India’s Prime Minister, Narendra Modi, recently made a call for a Self-Reliant India. Right from the time, social media has been flooded with messages. Many have directly mapped the vision to using only domestic products and services (“Made in India”). Some have even considered self-reliance at individual levels, asking how may they be less dependent on even the domestic or local markets. These thoughts are not surprising given that the COVID pandemic has made many people introspect on things they took for granted earlier.

In this article, I’ll build on what self-reliance truly means. I’ll assert that “Made in India” can rather lead us to a less strong economic development that what could be.

Fully domestic is practically a myth

A first thing is to consider what does it mean for India to become fully self-reliant (in the sense this is being interpreted by many people). As you’ll read below, this would be a myth for any country to achieve. A product we buy may be labelled “Made in India”, but is it? The components are often still obtained from outside, only the very least most of integrated circuit electronics is. The latter requires high investments for comparatively low returns because of which a few in India have stepped into it, albeit there is growth [1].

Then comes compatibility with existing devices and methods. Even if we design our own processors, we’ll likely be using processor instruction sets from outside (Intel, AMD, ARM). Else all existing software would also need to be rebuilt. If we license the processor instruction sets from outside, operating systems are next. These take so much investment that no one, (not even Microsoft, Apple, Google, …) can afford to do it anymore from scratch. Wireless protocols are next.

Even if we start making all of the above in India, giving up all existing apps and compatibility with the existing ones, the next is manufacturing equipment. Those putting “Made in India” labels are likely still buying manufacturing equipment from outside.

Even if we start making those too, the next thing comes — Intellectual property, specifically inventions. We would still need to make royalty payments to foreign countries for using inventions/patents from them.

Even if we … well, there’s no even if to that. There’s no way to avoid using inventions from outside, short of India getting out of International treaties on patent laws (which then is only saying we will openly steal intellectual property instead of avoiding using it, and so, it is not right).

True “Made in India” is a myth, for practically everything other than growing food and basics. We are talking going back to perhaps no later than the year 1900.

No one should think that Mangalyaan was 100% made in India.

The above, as I noted, is not just for India, it applies to perhaps every country, including China and US. The world is already interlocked into some globalization by now.

It can be argued that “Made in India” only means that the end product or service is owned by an Indian company [2]. That is as incomplete a picture as the percentage of foreign effort involved in making the product in its totality would indicate.

Fully domestic is not even the goal

Other than inventions, yes, it is possible in theory to be fully domestic. However, the investments required will be so huge that it will surpass the country’s GDP by a wide margin. That money better be spent elsewhere.

Having explained how “Made in India” is a myth, the true idea behind ‘local, vocal about local’ is broadly misunderstood.

The idea should not be to ban or limit imports of items to curb competition. The idea is to further the competition by developing the Indian economy.

Stopping all imports, by policy or culture, will not make the Indian economy better. Rather the prices of everything will go orders of magnitude higher and the economy will crash. If we are to build everything internally, we’ll have to struggle with initial costs of development, of the products, services, manufacturing equipment, etc.

Further, limiting imports of goods and services removes a competitive benchmark from the system. The domestic producers would then have less incentive to provide value in terms of quality and prices of the products and services. We would have higher prices for lower quality.

If we insist on “buy only domestic or local”, we will even see products which are falsely labeled domestic just to enhance sales. There are often regulations around this [e.g., 3], however, a typical consumer would not have the opportunity to validate.

What is the goal then?

The economy/society at practically every scale relies on a mix of cooperation and competition. Competition accelerates progress, but which can nevertheless not happen without cooperation. Achieving the right (optimal) mix of these often involves subtle choices.

We as humankind need to make progress for the entire world (while also striking a balance with nature/environment which is a topic in itself), and that broader goal is not in opposition to India or any country making progress.

To understand competition and cooperation better, let’s consider a (hypothetical?) example. China had put friction for Google’s search engine to be used in China, which helped with the development of Baidu, a China-grown search engine. Humankind was thus made to spend time and efforts building something which was already available with humankind. Thus, the costs of reaching economies of scale was re-spent. This could rather have been used for other developments and causes.

