In a seminal work by Angus Maddison that tracked the economic growth of nations between 0 and 2000 AD, published by the OECD in 2001, India’s share of world GDP in the 1st century AD was estimated at 32 .9%. A millennium later, in the 11th century AD, India remained the largest economy with a share of 28.9% of global GDP.
Over the next seven centuries, before the start of colonial rule, India’s share of world GDP fell to 16%, which was even higher than India’s share of world population.
With the onset of colonial rule and its concomitant flight of wealth, India’s share of world GDP was reduced to just 4% in 1950. Today, India’s share of world output remains at 4% in nominal terms while its share in the world’s population has increased to 18 percent and rising.
Our share in global manufacturing, which was also over 20% before deindustrialization under colonial rule, fell to 2% in 1947. In 2019, we only managed to increase it to 3.1% .
Given the above context, we would like to define Atmanirbharta, in terms of restoring India’s share of global GDP and global manufacturing to at least the same level as before the onset of colonial rule. Therefore, we must aim to achieve at least a 16% share of global GDP and a 20% share of global manufacturing for genuine Atmanirbharta.
The real Atmanirbharta should be understood as restoring India’s position in the global economy and localizing our efforts in the context of an open and globalized economy. Otherwise, we run the risk of equating Atmanirbharta with self-sufficiency to be achieved in a closed economy. This has been tried in the past over successive decades and has proven disastrous.
The current evolving backdrop of growing fragmentation in global markets following the Ukraine conflict and resulting fears of rising protectionism in a few countries should not lead to a new wave of export pessimism. India cannot achieve its goals of reaching upper-middle-income economy status without increasing its exports and encouraging greater inflows of foreign investment and technology.
Moreover, India’s gigantic population does not translate directly into a large economy with high levels of purchasing power. Every country trying to make the transition from a low-income economy to an upper-middle-income economy has had to increase its exports of goods and services.
Moreover, the successful increase of our exports will ensure that our businesses remain globally competitive and provide the best quality goods and services to our domestic consumers. Achieving global production scales, raising the quality of our services to global standards, and promoting goal-oriented R&D are efforts that will achieve the desired goal of a higher share in global trade and manufacturing. It will also generate quality jobs. Historically, India has been a trading nation. Indian traders traveled with their highly demanded wares to West Asia and East Africa, Cambodia, Indonesia, Myanmar, the Levant, and Europe at various times from the 2nd century BCE until colonization. Indians prospered when India was a leader in world trade.
However, colonial rule put an end to this prosperity and forced us to become a supplier of raw materials and indentured labour. As a result, our share in world exports fell to just 2.53% in 1947. This led to dramatic increases in poverty levels, frequent famines, and a population that was only at survival level with a annual per capita income of just ₹11,570 in 1950.
Due to the liberalization of the 1990s, the share of trade in world trade flows fell from 2.1% in 1950 to 2.7% in 2010. Since then, however, India’s share in world trade of goods stagnated at less than 2%. .
However, its share in services, supported by IT-based software services, has increased from 0.5% in 1995 to 3.5% in 2019. We will need a huge concerted effort from all stakeholders to restore India’s share in world trade to pre-colonial levels. In this context, the following suggestions might merit attention.
State export policies
Firstly, instead of preparing a pan-Indian Exim policy, which is akin to Brussels producing an export policy for the whole of the European Union, each state should be encouraged to design and implement its own export promotion policy. These should have clearly defined and time-bound objectives and a selection of priority export sectors. This will bring about a much-needed focus on exports in every state and help create quality jobs.
Second, it is neither necessary nor even practical to target only high-tech, high-value exports. As several countries have demonstrated, exports of minerals and agricultural products and low-tech products such as toys and clothing or services such as medicine, education and mass tourism are equally useful for generate good quality jobs and increase per capita incomes.
Third, exporting industries should obtain their energy and other inputs at comparable world prices. They should not be expected to subsidize household consumption by being charged higher tariffs for their energy, logistics and raw material inputs.
Fourth, it is important that the RBI ensures exchange rate neutrality between exports and imports. Exports should not be penalized by an overvalued exchange rate.
In essence, Atmanirbharta should be seen as a means of regaining India’s share in the global economy while simultaneously improving the quality of life of the common Indian.
The writer is the former Vice President of NITI Aayog and Chairman of Pahle India Foundation
September 23, 2022