In the over 100-minute speech of Prime Minister Narendra Modi covering a range of areas for a better tomorrow for India, a link node was the emphasis on self-reliance. Economist and former central banker Dr C Rangarajan feels the current global environment has made it necessary for India to focus on self-reliance.
However, the former governor of the Reserve Bank of India reminds that the way ahead for India will be ideal if there is strategic self-reliance without going back to the old system of blanket import substitution. He feels import substitution on a wide basis will not be desirable for India. It has to be only in some critical areas like chips for artificial intelligence (AI), critical minerals, rare earths (metallic elements used by several industries and products from smartphones to spacecraft).
Ideal way ahead
The ideal option, he feels, “is to organise other countries to come together and be a partner in a rule-based global trading system that ensures there are no unilateral imposition of duties and taxes.” The other approach, he says, is to enter into free trade agreements with different trading blocks. Though it can and is being can explored albeit outside the trading blocks, it still becomes restricted trade. All of these, are important as we cannot afford self-reliance in every area as we may not be cost competitive across the board, he says.
Global trade dealings
Also, since broken supply chain emerged as an issue at the beginning of the Russia-Ukraine war, we also need to ensure that we encourage multiple sources of supply for all the commodities and especially for critical inputs. With this, even when one source of supply is cut off we should be able to rely on bridging this gap by supplies from other sources. This will ensure that monopolies do not choke global trade dealings.