Business Today
Loading...
Rebooting Economy 45: What is AatmaNirbhar Bharat and where will it take India?

This is a nebulous idea designed to mean anything and everything under the sun without the burden of economic logic, facts and evidence

Rebooting Economy 45: What is AatmaNirbhar Bharat and where will it take India?

With a questionable origin and history behind AatmaNirbhar Bharat, Indians would do well not to fall for it or bet on it for their future growth and development

Why India turned from the fastest growing economy in 2015 to one of the slowest in 2020 (Spain and Italy are the other among the developed and emerging and developing countries, according to the International Monetary Fund's latest estimate) is known.

The key factors are: data fudging to present exaggerated growth rate in 2015; man-made disasters like demonetisation, GST and stringent lockdown; lack of institutional and intellectual support and frivolous political responses. (For more read "Rebooting Economy 44: India's journey from one of the fastest growing economies in 2015 to slowest in 2020")

Here is another thing to worry about.

India's response to the current crisis is a nebulous idea sans economic logic, facts and evidence: AatmaNirbhar Bharat Abhiyan.

Here is what, however, is known about it.

What is AatmaNirbhar Bharat Abhiyan?

The phrase AatmaNirbhar Bharat Abhiyan sprang out of an 8 pm national address by Prime Minister Narendra Modi on May 12, 2020 - just like demonetisation and lockdown earlier. By now its scope and meaning has expanded so far and wide that it subsumes every Indian policy and practice in it.

The Prime Minister began the presentation of this idea by saying that when "we" look at the world before the pandemic hit and thereafter, "it seems that the 21stcentury is the century for India". The "we" was not spelt out (who did he consult?); the meaning of "21st century is the century for India" not explained and the economic logic, facts or evidence for this diagnosis not revealed.

Presumably, the Prime Minister meant India would become the economic superpower of 21st century which he has been promising for years.

He did say how India would achieve this: "But what should be the trajectory? The state of the world today teaches us that there is only one path - AtmaNirbhar Bharat. Our scriptures have said "EshahPanthah", that is, this is the only path - AtmaNirbhar Bharat."

Also Read: Atmanirbhar Bharat 3.0 will pave way to economic recovery, push job creation: ASSOCHAM

What is this path?

1. It is free ration, education, skilling, manufacturing and everything else

The Prime Minister listed "Five Pillars" on which "this magnificent building of self-reliant India" would stand: (i) "Economy, which brings in quantum jump and not incremental change; (ii) Infrastructure, which should become the identity of India; (iii) System, based on 21st century technology driven arrangements; (iv) Vibrant Demography, which is our source of energy for as elf-reliant India; and (v) Demand, whereby the strength of our demand and supply chain should be utilised to full capacity."

The entire official machinery got into work. Quite apparently, there were no prior deliberations or consultations, policy papers or social and economic logic to fall back on. Every ministry interpreted it in its own way, making AatmaNirbhar Bharat a diverse set of things.

Here are some examples for illustrations.

On July 9, 2020, the ministry of consumer affairs, food and public distribution issued a statement, headlined "States/UTs can complete distribution of remaining free food grains and whole gram allocated under Atma Nirbhar Bharat scheme by 31st August 2020; Ministry is trying to onboard all remaining States/UTs for One Nation-One Ration Card by January 2021: Shri Ram Vilas Paswan".

One relevant fact here: Rationing of food grains (PDS) was first introduced during World War II and then independent India adopted it in 1950 to address high inflation but with one stroke it became a part of AatmaNirbhar Bharat.

Also Watch: Will Atmanirbhar 3.0 stimulus package help revive the economy?

The same ministry issued another statement on August 18, 2020 headlined "Atma Nirbhar Bharat Scheme for Migrants - A holistic perspective", widening scope of PDS to migrant workers and so, welfare of migrants fell in the ambit of AatmaNirbhar Bharat. No other country in the world witnessed millions of migrant workers being abandoned, beaten and humiliated by cops and government as they walked hundreds of miles to their homes in the hinterland.

