Make in India

  • India needs to look back at its history and learn to promote manufacturing at home

May 23, 2018-

The first meeting of the leaders of the Non-Aligned Movement (NAM) in Belgrade, Yugoslavia in 1961 was a landmark global gathering. This event guided and determined the foreign policy discourse and directions of international relations of a majority of the developing countries for at least the next four decades. While delineating the now much vilified concept of non-alignment, Pandit Jawaharlal Nehru had stated, “We call ourselves the conference of non-aligned countries. Now the word non-aligned may be differently interpreted but basically it was used and coined, almost with the meaning: non-aligned with the great power blocks of the world. Non-aligned has a negative meaning but if you give it a positive connotation it means nations which object to this lining up for war purposes, military blocs, military alliances and the like. Therefore, we keep away from this and we want to throw our weight, such as it is, in favour of peace.”

It was to a large extent the NAM that highlighted the critical wedge between the developed countries in the North and developing countries in the South.  Developed countries were the Centre as they played dominant, active roles in world trade. International movement of capital occurred from them and global technology development and flow was fully controlled by them. On the other hand, developing countries in the periphery that had just come out of the yolk of colonialism played a passive role in world trade and remained import dependent and borrowers of capital and technology.

Rise of a new world order

India’s foreign policy narratives and discourse was largely dominated by this non-aligned thinking, design and practices. In fact, India with Egypt, Indonesia and Yugoslavia became the flag bearers of this idea of non-alignment, which by the end of the 20th century had more than 120 member countries. Developing and newly decolonised countries looked for India’s global leadership. This movement became a widely accepted forum for the developing countries, mainly because of the common cause these countries together propounded. This led to many powerful conglomerations like the Group of 77 and also the setting up of United Nations Conference on Trade and Development (UNCTAD).

These institutions later became the vanguard of negotiations with the North on critical issues like stability of commodity prices, transfer of technology, development assistance to developing countries and also opening of markets and several other politico-strategic issues. The North was literally forced to agree to the appointment of two global commissions viz., the Pearson Committee in 1969 and Brandt Commission in 1980, both of which strongly supported the cause of the Global South. Both these Commissions solidly advocated that at least one percent of the Gross National Product of the developed countries be transferred to the countries in the South as Official Development Assistance.  It was against this backdrop that the New International Economic Order (NIEO) resolution was passed by the UN in 1974.

Unfair practice

In all these North-South negotiations a crucial issue had been the secular decline in primary commodity prices thereby very deeply and adversely affecting the terms of trade and balance of trade of developing countries. Raul Prebisch and Hans Singer empirically demonstrated how developing countries were made to export primary commodities—basically raw materials like bauxite, iron ore, cotton, copper, wool etc.—and how these commodities were converted into the final products and re-exported back to developing countries at a price many times higher than the cost of raw materials.

In the process, the cream of development that could have otherwise gone to countries with rich natural endowments, were usurped by the developed countries. These developed countries in Europe, United States and even Japan had the distinct advantage of having technology, capital, industrial ventures, human resources and control over the policies that govern the world trading and investment system. Besides the political regimes, India’s international negotiators and intellectual leaders like Sukhamoy Chakravarty, G Prathasarathy, LK Jha, KB Lall, Nikhil Chakravarty, Muchkund Dubey and others vehemently fought against such discriminatory practices.

India had been a fierce fighter for getting better deal in the global market for its primary commodities and other exports. The Africans, South East Asians, Latin Americans were all partners with India to fight against the developed countries on its unfair trade practices. However, there is no NAM now, and the World Trade Organisation has taken over with liberal market provisions.

India is no longer the voice of developing countries as most of them are now aligned to metropolitan and super powers. However, India has once again become the victim of the same trend and practice.  Only this time, the theatre of operation is not global: It is now regional and the critical actor and the market is not US or Europe.  It is its own neighbour China. Also, the situation is not like that of the immediate post-colonial era of the1950s, it is now a post-cold war continuum of the 21st century.

Same old story

The means, market, instrumentalities and even the comparative advantages are strikingly similar. However, the victim remains the same. India, which consistently fought against such a trend for full four decades, does not even express peripheral concerns today. The biggest example of this repeat drama is India’s trade with China, which started increasing steadily in 1990s. This has reached a volume of almost $62 billion in 2017 from a mere $40 million in 1990. India has a bourgeoning trade deficit. In 2013/14, India’s exports to China amounted to $14.8 billion and imports were valued at a hefty $51 billion, with a trade deficit of over $36 billion. The trade deficit stands at a colossal $51.1 billion in 2016/17. The terms of trade have been blatantly and conspicuously against India. More seriously, despite being a manufacturing hub, Indian exports to China are overwhelmingly primary commodities i.e. raw or semi-raw materials. The foremost of these are cotton, copper, iron ore, organic chemicals and other minerals.

And its imports are finished products like telecom equipment, electrical machinery, computer mobile hardware and fertiliser. Unlike during the four decades of the 1950s to the 1980s, India had literally no stand on this very ominous trend and practice. No voice has been raised and no measures are taken to correct the situation. This has already happened for 18 years now. China has done this to other developing regions including Africa and South East, Central and South and Middle East Asia. This is a quiet intrusion into the prolific natural endowments of neighbouring countries.

This is where Prime Minister Modi’s initiative of “Make in India” stands to be critical, where the country’s raw materials are used by its own manufacturing and other production bases. This allows India to enjoy the huge value added benefits that emanate from the regional and global markets. This would also restrict literally unbridled exports of raw materials and inspire research and development activities within the country. This is what the Chinese did. It used its comparative advantage of raw materials and relatively cheaper labour by bringing most of the top multinational companies from Japan, Europe and the US to its Guangdong, Fujian, Shanghai,  Zhejiang, Jiangsu, Shandong and Liaoning provinces in the form of  small and medium enterprises and ancillary units. This is why many things, from electronics to home appliances to cosmetics, are made in China. 

Therefore, PM Modi’s government has a formidable challenge—to go back to history, check why India historically fought against such a trend and how it mobilised the global South for this purpose and to correct these distortionary and discriminatory trade practices.  Can the “Make in India” campaign be globalised and fit  into the perspectives of other developing countries?  Can India lead from the front? Could India float a newer global platform to do so? These are the important questions.

Lama is a senior Professor at Jawaharlal Nehru University and was in the founding team of researchers in the think-tank set up by Non-Aligned Movement in New Delhi in 1980s

Published: 23-05-2018 08:08

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