As commentators trip over each other to applaud Narendra Modi’s first address to the nation as Prime Minister, I must confess to the slight feeling of scepticism that laced my own admiration as I sat glued to the box on August 15. How will Mr Modi’s seemingly simple, absolutely essential and yet infinitely complex, aims be achieved, I wondered. Instead of projecting a lofty vision or preaching pious platitudes, he addressed matters of daily concern that go to the heart of the national character. It sounded great, for instance, to hear him boom “Come, Make in India!” At first I wasn’t sure whether he was inviting foreign direct investment or whether he was urging young Indians to take up the challenge of manufacture. Both, it seemed, when he added he had full confidence in the capability of Indians to produce in all sectors.
“I invite our youth involved in manufacturing to ensure that all over the world, products say ‘Made in India’,” he continued, adding that there is no reason why we should have to import things when we have the capacity to make them at home. He was rightly categorical that it will benefit the country if we start manufacturing the electronic goods we now import. “Out of all the things we import, I will ensure that we start making at least one of those in India”. Amen to that.
But the idea is hardly new. “Import substitution” was Jawaharlal Nehru’s highly publicised mantra. It was expected to conserve valuable foreign exchange for essential purposes while developing a manufacturing base in India that would generate employment and develop indigenous skills. The Ambassador car, modelled on the 1950s Morris Oxford, was the outstanding symbol. Initially, our success in import substitution made India the envy of all developing countries. In the 1960s, India also planned a series of special economic zones (SEZs) in Kandla in Gujarat, Falta in West Bengal and other places to manufacture only for export.
One reason why the experiment collapsed is evident from the tremendous popularity of so-called “export rejects” and the cachet attached to two other magic words “export quality”. There is a mad stampede whenever a sale of Chinese goods is announced. Sir Vidya S. Naipaul, with his unerring eye and ear for human frailties, exposed this aspect of the Indian psyche by making a woman say in An Area of Darkness “I am craze for foreign”. Indira Gandhi must have had someone like her in mind when she told the story of Indians abroad gleefully buying up a whole wardrobe of garments with “Made in USA” labels. It was only on their return to India that they discovered to their chagrin that “USA” stood for Ulhasnagar Sindhi Association somewhere near
Mumbai.
Taste can’t be legislated though it can be changed through persuasion and instruction over a period of time. That didn’t happen with India’s aspiring upper middle class. Another example that comes to mind is of an American-made sharp, hot sauce called Tabasco. When luxury consumer goods could no longer be imported, Indian generated a very similar indigenously-made sauce called Capsico. I don’t know whether it was made under licence or was a totally indigenous product but Capsico seemed perfectly acceptable and was served in many hotels and restaurants. Its popularity dropped with the advent of liberalisation when the much more expensive Tabasco was again freely available.
Although set up long before China’s, our SEZs didn’t work as originally planned because of several reasons. First, the quality and packaging of Indian manufactures did not appeal to buyers in Europe, America and — increasingly — the richer nations of East and Southeast Asia. Second, foreign buyers complained of the absence of follow-up service and the difficulty, often impossibility, of getting spares from India. Third, delivery schedules were not kept. Fourth, many Indian exporters manipulated invoices and demanded payment on the side to avoid Indian foreign exchange and tax regulations, which respectable buyers abroad found unacceptable.
There were other abuses. An Indian exporter of medical supplies was banned in Australia because some bandages were found to be infected. The exporter promptly changed his brand name and continued sending the same contaminated stuff to the same destination. When he was caught out, he sold his company to another but innocent Indian businessman who began exporting to Australia in all good faith until he discovered his products had a bad name there.
Disincentives are not always criminal. A flourishing black market is always a challenge to legitimate production. Kolkata boasted a young businessman who was referred to as the “Chocolate man” and who could supply anything from a small bottle of French perfume to a German hi-fi set. He went round from office to office with a large suitcase full of imported tinned foods and — more to the point — several bulky catalogues of foreign goods that could be ordered. Some of his supplies came from Western diplomatic missions who sold wines, cheese and other foodstuffs on the quiet, and also from five-star hotels that didn’t make full and proper use of their import licence for consumerables. But, obviously, more professional contraband operators were also at work.
Liberalisation has increased the flow of such goods to a flood without the taint of illegality. They obviously can’t be banned because apart from World Trade Organisation rules, liberalisation has also added to wealth and many more Indians can afford imported goods. But the Modi government can try to ensure that Indian manufactures are of world class quality and that the abuses listed above are eliminated. Even so, the Indian public will have to be persuaded that desi is better than pardesi. It won’t be an easy task.
The writer is a senior journalist, columnist and author