On August 10, 2020, the education ministry issued a statement headlined "Union Minister of Education virtually participates in webinar 'AtmaNirbhar Madhya Pradesh - Health and Education", bringing everything that the ministry does (which were listed too), including the new National Education Policy (NEP) unveiled a few days earlier (on July 29, 2020) into its ambit.

On September 10, 2020, PM Modi brought skilling programmes into it while addressing trainers during the second edition ofKaushalacharyaSamadar 2020(Kaushalacharya Awards) by writing: "The whole nation has come together under the 'Atmanirbhar Bharat' mission and it is also the need of the hour...This is an opportunity for our young workforce to convert the present challenges into opportunities and become the strong pillars of 'Atmanirbhar Bharat."

Not to be left out, the ministry of defence released a statement on August 9, 2020 headlined "MoD's big push to Atmanirbhar Bharat initiative: Import embargo on 101 items beyond given timelines to boost indigenisation of defence production". The headline is self-explanatory.

Thus AatmaNirbhar Bharat became India's overarching national policy, vision and mission all-rolled- into-one for growth and development.

Also Read: Rebooting Economy 43: States exhaust MGNREGS fund, leave Rs 1,386 crore in unpaid wages

2. It is pandemic relief packages and reforms therein

After laying down the "Five Pillars" of AatmaNirbhar Bharat in his May 12 address, the Prime Minister said a "special economic package" was on its way which "will provide a much-needed boost towards achieving 'Atmanirbhar Bharat' and "focus on land, labour, liquidity and laws... cater to various sections including cottage industry, MSMEs, labourers, middle class, industries, among others".

He said together with the earlier pandemic packages (free food grain, cash support, emergency health allocation etc.) and RBI's liquidity infusion, the "special economic package" would take the total economic support to "Rs 20 lakh crore" or "almost 10% of India's GDP".

India had faced all-round criticism for a token package of Rs 1.7 lakh crore announced earlier. By the end of May 2020, India announced Rs 21 lakh crore of packages under the aegis of AatmaNirbhar Bharat Abhiyan. The packages constituted just 7-9% of fiscal spending, the rest 91-93% being credit facilitation - credit and credit guarantee schemes to be helmed by the RBI, other banks and financial institutions. (For more read "Coronavirus Lockdown XVII: The economics behind India's Rs 21 lakh crore package ")

The AatmaNirbhar Bharat Abhiyan's official webpage duly recognises it: "The Prime Minister has announced "Rs 20 lakh crore" special economic packages under the 'AatmaNirbhar Bharat Abhiyaan' to aid our country out of the Coronavirus crisis (by making us self-reliant)."

These packages did not excite many either, since leading national and global economists, including Nobel laureate Abhijit Banerjee, had been seeking far bigger fiscal spending, arguing that (i) India witnessed a demand recession, private investment had petered out even before the pandemic hit and (ii) the lockdown left millions job-less and devastated small businesses overnight, plunging demand further down.

Here is one reaction to the Rs 21 lakh crore packages for illustration.

Global security research firm Sanford Bernstein described the packages "aimless" and "lost opportunity". It said the packages focussed on "rural and strange end markets such as space programme" when measures should have been announced for urban corporates, consumptions, infra and the impacted sectors.

The reference to "rural" here includes agricultural reforms proposed in the packages, but spelt out much later through three ordinances (one was promptly undone with immediate ban on onion exports a few days later on September 17, 2020), sparking country-wide protests. An important ally, Shiromani Akali Dal, quit the government for not being consulted and Punjab, Rajasthan and Chhattisgarh passed new laws to protect farmers from exploitation that the ordinances exposed them to. (For more read "Rebooting Economy XXIX: Exposing farmers to unregulated market is more likely to harm them ")

The "strange end markets such as space programme" refers to the proposed private participation in "inter-planetary exploration" which remains a statement of intent so far.

