From an approach of globalisation and developing synergies with the world economy, the prime minister put forward an appeal for self-reliant growth. The vehicle for implementing this new strategy is to nurture domestic demand for domestic products. He had emphasised pride in local products, as opposed to global brands.

Hearing him, one almost felt reverberations from long before, from the late ‘sixties, maybe, even earlier, mid-‘fifties.

The new strategy is to be kicked off with an ambitious rejuvenation plan with an outlay of Rs 20 lakh crore or 10 per cent of the GDP. The prime minister has promised schemes for ameliorating the hardships of all sections of people, including the poor and migrant labour, farmers, the middle classes and business and industry.

These promises about benefits to varied sectors and affected people are nothing extraordinary. However, what he has said about resetting India’s overall economic policy thrust is significant.

From a purely economic perspective, the prime minister’s announcement was the second half of the package for revitalisation of the economy in the wake of the corona crisis, the first half being the announcements of the Reserve Bank of India for providing liquidity in the early days of the crisis.

The monetary-fiscal package follows the conventional economic wisdom of launching a combined package for overcoming the huge dent received by the Indian economy from complete stoppage of work since March 22. With the corona virus still far from being under control, the package will be timely aid.

Now onward we have to play a game of trade off. Fighting the disease and also at the same time limiting the damage to the economy, protecting the income stream and maximise employment gains in the situation. But while doing so, the prime minister has also sought to place a new strategy which is not new but harks back to olden days.

The emphasis was clear: go for the local over the global. Buy local products instead of global brands. Emphatically, he pointed out, today’s global products were local ones which were supported by their local market and buyers. These then gathered enough halo to emerge as global brands.

This change of tack and reversal of the globalisation model has been in the works for sometime. One prominent manifestation of this trend was the “America First” slogan of United States. Successive failures of multilateral trade talks, regional trading pacts, breaking up global economy into smaller blocs, the vociferous articulation of the discontentments from globalisation process were all parts of the new thinking.

For India at this point of time the emphasis on local economy and products may have been the upshot of recent experience when the country’s urgent shortages of medical supplies could hardly be met from global sources. There were instances when urgently required medical supplies from overseas were found to have been defective.

This might just as well be described as a return to the basics that were fundamental to India’s economic strategy in the immediate post-independence period. The Second Five Year Plan was premised on self reliant growth and development of core manufacturing capacity within the country was one of the essential components of that approach.

The economic reforms programmes that were launched in 1991-92 was based on the model of globalisation which had achieved a measure of success. India had opened up and dismantled its elaborate system of protective tariffs and barriers to short term capital flows. Resetting policies could be useful and in the current context when the rest of the world is turning increasingly inward looking, India might also have to take a fresh look. Questions might arise, will these liberalised financial flows be plugged in pursuit of self reliant growth, since short term capital flows had often been destabilising.

A real change of this sort will call for resetting India’s commercial policy and foreign investment policy as well. Will these now follow?

Looking forward, given the days of pandemic and the wreckage of major global economies, mighty upheavals in the global economy could just as well come in train. Therefore, the programme might have been devised to protect India from strong global headwinds. More particularly, the financial sector is prone to get hurt because of the sharp swings in the global financial markets. Hence, there will have to be special packages and schemes for maintaining financial sector stability. (IPA Service)