Going Swadeshi: Easier Said Than Done?

Guest Article
 Disclaimer: The views expressed in the article are the authors’ personal.

There is a strange concurrence between messages on WhatsApp and what the Prime Minister says. For a month, my inbox has been flooded with “Buy Swadeshi” messages, and this is precisely what the PM echoed in his speech yesterday. But what is the import of the message? How does it square-up with global and local realities?

First of all, we need to be clear with what the idea entails. Does it mean goods produced in India or goods produced by Indian companies? Because former would include Redmi phones made in Andhra Pradesh and Samsung phones made in Noida which provide employment to Indians. Surely we don’t intend to make these people unemployed.

Next, do we mean only final goods or intermediate goods as well? Because no product is entirely produced locally. Global supply chains integration implies that some part or component has to be imported from a country which produces it cheaply. If we extend it to intermediate products, the production costs rise, and our products become prohibitively expensive. This results in increasing inflation and reducing the efficiency of the economy. If we mean by it, just final goods, well it breaks one end of the supply chain on our side. Practically, there are limits to foreign companies making India their export hub without selling the goods in the local market. We may end up discouraging FDI and in turn, bringing down the overall investment level in the economy.

Next, what is its impact on local Indian companies? Would they benefit from local buying? On the contrary, it harms them more. It only benefits local elites who benefit at the expense of small entrepreneurs. They become much more efficient when they partner with competitive foreign companies. Mahindra’s grew on partnering with Ford. Maruti needed a Suzuki to manufacture a car. Surely we don’t want to return to the era of Ambassador.

Next, we talk about consumers. Why should they not have the option of better products and competitive prices? Or is that to be sacrificed for Swadeshi dreams? Or labour? Shouldn’t they have the option to work in better workplaces?

What about companies like Unilever, Colgate, ITC, etc which have been in India for more than 100 years? Are they still foreign or can they now be considered Indian? Are their contribution to the country’s economy ignored simply because the owner is a foreign national? Will e-chaupal, project Shakti be simply ignored because majority shareholding of these companies is foreign?

It’s time we fix these rather than harking back to failed policies of the Socialist era.

The solution to local manufacturing and globally competitive domestic companies is the creation of an ecosystem which allows entrepreneurship to thrive. This includes a skilled workforce, infrastructure at par with the world’s best, cheap sources of finance and a strong social security net which allows risk-taking by entrepreneurs. All of which India lacks, especially for the aspiring entrepreneurs having fewer resources. The one area in which we should be thinking Swadeshi: Higher education, is the one in which we are actually inviting foreign investment. Our population grows to be functionally illiterate as schools and colleges do not equip the students with sufficient skills. We have insufficient research at our universities. Our largest port has a turnaround time of 48 hours when the global best is 16 hours. Our average train speeds are just 22 mph, amongst the lowest in the world, combined with the highest freight fares. Our factories need to set up their own captive plants as the grid supply is unreliable.

It’s time we fix these rather than harking back to failed policies of the Socialist era.

The guest article is authored by a senior government official who prefers to be anonymous at this juncture. If you would like to share your feedback write to us at contact@ulaunch.in