Here is how "aimless" the packages' main thrust on liquidity is.

The RBI infused Rs 8.02 lakh crore liquidity through various instruments by the end of May 2020 (SBI's Ecowrap of May 18, 2020). Since then, RBI data shows this liquidity has gone nowhere. Every day, the additional liquidity gets parked in RBI's own reverse repo account because banks are unwilling to lend and businesses are unwilling to borrow. (For more read "Coronavirus Lockdown XIX: Where is excess liquidity generated by RBI going? ")

The latest RBI data, accessed on November 11, 2020 (data updated up to September 14, 2020) is mapped below to show how India is in a liquidity trap; liquidity doing nothing to the economy.

title=/

The RBI's monthly reports on deployment of bank credit to non-food sectors - mapped below - provide further evidence that credit facility is not working. Bank credit growth between April and August 2020 (last month for which data is available) was negative or near zero.

title=/

Further, the finance ministry's progress report "AatmaNirbhar Bharat Package - Progress So Far", released on October 1, 2020, confirms that the credit disbursed (by NBFCs, MFIs, MUDRA etc.) is meant to provide relief to households and small businesses to survive the current crisis, rather than jumpstart high growth.

A subsequent package of Rs 1 lakh crore announced on October 12, 2020 (LTC vouchers, festival advance etc.) to boost festival sales fizzled out. The automobile dealers' association said on November 9, 2020 that auto sales crashed 24% in October 2020, compared to previous year's sales.

Not just India, the global economy too is in a liquidity trap due to the same old and repeatedly failed neoliberal economic concept of infusing liquidity to address recession. This approach has helped stock markets to boom and billionaires to add more wealth when rest of the world economy is in a severe crisis. (For more read "Rebooting Economy 38: What makes stock markets and billionaires immune to coronavirus pandemic? ")

Last week, IMF's chief economist Gita Gopinath wrote an article "Global liquidity trap requires a big fiscal response" confirming it and proposing "big fiscal response" to overcome the crisis. She cautioned that "credit facilities installed by monetary authorities can only assure the power to lend but not to spend".

Thus, the AatmaNirbhar Bharat's prescription (liquidity) is not only limited to survive the crisis it is not even working. The RBI estimate says India is likely to record minus 9.5% GDP growth for the full fiscal year. The IMF estimate shows India will record minus 10.3% output (GDP) growth in 2020 while the global output is likely to grow by minus 4%.

Also Read: Rebooting Economy 42: How will changes to land laws in Jammu and Kashmir help, and whom?

3. It is import substitution

Having announced "Rs 20 lakh crore" special packages, PM Modi added other elements to his concept: promoting local products and joining global value chain.

This sparked a vigorous debate: Does AatmaNirbhar Bharat mean self-sufficiency or self-reliance?

Columnist Swaminathan Aiyar said in an interview that the idea seemed vague and contradictory. He said going back to "self-sufficiency" that Nehru and Indira Gandhi tried would be a terrible idea (flopped, India grew at 3.5%) and "self-reliance" made little sense when the idea is to join global value chain as well since that would entail both import and export and can't mean "self-sufficiency".

The debate had its impact and the Press Information Bureau (PIB) replaced its original statement detailing the Prime Minister's address of on May 12, 2020 with a sanitised version. However, tell-tale signs of the original statement exist on various official sites (like various Indian embassy websites that copy-pasted it in full), and newspaper reports.  

The sanitised version removed two sentences: "The state of the world today teaches us that a (AtmaNirbhar Bharat) "Self-reliant India" is the only path. It is said in our scriptures - Eshah Panthah. That is -self-sufficient India."

These sentences carried both self-sufficient India and self-reliant India to mean AatmaNirbhar Bharat.

In the meanwhile, border tension with China escalated, adding a nationalistic fervour to ban imports from China and elsewhere. Slogans like "Vocal for local" and "Local for Global" acquired new power.

