Vocal for local, impact on foreign investment

India’s prime minister Narendra Modi wants to be ‘vocal for local’. In other words, the government wants people to buy and endorse local products. The government has not yet described what vocal for local will translate into. The most important question is whether this initiative is even conceivable in a globalized world and is it not against the principles of an ‘open economy’?

Modi’s move seems to have an urgency to it. The Covid-19 pandemic has considerably changed the way India, and the world at large is looking at the globalized economy with rose-tinted glasses since the 1990s. The pandemic has also put a spotlight on China for world’s over-dependence for mass manufacturing, the so-called ‘factory to the world’. It is understandable why countries do not want to put all their eggs in one basket and are also looking to diversify. 

Countries all over the world are reorganizing the way they do business. In such uncertain times with an unforeseeable impact on the businesses, globalization clearly has a negative connotation to it. Therefore, countries are reconsidering post-colonial concepts like self-reliance (Hindi: Aatma nirbhar).

Self-reliance

Aatma nirbhar or self-reliance may sound anti-foreign investment, but India wants to seize the moment (e.g. with businesses looking to move out of China) to astutely push for a bigger emphasis on manufacturing in India. So far, India’s economy has largely been services-led, the country importing more than it exports. 

It is extremely important to understand that India is looking to achieve its larger objective of a new form of global trade and is not anti-investment. India wants a global trade where India is the new repository for the world to make, buy and trade! Essentially, it is implicitly asking the world whether it can be the next (and friendlier) China.

With vocal for local, Modi is hoping Indians will transform this crisis into an opportunity by going local and buying and using products manufactured locally. This will not only help in spending, which is an important requirement, if the economy has to be brought back on track, he also wants to achieve production uptick riding on this surge.

Modi, while addressing India Ideas Summit hosted by the US-India Business Council pitched for higher foreign investment in India. He listed sectors such as health care, civil aviation, defence and space beside others for investment opportunities. “It has never been such a best time to invest in India.” Modi highlighted the fact that India has attracted foreign investment of more than 20 billion dollars between April and July 2020 during the pandemic.

What do business leaders think about Modi’s vocal for local?

ASSOCHAM: “Building a self-reliant India would take us towards becoming a credible global force that reaches out to the world from a position of strength. The Make in India flagship would be a key catalyst for new investment, be it local or global,” 

FICCI: “Fully support the PM’s dream of a self-dependent India and ensure all measures to make this a reality.”

There are also those who are doubtful:

9Unicorns: Why is it even required? “More than 70 per cent of Indians have been buying local brands from homegrown companies.”

Hindustan Unilever (HUL): One of India's biggest consumer companies, HUL, manufactures locally even though its parent company is UK-based. “Does that make HUL a local company or a foreign company?” Also, “don’t think there is anything wrong in being inwardly focused economy while maintaining the diplomatic trade relationships. Even the US is now considering adopting that strategy.” 

However, many feel that “there are better ways to bolster the economy than rocking the foundations of India’s open economy. Strengthen the ‘ease of doing business’ by adopting suitable policy measures in fiscal and legal realms, increase massive investment in public infrastructure which can 'crowd in' private corporate investment and (have) a calibrated monetary policy stance. It’s still a lot more difficult to export than it is to import, and still a lot more difficult to manufacture than it is to trade. That gap can be bridged by simplification of policy, removing the bad parts of labor and other laws, and by reducing the red tape.”

 

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