oppn parties Will We Remain The Screwdriver Economy Forever?

News Snippets

  • ED has issued a showcause notice to Xiaomi India, two of its senior officials and three foreign banks for FEMA violations to the tune of Rs 5551cr
  • India's South-West coast to be hit by very severe Cyclone Biparjoy which will intensify in the next 36 hours
  • PM Modi pays tributes to Birsa Munda on his death anniversary
  • CBI forms SIT to probe violence in Manipur
  • Coal mine collapses in Dhanbad, three dead and scores feared trapped
  • Death threats for Sharad Pawar & Sanjay Raut, probe ordered and security tightened
  • Akhilesh Yadav says law & order situation is out of control in UP
  • Diesel (8.22 million tonnes), petrol (3.35 million tonnes) consumption hits a new high in May
  • Congress' Kamal Nath Sandesh Yatra will begin in Madhya Pradesh on June 15
  • Congress rubbishes reports of Sachin Pilot starting a new outfit, says they are just rumours
  • Delhi Police take women wrestler who had complained against WFI chief B B S Singh to federation office
  • IT minister Rajeev Chandrasekhar says government will regulate the AI space to keep digital citizens safe
  • Stocks turn negative on Friday: Sensex loses 223 points to 62625 and Nifty 71 points to 18563
  • WTC final: If India can keep the Aussie lead to below 400, they can still make a match of it
  • WTC final: Indian bowlers get their act right in the second innings but Aussies race to a lead of nearly 300 for the loss of 4 wickets
Fresh flare-up in Manipur as 3 persons were shot dead in a Kuki village inKangpopki district
oppn parties
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.