Self-reliance should not be taken to mean we are giving up on division of labor!  If one thinks about it, division of labor has led to several orders of magnitude more development than there would have been if it were not there. (This too is a topic on it’s own which I’ll consider writing more on later.)

With the pandemic, the world seems to taking a step backwards from globalization.  We need to be dissolving political, religious, all these boundaries, not strengthening them!

Making India ‘self-reliant’ truly means increasing the country’s economic output by:

  1. Making the locally-produced better in features, quality, price, service, trust,  … while following morals (not exploiting labor), while following good health practices, not abusing laws, …
  2. Doing the above to an extent that the local public naturally ends up buying domestic produce more.
  3. Enhancing the country’s trade balance by making the product and services more appealing for the rest of the world. Re-building what the rest of the world already has just because we artificially prefer to make and buy ‘domestic’ would offer less growth possibilities and probabilities for the country than solving extant problems and carving new opportunities.
  4. Feeding into research and development which leads to the above happen not once but in a sustained fashion.

Modi’s Direction is Still Meaningful

My sense is that the broader view Modi has taken is to use this period of heightened sensitivity to enhance the country’s economy and the living standards of the people.

It’s true that some push is needed for the economy to develop because the systems are non-linear making it easy to stuck into local minima.  People using a foreign product or brand may just continue to using it even when a specific domestic one is or becomes not only good enough, but better.

Advertising taints our minds.  An unheard of domestic product will not easily sell against a well-known (international) brand.  This is because we need to have some trust in what we buy.  And advertising puts a fake familiarity into our minds.

So what should we actually do?

The ultimate and long-term development in the country’s economy will not come from “buy domestic”. We should not be developing things that already exist and which we cannot make better, and content ourselves with less competitive products just because of a preference to buy local.

To help develop the country (more generally, humankind, as I do not exactly believe in having political boundaries):

  • We should be adding genuine value to the customers (domestic or international), by making new products or outperforming the existing ones on various factors listed above.
  • We optimize ourselves by capitalizing on areas where we can be more efficient and effective, as well as expanding out reach to areas where we aren’t yet.
  • As consumers, we should not let ourselves be biased by any maxims, advertisements, or pure inertia, but make good decisions on what to buy and produce based on the product-market fits.

There are a host of problems to be solved, improvements to be made, environmental damage to be reduced/reversed, … we should spend time on all those.  Development of the country will come naturally if we do it well.

The development will come faster from people developing a better sense of quality and pride in their work, collaborating well with each other (not engage in deception and fraud), looking for means to improve their efficiency (whether the source is domestic or international).  And by realizing and honoring the Truths, which we forever seem to run away from, or are so easily misled against.

So what is “Self-Reliance” then?

Self-reliance is not killing division of labor, neither at the level of countries nor individuals.

Self-reliance is creating more socio-economic value than what we consume.

As far as we have that, we also have economic negotiation power just in case a supplier tries to play over-smart.

Not generally, but just for some edge situations, self-reliance is also having back up plans for critical items in case supply chains or dependencies are broken.

References

  1. https://en.wikipedia.org/wiki/Electronics_and_semiconductor_manufacturing_industry_in_India
  2. Mitron app was debated recently for being made in India or outside. The founders claim “When any company purchases or open-sources such code, the focus is on the suitability of the code for the company’s purpose and not the origin of the developer. So, any discussion around the origin of the developer is not relevant to us.” They further state, “We are an Indian startup that’s based in Bangalore. … And we have used servers in India for data storage and computation.” See here: https://gadgets.ndtv.com/apps/features/mitron-app-tiktok-alternative-pakistan-link-2244726. So if the “origin of the developer” is not relevant, is “Made in India” itself relevant?
  3. https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard

{Adapted from a prior WhatsApp post on my school’s alumni-teachers group on May 16, 2020.}