On June 3, 2020, the Department of Promotion for Industry and Internal Trade identified 10 sectors where in the imports are to be cut. This includes textiles, jewelry, mobile, gems, pharmaceuticals, garments, electronics, machinery, etc.
The GoI has recently changed the set targets in order to become self-reliant in footwear, furniture and air conditioner. In parallel, the Government has also laid groundwork to become self-reliant in 10 other sectors.
The Government has selected these 10 sectors in particular as India has natural advantage in these sectors. Hence, given a small push, these sectors have the potential of becoming the strength of the country.
The Government has made the decision of cutting imports to target the quality of domestically made products. Also, India will focus on increasing quality controls.
Imports in India
India imported 467.2 billion USD worth goods in the year 2019-20. Of this, leather and leather products amounted to 1.01 billion USD, machinery of 37.7 billion USD and machine tool imports of 4.2 billion USD.
The AC industry concern
The AC industry of India is largely dependent on imports, mainly imported compressors. These imports account to 60%-65% of AC production value.
What is the issue?
The Japanese split AC companies that are market leaders are taking advantage of India-ASEAN Free Trade Pact and importing from Vietnam and Thailand claiming to be registered in India. This is so common especially in new inverter category ACs.
Concerns of Atma Nirbhar Bharat Abhiyan
The steps of cutting imports and encouraging domestic manufacturing is being done under Atma Nirbhar Bharat Abhiyan. However, these steps may bring on certain issues. They are as follows
- India might go back to Import Substitution Industrialization.
- Trade Distortion. The prescribed limits of import duties of WTO may be crossed.
Import Substitution Industrialization
The ISI is criticized for the following
- Only the consumer goods are boosted
- The employment growth rate is slow
- The productivity growth is minimal and the agriculture sector declined greatly
- The internal migration increased.