Nostalgia is good, a reality check is better

The attitude that India must become self-reliant goes against the grain of 21st-century systems of global supply chains where products are made across several countries

The plan to revive desi cola brand Campa Cola has stirred up nostalgia. The fizzy drink that replaced global icons Coca-Cola and Pepsi for nearly two decades still has a place in the hearts of the older generation.

Apart from recollections of a unique brand, it also stirs recognition that the atmanirbhar (self-reliance) concept is not a new one. The idea of being self-sufficient was one of the core principles of economic policy-making in the sixties and seventies. Indigenisation was a keyword for those formulating industrial policies at the time. In fact, the ‘Make in India’ concept resonates as it was the over-arching ideal for the manufacturing sector at the time.

As for pushing Coca-Cola out of the country, it is George Fernandes, industry minister in the then Janata Party government, who is credited for doing so in 1977. But it was the new law on foreign shareholding introduced by the previous government led by Indira Gandhi that forced the cola giant’s exit. The company had to dilute its equity to 40 per cent to comply with the Foreign Exchange Regulation Act (FERA). Coca-Cola was not prepared to do so, largely to protect its famed secret formula. Ultimately, it had no option but to leave India.

Read | As Campa Cola returns, Coca-Cola cuts 200 ml bottle price by Rs 5

The multinational made a comeback in the nineties on the heels of Pepsi. Campa Cola, the drink created to replace Coca-Cola in India, then faded out slowly, but was not forgotten by a generation that saw it as an assertion of Indian identity. Revival plans by Reliance Retail, thus, evoke memories of a bygone era.

But the reality is, it was not the best time for the ordinary citizen. It was a time of endemic shortages and constant waiting in queues for basic goods. Rigid adherence to self-reliance meant consumer choice was restricted unless one was a privileged government employee with access to special quotas. Or unless one was using the license raj system to their advantage.

The economic landscape was different then, so comparisons would be unfair. As far as atmanirbharta is concerned, it raises fears that ideas of protectionism and barriers against global competition are being brought back in vogue. It may be too late to turn back the clock on liberalised imports, but there has certainly been a creeping trend of raising customs duties in the past few budgets.

Former Niti Aayog Chairman Arvind Panagriya has consistently argued that import tariffs have been rising significantly since 2018-19. While this can be justified in the case of goods ‘dumped’ here, as is the case with many Chinese manufactured products, the problem is best dealt with by imposing anti-dumping duties. Complaints can and have been routed to the World Trade Organization (WTO). Of course, the argument can be made that the WTO is increasingly becoming a toothless entity.

Even so, the attitude that the country must become self-reliant goes against the grain of 21st-century systems of global supply chains where products are made across several countries. Semiconductors are the ideal example. These are typically manufactured in three or four countries with the finished product assembled from different locations. On the plus side, it has already been recognised that becoming part of global supply chains such as these is needed for the manufacturing sector to reach its true potential. This has prompted India to collaborate with its Quad partners (Japan, Australia, and the US) to set up a semiconductor chain of production. The idea is to meld the differing expertise available in each country to produce the ubiquitous chips used in virtually every electronic product.

Countries must work in concert to achieve success. It’s, thus, time to start using the term ‘global interdependence’ as a mantra rather than ‘self-reliance’. India must become part of global supply chains that are stretching across continents. In this endeavour, it must compete with other Asian countries that have more liberal import duty regimes as well as highly-developed manufacturing sectors. Some of these lacunae are being addressed by providing incentives under the production-linked incentive (PLI) scheme. A Resilient Supply Chain Initiative has also been launched in a tie-up with Japan and Australia to set up industrial supply clusters.

India has a big opportunity right now to replace China in these global supply chains as many countries are looking to shift their production bases away from there after the pandemic. But they will look for an environment that is not protectionist or insular. It is the era of interdependence in the global economy. India’s policies need to shift gears to reflect a more contemporary way of looking at the world.

(Sushma Ramachandran is a senior journalist.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.