By Nageshwar Patnaik in Bhubaneswar, June 7, 2020: Is India formally ending its nearly three decade long romance with liberalization, privatization and globalization (LPG) with the advent of Covid-19 pandemic? India under Narendra Modi seems to turn once again to “self-reliance” as its national credo. However, if past experience is any indication, this would be an awful mistake.

Prime Minister Narendra Modi recently put emphasis on the necessity of a self-reliant India. “The state of the world today teaches us that a self-reliant India (atma-nirbhar Bharat) is the only path. Our responsibility to make the 21st century the century of India will be fulfilled by the pledge of self-reliant India.” Modi remarked outlining his government’s response to the ongoing pandemic.

He referred to the absence of domestic production of personal protective equipment (PPE) when COVID-19 struck, but the country quickly ramped up PPE production. Mr. Modi said there needs to be improvement in quality and domestic supply chains going forward. If this is to happen though, India will have to make major course changes in development strategies.

Undoubtedly, the pandemic has clearly exposed the limits of globalisation. Even the U.S, which champions laissez faire economy to the core, found itself in an awkward situation as it relied heavily on other countries for the supply of essential medicines and medical equipment. However, it does not mean that we can afford to completely repudiate globalization.

Which is why perhaps, Modi clarified that his call for self-reliance should not be mistaken for “self-centric arrangements”. But one must also not forget the curse of Hindu rate of growth in the pre-liberalization India. Frankly speaking, the grandiloquence of self-reliance ultimately may lead to the already experienced mediocrity.

In the new context of life threatening pandemic, Modi appears to have proposed a new syntax for globalization with human face as opposed to the current profit motivated model. Even before the Coronavirus outbreak, globalisation was in trouble.

In fact, in last couple of year, the Narendra Modi-led NDA government has reversed nearly three decades of trade liberalisation by raising tariffs on a range of goods. Modi government also made a significant move last year to walk away from the Regional Comprehensive Economic Partnership (RCEP). This sent a clear signal that India was not ready to subject its companies to the global competition. Well-run Indian firms and the Indian consumer were the ultimate losers.

More so, India has severe limitations in capital, technology and human resources. Balancing the interests of capital and labour is not easy. In 1991, India opened up with the end of licence-permit Raj, steep cuts in fiscal deficit and tariffs, and devaluation of the Rupee.

With these policy measures, the economy was pulled out of a crisis and placed on a new growth path. The key to 1991 was the political articulation of a vision that went beyond platitudes. But with Covid-19 pandemic, global supply chains virtually broke down, borders became tighter, flow of goods and labour became more difficult and countries turned insular. Inevitably, protectionist policies became acceptable.

But no one can deny the fact that a country cannot produce everything that it needs for economic growth. Globalisation, despite all its flaws, lifted billions out of poverty through an expansion of global demand.

One of the five pillars of self-reliance that Narendra Modi mentioned was India’s demography, which perhaps could work in its favour. But it is well-known that the country’s land regulation, labour law and banking finance hinder domestic manufacturing investment. Will Modi bring radical reforms in these areas so that the country’s vast workforce could be tapped into effectively and achieve competitive advantage.

From the days of seeking self-reliance as a post-colonial country in the 1950s and 1960s, India in 1991 onwards scrupulously pursued the LPG era, But now can India afford to go back its past self-reliance mode? Is the self-reliance of villages, or districts, or states possible?

Pursuing self-reliance, Modi had announced to step up in public spending and investment, aimed at promoting welfare and raising the investment rate. Increased public spending may boost demand and generate employment in the short term and add to infrastructure capacity in the medium term.

He also talked of policy reforms aimed at making the domestic economy more globally competitive. But these policy reforms, including changes in land, labour and other policies, still remain a slogan with the trade unions including the Bharatiya Majdoor Sangh (BMS) – the labour wing of the Rashtriya Swayamsevak Sangh (RSS), the parent organisation of the ruling Bharatiya Janata Party (BJP) announcing plans of a nationwide agitation on June 10. Investors will now wait and watch to test the sincerity and efficiency of governments at the Centre and in the states.

Modi also spoke about a long-term structural shift making the economy more “self-reliant” and less dependent on the world economy. India is largely dependent on the imports oil and gas and it will remain import-dependent for energy. Luckily, the global crude oil and gas markets are expected to remain buyers’ markets for some time to come. India also depends on foreign exchange inflows both in the form of remittances, mainly from the Gulf and the US, and financial flows into capital markets.

No one knows about the impact of the new Modi strategy of self-reliance proposes on these remittances. India also is dependent is on imported defence equipment, mainly from Russia, the US, Israel and France. With China becoming more aggressive, can India afford to opt for Make In India defence equipment at this juncture.

India opened up its economy much later. Had it shelved the self-reliance policies in 1971 two decades before it did, the country could have emerged as Asia’s largest economy. Modi must take a leaf out of it and try not repeat the same mistake.