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Merging Local With Global (9 September 2020)

Merging Local With Global (9 September 2020)

Why in News:

Prime Minister Narendra Modi last week said 1.3 billion Indians have embarked on one mission -- to create an "Atmanirbhar Bharat", which seeks to merge the local with the global and ensure the country's strengths act as a global force multiplier.

Context:

"Time and time again, India has shown that our goal is global good," said PM Modi in his special keynote address at the third leadership summit of the US-India Strategic Partnership Forum via video conference. Pitching India amongst the best investment destinations worldwide, the PM said the country's political stability and policy continuity makes it the best place for global investors looking for attractive business opportunities during the COVID-19 pandemic.

Background:

US-India Strategic Partnership Forum (USISPF) was established in 2017 for focussing on the partnership between India and the US.

Its purpose is also to enable businesses and government to collaborate and create meaningful opportunities that can positively change the lives of citizens

In 2019, overall USA-India bilateral trade in goods and services reached USD 149 billion.

Summary of the Debate

US-India Strategic Partnership Forum (USISPF):

  • USISPF is an independent not-for-profit institution dedicated to strengthening the U.S.-India partnership.
  • It is a week-long discussion on navigating new challenges and enhancing the economic and strategic partnerships between India and the United States.
  • The summit titled ‘US- India Navigating new challenges’ and was set to discuss the roadmap for India- US energy Partnerships, areas of Indo- US bilateral cooperation including trade and investment, strategic energy collaborations, ties in fintech, healthcare, technology, and India’s position in the global supply chain.

Key Highlights of the Summit:

  • In the forum PM tell the international audience and the investor that India have handled the covid-19 situation very well and have taken care of poor people. Giving this bright picture of emerging India, in India PM talks of vocal for local but now he was talking of merging local with global and making an invitation to foreign investors.
  • The forum also talked about the recent transformation of the world and how this requires India’s bolder relationship in the neighbourhood and a bigger footprint in the world.
  • According to the forum estimates, India-US bilateral trade is projected to grow to 238 billion dollars by 2025.
  • The forum discussed about how India is promoting policies that would incentivize investment and working together in both countries towards building a mutually beneficial relationship.
  • The next part covered up India’s policy of “Atmanirbhar Bharat”, a more self-reliant India, a program to increase its national manufacturing capacity.

                 USISPF (@USISPForum) | Twitter

Challenges:

  • The most important is cost of doing business, which is very high in India. It’s not just ease of doing business because when someone is looking at putting his money, he’s seeing where he gets the biggest bang for his buck and therefore a lot of investment has been going to Vietnam, to Philippines and even to Bangladesh. We have had some success with Foxconn which has come in and making some number of Apple phones in India. So, India have to address the cost of doing business and this involves very high cost of finance even though our interest rates have come down they are much higher than global interest rates.
  • The cost of land which is very painful process to put together because the land is in parcels.
  • The cost of electricity in the industry is high because consumers are cross subsidies and keep industry tariffs very high and consumer tariffs low. But in all over the world, it is reverse, where industry tariffs are lower than consumer tariffs foster industrialization.
  • These makes the cost of production in India higher and less competitive than other global destinations.

Way Forward:

  • For making a balance between local and global, the policies should not be only for FDI, they should be for all investment, domestic and foreign which creates jobs and capacities, which sets up manufacturing facilities in India.
  • Industrial parks should be set up and it should be open to domestic investors to invest as well as foreign investors.
  • India is need to look on intelligent government regulation which would provide an incentive to set up capacities in India rather than supply from outside.
  • The partnership between the centre and states need to be strengthen and well equipped intellectually and in terms of skills, bureaucracy and civil services.

Important points made by the Guests

Ashok Tandon, Senior Journalist

  • When the PM address the international audience and particularly investors, he has to first give them an assurance about the domestic political situation, the economic situation and the ground reality.
  • Because our perception abroad, particularly among the western investor is not very good. So, that is why, while he as addressing the potential investor, he first gave a picture of how India has been dealing with pandemic.
  • Before going for Vocal for Local, India has to become manufacturing hub and to become a manufacturing hub, ease of doing business, startup India, Make in India projects need leverage.
  • When the collaborations come, FDI also comes in and when a country become a manufacturing hub then obviously it will not be confined to the Indian market and that will help India to become a global player. So, there is need of joint ventures.

Meera Shankar, Former Ambassador 

  • Prime Minister focused on the economic opportunities which are opening up in India and this is very timely because the world is looking at new models of doing business. They want to de-risk, not be totally dependent on one country like China and they are also looking at diversifying supply chains.
  • So, there is an opportunity for India to build its capabilities attract foreign investment and do both things at the same time, but it’s not that it’s going to flow to Indiaautomatically.
  • India have some strengths, a large market, a very young demography and there will be consumers entering market and capable manpower, which is able to absorb high technology and work in those areas. But we also have weaknesses and those weaknesses we need to address.
  • If the government could really set up industrial parks like they did the technology park and it need not be a very large number, it could be just 10 big large industrial parks along the coast with appropriate infrastructure not waiting from the private sector to come and put in the electricity to get all the clearances in advance, environmental, etc. especially the park is reserved for certain kind of industry which are not environmentally problematic.
  • The land would be a key thing and India need an innovative policy, leasing the land or the government using the land as equity on which they can get return also over a period of time. All these are structure and models which need to be tried to get things going.
  • One of the problems India have is the absence of long-term finance, we do not have our loans from the banks for 10 years or for 12 years, we do not have 30 years loans or bonds for raising finance for infrastructure projects or any projects. The government should focus on it.
  • Some of the companies are addressing it by really the large ones by going out to the international market and raising loans there.
  • The Chief Ministers have to make their governments investor friendly knowing the problems which arise at the grassroots level. They have to be prepared to use their authority to push these project proposals and actually have somebody who will help to address each of their major and minor issues.
  • There is need to use government policies where India have been dependent on imports such as solar, where if the government says that it is going to procure for the next 10 years or 5 years, ‘X’ amount of solar equipment, which has ‘Y’ amount of value addition in India then this would be acceptable because India is not a part of the government procurement agreement under the WTO, if India do this, capacities will be set up to supply the government instead just importing from China.
  • The two sectors which have succeeded in India is farmer and automobile. Both have been as a result of facilitative government policies.
  • In automobiles, there is high tariffs. So, the incentive was for companies to come into India. So, make components in India rather than supplying from the outside.
  • In farmer, in the 1970s, we had a patent law which did not recognize product patentonly recognize process patent, It was legally open to our companies to produce the same product through a different process and that is how they build their capacities for generic pharmaceuticals where India is now supplying to the world. 

Shakti Sinha, Director, Delhi School of Public Policy & Governance 

  • Looking at development, looking at a private investment as something that India needs is not going to be easy, lots of thing have changed for the better. The other announcement made by the PM was Mission Karamyogi, the need for government servants across the country across the level.
  • The uses of this Karamyogi platform to allow people to upgrade themselves and develop the necessary skills. We keep making slight changes in policies to accommodate difficulties, some amount of policy uncertainty comes in and investors get little nervous on this and that problem arises because our bureaucrats, civil servants are simply not good enough to understand the kind of policies required.
  • Therefore, the need is to equip them, to strengthen their capacities and to interact with the private sector and society. How to build synergies to attract the kind of investment required, India has to create a minimum of 12 million jobs annually.
  • India need $ 650 billion of fresh investments every year. FDI will be around $ 50-60 billion and the balance is domestic. So, India need to create an environment which enables all investments to come in.

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