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Tuesday, November 24, 2020

6 myths busted about Centre’s Atmanirbhar plan that you must know

So once again, in the latest episode of Mann Ki Baat, PM Modi rooted about the Centre’s Atmanirbhar plan. He spoke repeatedly for the country’s self-reliance on the economy. The idea of becoming an independent economy, which stemmed from immense economic slowdown following the Covid-19 outbreak in the world, seems to be tempting with lots of positivity into it. But if we look into its depth, how feasible it is for a country to be totally self-reliant in today’s time and era? We shall discuss the Atmanirbhar Bharat plan and bust its myths in this article.

6 myths busted about Centre’s Atmanirbhar plan that you must know

1. Atmanirbhar plan is already facing heat

On June 2, Google Play Store removed the “Mitron” and “Remove China Apps” from its Google Play Store for policy violations. Both apps were by-products of India trying to demonise China. The “Mitron” app violated its ‘spam and minimum functionality policy’, say sources. The “Remove China Apps” went live on Google Play Store on May 17 and was downloaded over 10 Lakh times since then. “Mitron” (which functioned just like TikTok) gained popularity amid negative reports about TikTok. Finally, Google Store had to remove around over 8 million negative reviews about TikTok and its ratings went back to 4.8,

Mitron was removed after it was found that it was not an Indian app at all but had been developed by a Pakistani software development firm. The Centre should understand that it is easy to say that software is Indian when actually it has been developed overseas. All that is needed is a backroom financial arrangement to let the Indian developer claim that it has been developed in India. The Made in India ruse can cause more harm than good. The irony is lost on many. Once competitors (from China or elsewhere) are driven away, by disinformation or clandestine government support, the cost to be paid by customers eventually begins to rise. That is why bans of any technology from anywhere are dangerous games that the unscrupulous can exploit, much to the disadvantage of India and the Indian customer. It could be the Cobra effect all over again.

2. Blind shutting of a particular country is unhealthy for trade

Complete blocking or shutting doors to China in the economic sphere is absurd and unhealthy. This effect can be seen in some of the ridiculous decisions taken in the realm of finance as well. Consider, for instance, the decision to give MSMEs collateral-free loans. As any economy watcher will tell you, this is an incentive to any unscrupulous promoter to take funds from the banks and not repay the loans. This is precisely what happened when Indira Gandhi gave our collateral-free loans to farmers in the name of Loan Melas.

Ditto with the decision to restrain investments from China in any Indian venture. That is absurd. The least the government could have done is to get all investments approved by a select committee. You do not single out a single country – neither diplomatically, nor commercially – especially when that country is the largest investor in the world, and when India is in dire need of investments. It may make good headlines. It may help distract attention from the economic crisis confronting India. It may also help provoke a border clash, which is made to look bigger by roping in other global players. Yes, it does take away attention from the huge migraine of the economic slump. But it will not help in the long run.

3. Boycotting foreign countries may hamper India’s peace

India needs to focus on peace, on not allowing things to flare up anywhere. The economy needs attention. The industry is in tears – And as Rajiv Bajaj of Bajaj Auto stated publicly, India flattened the wrong curve – the GDP curve. Agriculture too needs help. Policies for procurement and subsidies need to be changed. And the government itself needs more transparency. Just look up Mospi’s website. See how outdated and incomplete some data is. Ditto with the Warehousing Development Regulatory Authority WDRA. Either someone is having a paid holiday, or there are instructions not to share data with the general public.

You do not cut your nose to spite your face. And do remember that the largest bonanza young Indian entrepreneurs in the IT space have got is from Chinese Investments. China funds have helped grow the largest number of Unicorns in India. Tomorrow, when Western countries do not bring in their money to help India grow its industries, India may have to go back to the Chinese. It will then have lost much of its bargaining strength, even a loss of face. Or the government will spin another yarn about the supreme sacrifice Indians have made in coping with bad times.

