar?

China has become one of the largest markets in the world. Even China imports worth $1500bn every year and India is not able to enter this market. Learning from the Surgical strike – instead of preventing Pakistan from entering the Kashmir, it is better to push them to give POK back. We need to focus on getting a bigger pie of the Chinese market.

There is a Hindi proverb ‘Sau Chitiyo ko marne se acha hai ek hathi ko marna’ which literally translates to ‘Instead of killing 100 ants, kill one elephant’, or instead of focusing on many small things focus on one big thing. I identified that one big thing based on two factors

1. What is the biggest product we import from China

2. Which is the largest product China imports from the rest of the world

Almost 50% of products coming from China are telephone/mobile/semiconductors/ telecom equipment and related products. The major part of China’s imports is also semiconductors/integrated circuits or computer chips (almost $433bn). So if we really want to focus only on one industry, we can just focus on the computer hardware, chips and telecom equipment manufacturing and capture a large market.

But this industry has never been successful in India. Intel had clearly said we are not thinking of starting manufacturing in India. The reasons are two -Infrastructure and Policies.

To build capacity, we need huge capital, water and power. India’s weak infrastructure of roads, power and ports along with its strong environmental rules and tough business policies, don’t allow us to be competitive.

We need to trade-off between environmental protection & Economic growth. Even China started its growth with very open and relaxed policies. They also grew at the cost of their environment. Now they have achieved the scale where they can start caring about the environment. In India, the extra focus on environmental protection has been one of the hindrances in the growth of manufacturing. These protections put a huge cost on the production, making the product expensive and thus non-competitive. I am not saying we should forget about the environment, but a trade-off needs to be established.

Now we have an excessive focus on tech-based startups. Without undermining their capabilities we need to accept that these tend to remain Indian market-oriented only and they are not that huge employment generator, which India needs. We need to focus on these manufacturing units to come out of the current problems.

Solution

There is no short term solution. The role of govt since the 1950s has been to take up businesses which don’t attract private players because of capital or non-development of other resources. I think it is time again to get this role back and divest the non-strategic investments and focus on such important industries which can fuel the growth of the country for the next decades.

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