India Bans Wheat Exports Days After Setting “Ambitious” Trade Targets!! Will Atmanirbharta save the Indian Economy??

Trade
Photo by Austin Kehmeier on Unsplash

Breaking news coming in about India banning wheat exports, just days after setting “ambitious” trade goals and targets for the coming year. According to news outlets, this sudden decision is based on the reports of a drastic fall in wheat production, and foodgrains in general, mainly due to the heatwave sweeping North India. This is yet another sign that the policymakers want to focus on the domestic priorities, at a time when unfavourable global headwinds and deteriorating local conditions create a “perfect storm” of converging crises related to climate, economy, finance, and society. This U-turn is reminiscent of what happened with the Vaccine exports wherein domestic compulsions forced the government to halt supplies to other countries. On the other hand, the decision to ban wheat exports is very much in line with the Atmanirbhar (or self-reliance) approach of the Modi government.

India is not alone where domestic compulsions override global priorities. Countries stretching across the Equator like Australia and China are turning inward, in the aftermath of the Covid 19 pandemic, seen as a public health disaster, happening due to too much globalization. On the other hand, while we focus on self-reliance or Atmanirbharta, others are forced by the ongoing global turmoil to realign and reorder their domestic policies. For instance, the EU or the European Union is gradually decreasing its dependence on energy imports, especially gas, from Russia, as the unfavourable geopolitical scenario makes it imperative to isolate Russia as much as possible and punish it for its aggression and imperialistic invasion of Ukraine. So, it cuts both ways as India and other nations put the country first instead of global ambitions and on the other side of the spectrum, global conditions force entities to change direction.

As the ad goes, There are some things money can’t buy, and so too in the present situation, where Atmanirbharta alone cannot save the Indian economy. We are dependent on imports of a range of commodities, including Oil, as much as we are dependent on finished goods from both the West and China. Though the latter can be somewhat curtailed or even made locally, over a period of time, our energy and commodity imports are absolutely imperative to our economic wellbeing, thereby necessitating friendly relations with the Arab world as well as with our all-weather friend, Russia. On the other hand, Russia is leaning on us for wheat and other commodities, as much as we are depending on them for Oil and Defence needs, and so, it is my opinion that we must and should be self-reliant, though letting ourselves open to the world. In short, mix global and local priorities in such a way that we become Glocal (a term coined by the NYT columnist, Thomas Friedman) in our approach.

Perhaps the biggest reason why Atmanirbhar policies are limited in their usefulness is the IT(Information Technology)/Pharma/Services/Raw Materials sectors. The Indian Economy is an export powerhouse in all these segments, especially the first three, being the Silicon Valley of the East, the Pharmacy of the World, and the Number One destination of choice for BPO and Financial/Legal services outsourcing. Not to leave out exports of raw materials ranging from Iron Ore to other commodities. Moreover, we need hard cash (read the Dollars) to finance our imports, and so, we simply cannot shut the door on the world. In addition, in the globalized world of the 21st Century, trade forms an integral part of any developing economy, and more so, when the domestic consumption is not enough to sustain the volume of goods and services we produce. So, there are very strong reasons why we just cannot be Atmanirbhar in the shorter term at least.

Having said that, Atmanirbhar policies work very well in the context of the approaching Global Crises, where India needs to insulate its financial system and the broader economy from the maelstrom that is now wreaking havoc. For instance, the precipitous fall in the value of the Rupee should be a wake-up call for our policymakers to ringfence the markets from possible global headwinds. More so, when our neighbourhood is aflame mainly due to their dependence on the almighty Dollar for their sustenance. We can and must shield our currency and our various financial markets at a time when capital flight and fund outflows are happening and are likely to intensify further. This is where the test of Atmanirbharta comes into play as it is a barometer of how much we can protect ourselves from contagion from overseas and at the same time reap the benefits of trade. To conclude, what is urgently needed is a judicious mixture of policy actions that balance the competing agendas and interests of the global and the local events and entities that would determine how unscathed we would emerge from the coming crisis.

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