Former Chief Economic Advisor (CEA) Arvind Subramanian and his co-author Shoumitro Chatterjee wrote a two-part article in a national daily in October 2020 arguing against the idea ("India's Inward Return" and "India's export opportunities could be significant even in a post-COVID world").

They brought academic rigour to their arguments with facts and logic.

They asked: "Will it work?"

Their answer: "Not really."

They argued that India's new approach amounted to "abandoning two core principles of the post-1991 consensus: Export-orientation on the macro-economic side, and slow but steady liberalisation on the trade side" that propelled India into higher growth trajectory.

They also argued that India's market size is grossly overestimated, not big enough to give big enough lift and wrote: "The delusion of size is making policy-makers set their sights on the domestic market when it should be on the world market."

Also Read: Rebooting Economy 41: India's growing poverty and hunger nobody talks about

They pointed out that ever since the NDA-II came to power in 2014, it has increased tariffs of 3,200 product categories, out of 5,300, affecting $300 billion or 70% of total imports to protect and promote local businesses - a reversal of policy pursued between 1991 and 2014.

In January 2020, India had refused to sign regional trade treaty RECP also for the same reason of protecting domestic producers. Taken together with tariff hikes since 2014, these moves to protect and promote local products are not new and certainly not part of AatmaNirbhar Bharat that appeared on May 12, 2020.

The idea of import substitution so rattled economists that even Arvind Panagariya, former vice chairman of Niti Aayog who had quit to join academia and a diehard supporter of every government policy and decisions (demonetisation, GST, lockdown, farm and labour reforms), changed tune.

He said "no" to the idea and cautioned against falling into a trap (which is easy since local businesses drive policy, he said). Such a step would allow less efficient producers to get into market, won't be competitive or contribute much to export, he argued.

4. Niti Aayog's go-ahead without knowing what it is

As usual, Niti Aayog supported AatmaNirbhar Bharat right from the beginning.

In a signed article, leading Niti Aayog member VK Saraswat wrote an article headlined "Modi's AtmaNirbhar Package Paves Way For Make In India 2.0 In Post-Covid World" on June 5 2020.

His arguments were: (i) the packages address immediate financing and liquidity problems of the economy and (ii) the proposed reforms "could kick-start a manufacturing movement for India in the longer term".

At that time, the reforms proposed in the packages had not been spelt out and hence his appreciation was baseless and unwarranted.

The agricultural and labour reforms were unveiled in September 2020, sparking country-wide protests from farmers and worker unions alike (including RSS-affiliated Bharat Mazdoor Sangh). Private participation in "inter-planetary exploration" has not yet been spelt out. Given that India's private sector has contributed little to technological advancement in any area, its participation in inter-planetary exploration is surely not for advancing India's space technologies.

Also Read: Rebooting Economy 40: Why Punjab farmers burn stubble?

Nevertheless, when former CEA Arvind Subramanian argued against AatmaNirbhar Bharat with facts and evidence, the Niti Aayog vice chairman Rajiv Kumar hit back - on twitter.

On October 14, 2020, he tweeted, "Very surprised to read @arvindsubraman's co-authored piece this morning criticising #AatmaNirbharBharat. It effectively started during his tenure as Chief Economic Advisor which as he writes saw the highest increase in import tariffs in 2018 to nearly 18%. Not fair or honest to take one stand when within the government and the opposite after leaving it."

This too was unwarranted. For one, AatmaNirbhar Bharat didn't exist in Subramanian's time (he quit in 2017) and secondly, Subramanian (and his co-author) argued with facts and evidence, Kumar didn't.

With such questionable origin and history behind AatmaNirbhar Bharat, Indians would do well not to fall for it or bet on it for their future growth and development.

Get latest news & live updates on the go on your phone with our News App. Download The Business Today news app on your device
More from OPINION