Indian Prime Minister Narendra Modi addresses the nation during Independence Day celebrations at the historic Red Fort in New Delhi, August 15, 2020.(REUTERS)
Indian Prime Minister Narendra Modi addresses the nation during Independence Day celebrations at the historic Red Fort in New Delhi, August 15, 2020.(REUTERS)

Modi’s clear message | HT Editorial

But domestic competition is not enough. Indian firms need help to become globally competitive
By Hindustan Times
UPDATED ON DEC 28, 2020 09:52 PM IST

Being “vocal for local” co-exists very uncomfortably with “zero effect, zero defect.” In every public speech these days, Prime Minister (PM) Narendra Modi has spoken of the need for economic self-reliance, embodied in the slogan Atmanirbhar Bharat. His latest radio address was no different. He praised individuals who had purged foreign-made items from lists of daily-use products. This was blended with his larger vision of national revival, speaking of “things manufactured abroad” having “shackled” Indians. But the PM went on to demand “a clear message for our manufacturers that they should not compromise on the quality of the products.” Made in India products, he insisted, must “meet global standards.”

It may not be obvious, but these two imperatives do no align with each other. If Indian consumers were to move en masse to only products made in their country, they would give domestic manufacturers a captive market. The impetus for an Indian factory-owner to then invest in improving his products would largely evaporate. Modi has remarkable powers of persuasion, but even he cannot change basic economic behaviour. The most important driver of innovation for a corporation is competition. Without the sense that a product is losing out to rivals, there is no incentive for a firm to invest in research or create a managerial environment conducive to change. Domestic competition is not enough. Cartelisation is almost inevitable in such situations, especially when regulators are weak. Price tags become inflated and global standards are sacrificed.

Reviving the manufacturing sector would help create the jobs that would, in turn, feed a post-pandemic domestic recovery. Additionally, there is a strategic need to reduce China’s economic footprint in the country – the country is the single largest source of imported goods into India. There is a strong case for putting up barriers to Chinese products given deteriorating relations and their restrictions on Indian imports. The real danger is that the idea that pushing Indian products will help long-term growth will come to permeate policy-making. This could not be further from the truth. Any reduction in competition in a market economy can be guaranteed to ensure economic mediocrity. What Indian firms need is help to become globally competitive, not captive nationalistic consumers.

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The government must be applauded for this imaginative diplomacy, aided in no small measure by the structural advantage of being the world’s pharmacy (Pratham Gokhale/HT Photo)
The government must be applauded for this imaginative diplomacy, aided in no small measure by the structural advantage of being the world’s pharmacy (Pratham Gokhale/HT Photo)

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