Context
Former Reserve Bank of India (RBI) Governor C. Rangarajan recently expressed concerns regarding India’s “Atmanirbhar Bharat” initiative, emphasizing that it should not devolve into inefficient import substitution. His remarks, made during the 14th Convocation of the ICFAI Foundation for Higher Education, underline the need for a balanced and strategic approach to self-sufficiency in the wake of global supply chain disruptions.
Understanding Atmanirbhar Bharat
The Concept of Self-Reliance
Launched in 2020, the Atmanirbhar Bharat initiative aims to make India self-reliant across various sectors, including manufacturing, agriculture, and services. The initiative gained momentum due to the disruptions caused by the COVID-19 pandemic and geopolitical tensions, such as the Russian-Ukrainian war, which highlighted vulnerabilities in global supply chains.
Objectives of the Initiative
The primary goals of Atmanirbhar Bharat include:
- Reducing dependency on imports for critical goods and services.
- Promoting local manufacturing and entrepreneurship.
- Enhancing the competitiveness of Indian industries in the global market.
The Warning Against Inefficient Import Substitution
Defining Inefficient Import Substitution
Rangarajan cautioned that India’s push for self-reliance should not lead to a return to the old model of import substitution that characterized Indian economic policy in the 1960s and 1970s. Inefficient import substitution often results in higher costs for consumers and businesses, stifling innovation and competitiveness.
The Risks of Expensive Import Substitution
Rangarajan emphasized that any import substitution strategy must consider cost-effectiveness. He stated, “Expensive import substitution is not to the advantage of anybody.” This perspective highlights the importance of ensuring that domestic production is not only viable but also competitive in terms of pricing and quality.
A Multi-Dimensional Development Strategy
Rangarajan advocated for a multi-dimensional approach to India’s development strategy. He suggested that growth could be stimulated by:
- Raising Investment Rates: Increasing investments in various sectors can drive economic growth and create job opportunities.
- Emphasizing Key Sectors: A focus on agriculture, manufacturing, and services is essential for a balanced economy. Each sector plays a crucial role in contributing to GDP and employment.
- Adopting New Technologies: Embracing technological advancements can enhance productivity and efficiency across sectors, making Indian industries more competitive globally.
Economic Growth Projections
Setting Targets for Per Capita Income
To achieve an ambitious target of over $13,000 per capita income by 2024, Rangarajan suggested that India needs to maintain an average annual real growth rate of 6% to 7%. This growth is essential not only for improving living standards but also for ensuring that economic progress benefits a broader segment of society.
The Role of Higher Education
Rangarajan emphasized the importance of strengthening higher education in India to support economic growth. He identified three dimensions of reform in higher education: access, equity, and quality. Improving the quality of education will equip the workforce with the skills necessary for a competitive economy.
Conclusion: A Balanced Approach to Atmanirbhar Bharat
Rangarajan emphasizes that while the Atmanirbhar Bharat initiative is vital for India’s economic future, it should be approached with caution. The focus must be on efficient import substitution that boosts competitiveness, not on outdated practices that impede growth. India’s self-reliance strategy should be multi-faceted, encouraging investment, technological adoption, and job creation. A balanced approach can help India achieve self-sufficiency while fostering a competitive and resilient economy that benefits all citizens. The vision of Atmanirbhar Bharat should aim to reduce imports and build a sustainable economic framework for the future.
Source: Economics Times
UPSC Mains Practice Question
Q. Critically analyze how India can achieve self-reliance while avoiding the drawbacks of inefficient import substitution. Discuss the measures needed to ensure that this initiative enhances competitiveness, promotes investment, embraces technology, and fosters job creation.