4. Investors will lose interest if the Indian market doesn’t offer competition

By changing rules, and making some of its players sick, the government has made the entire telecom industry sick. Revenues have begun falling. Competition has been reduced. And average revenues per user (ARPUs) have slumped. Like in any business, if you drive away the competition, and run it to the ground, you could cause customers to pay more later. This will have the deleterious effect of the cost of packages going up gradually, and the quality of service going down. This is one sector that has tremendous potential. But the government’s on-again-off-again policies could destroy the revenue potential from this industry.

Atmanirbhar India
Photo: Twitter

It does not take a genius to realize that an investment inflow of $2 billion from five competing companies can always become larger than $5 billion from just one company. That is why, governments should always take care to ensure that competition in the industry does not diminish, that all players make money fairly, and that rules are not tilted in favor of one player and against others. Not surprisingly, good investors loath to come to India. It does not have investor protection in place. Rules are often tweaked to favor one and penalize another. For instance, the fines SEBI levies on an NHAI for the delay in making timely disclosure about financial results are a laugh when compared to the still penalties it levies on others. Investors do not like rules of business to change after the money comes into India. This is what happened with Amazon and Walmart. This is what happened with telecom companies. This is what is happening with debit and credit cards, wallets, and payment gateways. And this is what is happening with IT as well, even as the government allows a shrill tirade against Chinese apps. Policymakers forget that some of these apps have been made by Indian developers, even though the funding was Chinese.

Hopefully, policymakers will deliberate more, discuss more, and not allow regulatory capture. Hopefully, India will emerge as a destination for investments as it realizes the crucial need for effective dispute resolution, including international arbitration. We hope that India will not witness the resurrection of the cobra effect.

5. Atmanirbhar Bharat is not a good way to recover GDP

What it needs urgently are investments – from anywhere.  And as much as is possible. For perhaps the first time in its independent history, the country may see negative GDP growth. Part of it was on account of the lockdown caused by the Covid-19 pandemic. But part of the economic disaster the country faces is on account of past policies – ranging from a poorly understood and misapplied demonetization, a badly implemented GST and a confused approach to law and order itself. Hence investors are shying away from India.

Nobody wants to come to India because it is difficult to do business here (though its ranking has improved since 2017. But what has not improved is its inability to enforce contracts. India even changes its business rules, after investors have put in their money. Look at the way the rules of business were changed for wholesale and online trade after Walmart and Amazon entered India. Everyone knows how telecom rules were changed. And now the government wants to disrupt the payment gateway, e-wallet,  credit card, and debit card markets by changing more rules. Worse, India discourages companies from opting for international arbitration.

The Indian government offered the biggest allocation – for MSMEs – in Tranche 1 following the Covid-19 outbreak. It allows MSMEs to borrow without collateral.  This is what Indira Gandhi did in 1982 with her loan melas. Loans were given without collateral. Much of the money did not come back, as feared by prudent bankers. This will happen again. So the Centre should not introduce schemes which tempt people to be corrupt and instead give 2-5% of turnover as a grant to all MSMEs. Also, an outlay of Rs 21 lakh crore has been announced. But half the amount relates to measures announced earlier. That, as Kaushik Basu, economist, has pointed out, is woefully inadequate.

There is a little audit. Normally, good governance demands that the larger the sums involved, the stronger should be the audit controls. Yet PM Cares (unlike the PM’s National Disaster Relief and other funds) is not subject to CAG audit. That does not inspire confidence.

Atmanirbhar India
Photo: Twitter

6. Atmanirbhar Bharat plan lacks vision and realistic outcome

Lastly, there is little vision in the proposals. Nowhere is this more visible than in the proposals for agriculture (tranche 3).  This is both surprising and immensely saddening. Agriculture remains the backbone of India where 50% of its population dwells.  That is a huge purchasing power for a consumption economy. It is also a huge voting block.  Moreover, as studies have shown, a rupee invested in agriculture goes a lot farther than if invested in the industry. Yet there is no grand plan, no incentive for investment, no attempt to push agriculture up the value chain.

Instead, the government has hobbled agriculture, especially milk, which is the most successful agricultural product.  But the lack of vision and the lost opportunities in agriculture, education and healthcare will be grist for another article. The omissions are sad and horrifying.

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