Self-reliance is about resilience and decentralisation, not isolationism
In recent weeks, Prime Minister Narendra Modi delivered two important speeches outlining his long-term vision for the economy. The first speech was part of the context-setting for the stimulus package subsequently announced by Finance Minister Nirmala Sitharaman. The second speech was an address to the annual session of Confederation of Indian Industry. In both cases, the Prime Minister emphasised the idea of “Atmanirbhar Bharat” (self-reliant India). But, what does Atmanirbhar Bharat really mean? How does it fit with the reforms being currently announced? What does it imply for future policy?
It is important, at the very onset, to clarify that this idea of self-reliance is not about a return to Nehruvian import substitution or autarkic isolationism. The prime minister emphasised that his vision includes active participation in post-COVID global supply chains as well as the need to attract foreign direct investment.
Similarly, it should also be clear that it is not a return to licence-permit raj and inspector raj of the socialist era. Far from suggesting a centralised, top-down model directed from the “commanding heights” of the Planning Commission, the prime minister spoke of freeing Indian entrepreneurship and innovation from bureaucratic hurdles. This is about decentralised localism that takes pride in local brands, emphasises resilience and flexibility, and encourages local capacity-building and indigenisation.
In order to understand the intellectual underpinnings of Atmanirbhar Bharat, therefore, it is necessary to skip past the socialist-era connotation of the term to an earlier era of thinkers like Swami Vivekananda. In this context, the idea of self-reliance is about resilience, leveraging internal strengths, personal responsibility, and a sense of national mission (or “Man Making” to use the late 19th century expression of Swami Vivekananda).
The recently announced liberalisation of the agriculture sector is a good illustration of this world view and its economic implications. Since the 1950s, Indian agriculture policy has been driven by two sets of laws — the Essential Commodities Act (ECA) and the state-level Agricultural Produce Marketing Committee (APMC) Acts. Together, these draconian laws gave government officials the power to tell farmers where to sell their produce, restrict transportation, fix prices, confiscate stocks and even imprison so-called “hoarders”.
All of this was justified in the name of food price stability and the paternalistic idea that farmers did not know how to market their produce. The system was not only unfair to farmers, it did not even stabilise food prices. As discussed in the latest Economic Survey (Volume 1, 2019-20), the ECA actually increased the volatility of prices for commodities like onion, pulses and sugar. Moreover, it led to harassment of traders and rampant rent-seeking by officials. The Survey found evidence that only 2-4 per cent of ECA-related raids stood up in court; no small matter when there were 76,000 such raids in 2019 alone.
The scrapping of the ECA-APMC system enables localised decision-making by farmers even as they can participate in a national common market or export to the global market. Similarly, traders can now invest in supply-chains and agri-businesses without the fear of being arbitrarily labelled a hoarder by an inspector. The government still has a role but it is as an enabler, providing soft and hard infrastructure.
