oppn parties Will We Remain The Screwdriver Economy Forever?

News Snippets

  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
  • India has moved to the 40th spot in the innovation index, up 6 spots from last year
  • DGGI has alleged that top insurance companies, banks and NBFCs has committed a fraud of Rs 800cr by claiming input tax credit without underlying supplies
  • The Centre will borrow Rs 10000cr less than planned earlier due to good revenue collections
  • At $23.9bn, India's current account deficit widened to 2.8% in Q1, the worst in four years
  • Stocks continue to flounder on Thursday: Sensex sheds 188 points to 56409 and Nifty 40 points to 16818
  • The 36th National Games were declared open on Thusrday by PM Modi in front of a record crowd in Motera near Ahmedabad
  • Jasprit Bumrah most likely to miss T20 World Cup due to recurrence of back injury
  • PFI's political wing, the SDPI is on EC radar and action will follow soon if discrepancies are detected
  • Ashok Gehlot to meet Sonia Gandhi today, says all issues will be sorted out soon
  • Referring to the PFI ban, most Muslim organizations ask the government to take similar action against right wings organizations like the RSS, Bajrang Dal, VHP and the like
In a landmark order, Supreme Court rules that all women, married or unmarried, are entitled to safe and legal abortion up to 24 weeks of pregnancy as per the MTP Act
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Will We Remain The Screwdriver Economy Forever?

By A Special Correspondent
First publised on 2020-08-04 17:01:26

The government has moved the import of fully built television sets to the restricted list. This means that anyone importing the same in India would have to apply for an import license. It is also thinking of putting toys, furniture and sports goods under the restricted list. Ostensibly, it is being done to promote local manufacturing in line with Prime Minister Modi's vision of atma nirbhar Bharat and Make in India. It is, on paper, a very noble initiative as it will promote local brands, bring in investments and create jobs.

But there are several things that need to be considered before any such policy change can be regarded as good. The first and foremost fear is that it will bring back the dreaded, and inhibiting, license-permit raj. Second, in the absence of local manufacturing of components, India will become the assembling destination of the world. Fully built items placed on restricted import lists will now be imported in completely knocked-down (CKD) or semi knocked-down (SKD) kits and will be assembled in workshops (it will be a misnomer to call them factories) here. All that will be needed will be soldiering irons and screwdrivers. Do we really wish to be an economy that survives on such activity? It also results in loss of revenue for the government as imported SKD kits in many sectors attract little or no duty while the import finished product brings huge revenue. Finally, it is against the government's stated objective of aligning the Indian economy with global supply chains.

Local manufacturing will not be encouraged by banning fully built products. Instead, the manufacture of components that go into making these products must be started in India. Tariff and non-tariff barriers are self-defeating, even crushing, in the long term in the absence of local manufacturing from the component level. They either encourage assembling from imported components (thereby increasing the cost of the finished products to the disadvantage of the end-buyer) or the making of shoddy, uncompetitive products that have no export potential.

The government must not ban fully built products until India starts making components and then the final products all on its own. The government's efforts in attracting FDI should be in the area of encouraging component manufacture for such essential and fast-selling items with huge export potential as computer and mobile phone chips, memory cards, hard disks and other components or LCD screens. Once these components are manufactured in India leading to the local sourcing and assembling of the same by brands, only then can we truly say that Make in India is successful. Until then, we will remain a nation of CKD and SKD kits importers and assemblers.