The government's Atmanirbhar Bharat policy is not a return to import substitution and licence permit raj or about protecting inefficient industries; it is about improving the resilience of a highly competitive industry. The principal economic advisor to the Government of India Sanjeev Sanyal explained this in his address to the Financial Market Summit 2020 organised by the Confederation of Indian Industries (CII) today.
Sanyal said: "Let me be clear, Atmanirbhar bharat is not sarkar nirbhar Bharat." He also appealed the industries not to lobby with the government for protection as this is not what the government has in mind.
Sanyal's reaction came after the former Reserve Bank of India Governor Raghuram Rajan recently cautioned against import substitution by erecting tariffs under the 'Aatmanirbhar Bharat' initiative.
"If the focus is on import substitution, which we have done many times over the last few years, then I think we have tried this direction before and it has failed. I would caution against going in that direction," he said.
Further, Sanyal said that the government does think there are areas that need strategic support -- some of them may be for strategic purposes like defence.
He, however, added that if at all the government is providing protection to any industry it is purely from two reasons - from a resilience perspective and to provide the country flexibility to be able to compete in the future where the country may need to provide protection to certain infant industries.
He explained the resilience problem by taking the example of the pharma industry, which is extremely competitive in the generic space and otherwise also.
"We discovered over the last six months that this highly competitive sector has a resilience problem as many of its inputs had to come from other countries, particularly from China. And this meant that whenever there is certain kind of breakdown -- like what we saw recently -- this sector may come to a grinding halt. So, there is a resilience problem," he explained.
According to him, the government needs to protect domestic production of some of the critical inputs that particularly come from a single source.
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