Self-reliant IndiaApprox Read Time: 5 minutes
In News: Self-reliant India
- Prime Minister Narendra Modi recently brought up the importance of local manufacturing and consumption of locally produced goods, stating that Indians needed to become “vocal for local”.
- He hinted that the government would need to undertake major reforms for the Indian industry to play a major role in the global supply chain.
Sectors that heavily depend on imports:
- Electrical equipment such as smartphones and computers are a key part of India’s import bill.
- The value addition in India’s electronics industry is limited to mostly Assembly, while the country depends on imports to access most of the primary and critical components used to make them, including printed circuit boards (PCBs).
- For instance, around 88 percent of the components used by the mobile handsets industry are imported from countries like China and over 60 percent of the country’s medical devices are imported.
- Other products heavily imported into the country are cells and modules used by the country’s solar power industry.
Sectors that partially depend on imports:
- India’s pharmaceutical industry is capable of making finished formulations, and also has domestic manufacturers of several key ingredients used to make them.
- However, the industry also imports some key ingredients for antibiotics and vitamins currently not manufactured in India.
- India imported around Rs 249 billion worth of key ingredients, including fermentation-based ingredients, in FY19, and this accounted for approximately 40 percent of the overall domestic consumption.
- The country is currently trying to encourage domestic firms to make these key ingredients, known as fermentation-based APIs, however, this may take a few years.
- Medical devices like ventilators also rely on imports of several crucial components like solenoid valves and pressure sensors.
- Some auto manufacturers depend on imports for various components, while the country’s electric vehicles industry is dependent, to a large extent on Chinese imports for chemicals used to make cathodes and battery cells.
- Local dyestuff units in India are also dependent on imports of several raw materials, while specialty chemicals for textiles like denim are also imported.
- For instance, when China initiated its lockdown of Wuhan earlier this year, nearly 20 percent of India’s dyes and dyestuff industry production was hit due to a disruption in raw material.
Sectors with minimal dependence on imports:
- According to trade experts, India is not as dependent on imports for some textile components like yarn.
- Although the domestic industry argues that China is a major threat, India’s share in textiles has been going up.
- While technology transfer is required for more advanced and critical medical devices, the country does have the capacity to domestically make products like hot water bottles, mercury thermometers, hypodermic needles, wheelchairs and patient monitoring display units.
Issues in scaling up production in India:
- The manufacture of some of the key products that India imports such as semiconductors, displays and other very capital intensive electrical equipment may not be possible soon as manufacturing these requires large, stable sources of clean water and electricity.
- They also need a high degree of policy certainty as these require high upfront investments.
- The Indian industry faces much higher costs in inputs such as electricity and much higher logistics costs than Chinese firms.
- For example, it costs Rs 4/kg for a shipment of cable to arrive at Mumbai from a city 300 km away from Shanghai but it costs around Rs 14/kg for that shipment to be transported from Mumbai to a factory in Noida.
- This is also true for fermentation based APIs, in which the country became less competitive in when China began receiving infrastructure and logistic support to produce and sell them at cheaper rates.
- Another key issue holding back manufacturing in the country is a lack of flexibility in labour laws and high costs and low availability of land.
- Indian firms can however begin producing less sophisticated components if certain policy measures are taken.
- To change the current state of affairs the country needs a holistic industrial policy, along with a forward looking innovation policy, that address the current issues and lay the foundations of a robust and efficient infrastructure.