Patralekha Chatterjee | Managing future shocks: Way to self-reliant India
DECCAN CHRONICLE | Patralekha Chatterjee
"It is very romantic to be in love. But there is nothing romantic about a definite proposal. Why, one may be accepted… One usually is, I believe. Then the excitement is all over. The very essence of romance is uncertainty," says Algernon Moncrieff, the wealthy, witty man-about-town in Oscar Wilde’s famous play The Importance of Being Earnest.
One wonders what Wilde would have said had he been alive today and navigating the wildly uncertain times we live in, where crises don’t come sequentially, but all at once, and where you never can tell what will happen next.
Clearly, the only certainty is uncertainty, at least in the near term. And it is helping fuel fear more than romantic love.
As 2022 kicked off, many of us had hoped the Covid-19 pandemic would be petering out, and that the economy, both local and global, would be on the path to a bounce-back. And even if the longed-for pre-pandemic "normal" remained a distant dream, we would be inching towards that goal.
On February 24, Russia invaded Ukraine, a sovereign country, which overturned many of these assumptions.
A month into the conflict, the human toll has been devastating. Clearly, the worst-affected are the ordinary Ukrainians who have lost their lives, livelihoods, homes and everything they cherish. Millions have been displaced, millions more are fighting heroically.
Even those far from the frontline have been hit. No one really knows what the world will look like in a year or two but at this moment, it seems very likely that the war will continue, with wide-ranging ramifications everywhere.
Energy and food prices are soaring, creating macro uncertainty across the world.
"Global inflation will be higher, and we see a direct drag on growth from higher commodity prices and possibly a further drag from uncertainty," says Seth Carpenter, chief global economist, Morgan Stanley Research.
And lest we forget, the pandemic is not over. Many countries, including China and parts of Europe, are seeing a surge in the Covid-19 cases.
India is far better equipped than it was at the onset of the Covid-19 pandemic in 2020, primarily because of vaccines, but you never can tell what the future brings.
The economic impact of the Russian invasion, even as the pandemic rages on, is reverberating across the world. India is not an exception.
How do we prepare for future shocks or mitigate the impact of ongoing shocks? The short answer is: there is no foolproof formula.
What we can, and should work towards, is greater resilience when none of the old assumptions hold.
The unprecedented uncertainty has topicalised the discourse around "atma nirbharta", or self-reliance.
Like many nations, India is affected by disruptions in the global supply chains. India is dependent on not only Russia for its defence and energy needs but also China for electronics, auto components, pharmaceuticals and other sectors.
As I write, the news comes that fuel prices have been hiked by 80 paise per litre, and LPG by Rs 50 per cylinder. This is the first increase in fuel and cooking gas prices in four-and-a-half months. The price of petrol in New Delhi, the national capital, has increased to Rs 96.21 per litre from Rs 95.41. Diesel will cost Rs 87.47 per litre, up from Rs 86.67. Similarly, non-subsidised LPG will now cost Rs 949.50 for a 14.2 kg cylinder. Globally, crude oil prices have spiked, going beyond $100 a barrel, in the wake of the Russian invasion of Ukraine. India’s oil imports account for over 85 per cent of the country’s requirements.
Given these harsh ground realities, what does self-reliance really mean? And does it have to mean being closed to the world?
First things first -- talk about being "self-reliant" may be high-decibel now but it is not new. We have been talking about self-reliance for years. However, despite many task forces, committees and vision statements, in many critical sectors, India is far from being self-reliant. It is not just in defence and military matters. Further, the Russian invasion of Ukraine is not the only factor at play.
"The global economy - already struggling with war in Ukraine and the stagflation risks it is fanning - is bracing for greater disruption as China scrambles to contain its worst outbreak of Covid-19 since the pandemic began. Since Wuhan two years ago, China has had relative success in minimising disruption by bringing virus cases quickly under control. Now, the geographic spread of infections and higher transmissibility of the Omicron variant is challenging the country’s hawkish pandemic strategy of aggressive testing and locking down whole cities or provinces," a recent report by Bloomberg noted.
This is the cause of worry. India’s pharma sector is heavily dependent on Chinese APIs (active pharmaceutical ingredients) -- active components in a pharmaceutical drug that produce the required effect on the body to treat a condition.
In March last year, the Union government had approved a scheme to set up three bulk drug parks to make active pharmaceutical ingredients (APIs) and intermediates to reduce the dependency on China, but even after one and a half years, the much-hyped bulk drug parks are nowhere in sight, a December 2021 report in a national newspaper noted.
It is not just APIs. India is also dependent on China for other products, including medical devices.
Industry representatives say this is largely due to customs duties, which make Indian products more expensive and consequently jeopardises the country’s health security.
The wider point in all this is not that we stop all imports and see self-reliance as isolation.
Self-reliance means resilience, factoring in future shocks, and worst-case scenarios. This includes massive disruptions in global supply chains in the time of crises.
Self-reliance also means being self-aware. The five pillars of the Narendra Modi government’s vision of an "Atma Nirbhar Bharat" are "economy, infrastructure, system, vibrant demography and demand".
Beyond words, slogans and acronyms, "self-reliance" in the Indian context has to recognise that Indian billionaires notwithstanding, millions in the country remain trapped in abject poverty. Therefore, our core concerns must necessarily include ensuring social stability through expanding our economic and human capability. It also means provisioning for the basic needs of India’s most vulnerable, who typically fall through the cracks during intense uncertainty. This is not about freebies. It is central to the "vibrant demography" that the government advocates for in various platforms. Self-reliance also means taking into account ecological factors. In the process of economic growth, this country can’t afford to ride roughshod over ecological balance.
The road to a self-reliant India must be sustainable. This is the key to mitigating future shocks.