Self-reliance in electronics, defence, pharma sectors can lead to import substitution of $186 billion: Study

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September 16, 2020 9:30 PM

The study recommended several sector-specific strategies for reducing import dependence by enhancing domestic production, based on an assessment of the specific needs and issues faced by each of the sectors.

The study has also included sectors such as auto components, and iron and steel where, though there is overall trade surplus for the country, but in some sub-categories, there is trade deficit, particularly with China.

Promoting self-reliance in sectors such as electronics, defence equipment, pharmaceuticals, among others, can lead to import substitution of over USD 186 billion for the country, says a study by Export and Import Bank of India (Exim Bank). Other sectors identified for import substitution and enhancing domestic production include machinery, chemicals and allied sectors, and select agricultural products, according to the study titled ‘Self-Reliant India: Approach and Strategic Sectors to Focus’.

The study has also included sectors such as auto components, and iron and steel where, though there is overall trade surplus for the country, but in some sub-categories, there is trade deficit, particularly with China. It has included rare earth elements in the scope, as securing these strategic minerals is important for the country to enter high-tech manufacturing. “These sectors account for more than USD 186 billion of imports by India, with a share of nearly 39 per cent in overall imports and 50 per cent in the non-oil imports by India,” the study showed.

The study was released by K Rajaraman, additional secretary, department of economic affairs, the Ministry of Finance, in a webinar organised by Exim Bank. According to the study, the recent performance of the manufacturing sector in the country is indicative of an underlying inertia, with the share of manufacturing in the country’s gross value added declining to 15.1 per cent in 2019-20, as compared to 18.4 per cent in 2010-11, despite the strong and growing private consumption demand in the country. “This weakness in the domestic manufacturing sector has translated into greater dependence on imports to meet the growing domestic demand over the years,” it noted.

The study recommended several sector-specific strategies for reducing import dependence by enhancing domestic production, based on an assessment of the specific needs and issues faced by each of the sectors. For instance, in sectors like agriculture and rare earth, there is a greater need for strategies that enable collaborative arrangements and encourage outward investments into partner countries for meeting domestic requirements, it said.

In technology-intensive sectors, the focus should be on creating domestic capacities for reducing import dependence.

Some of the other strategies suggested by the study include- specific interventions for encouraging innovation-led manufacturing, addressing deficiencies in tax and duty structures, encouraging joint ventures, revisiting government regulations and programmes, among others.

Speaking at the webinar, Exim Bank’s managing director David Rasquinha said with the current international attention on the country’s tremendous potential for economic growth, international trade and global value chain participation, it would be an opportune time to push for rapid progress on structural reforms to increase domestic capabilities.

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