How to make a ‘buy Indian’ strategy work
Standoff with China could convince more consumers, but will come at a higher price
Standoff with China could convince more consumers
Prime Minister Narendra Modi wants all 1.3 billion Indians to be ‘vocal for local’ — meaning, to not just use domestically made products but also to promote them. As an overseas citizen living in Hong Kong, I’m doing my bit by very vocally demanding Indian mangoes on every trip to the grocery.
But half the summer is gone, and not a single slice so far.
My loss is due to India’s Covid-19 lockdown, which has severely pinched logistics, a perennial challenge in the huge, infrastructure-starved country. But more worrying than the disruption is the fruity political response to it.
Rather than being a wake-up call for fixing supply chains, the pandemic seems to be putting India on an isolationist course. Why?
Granted that the liberal view that trade is good and autarky bad isn’t exactly fashionable anywhere right now. What makes India’s lurch troublesome is that the pace and direction of economic nationalism may be set by domestic business interests. The Indian liberals, many of whom are Westerntrained academics, authors and — at least until a few years ago — policymakers, want a more competitive economy. They will be powerless to prevent the slide.
Modi’s call for a self-reliant India has been echoed by Home Minister Amit Shah, the cabinet’s unofficial No. 2. If Indians don’t buy foreign-made goods, the economy will see a jump, he said. The strategy has a geopolitical element.
A military standoff with China is under way, apparently triggered by India’s completion of a road and bridge near the common border in the tense Himalayan region of Ladakh. It’s very expensive to fight even a limited war there. Economic boycotts, such as Chinese consumers’ rejection of Japanese goods over territorial disputes in the East China Sea, are well understood as statecraft. In these times, it’s not even necessary to name an enemy. But is it ever that easy?
A hastily introduced policy to stock only local goods in police and paramilitary canteens became a farcical exercise after the list of banned items ended up including products by the local units of ColgatePalmolive Co., Nestle SA, and Unilever NV, which have had significant Indian operations for between 60 and 90 years.
Internal considerations
The since-withdrawn list demonstrates the practical difficulty of bureaucrats trying to find things in a globalised world that are 100 per cent indigenous. Free-trade champions fret that the prime minister, whom they saw as being on their side six years ago, is acting against their advice to dismantle statist controls on land, labour and capital to help make the country more competitive. Engage with the world more, not less, they caution.
But Modi also has to satisfy the Rashtriya Swayamsevak Sangh, the umbrella Hindu organisation that gets him votes. Its backbone of small traders, builders and businessmen was losing patience with the anaemic economy even before the pandemic. Now, they’re in deep trouble, because India’s broken financial system won’t deliver even state-guaranteed loans to them.
The US-China tensions — over trade, intellectual property, Covid-19 responsibility and Hong Kong’s autonomy — offer a perfect backdrop. A dire domestic economy and trouble at the border provide the foreground.
Big business will dial economic nationalism up and down to hit a trifecta of goals: Block competition from the People’s Republic; make Western rivals fall in line and do joint ventures; and tap deep overseas capital markets.
The first goal is being achieved with newly placed restrictions on investment from any country that shares a land border with India. The second aim is to be realised by corporate lobbying to influence India’s whimsical economic policies. As for the third objective, with the regulatory environment becoming tougher for US-listed Chinese companies like Alibaba, an opportunity may open up for Indian firms.
At odds on ideology
All this may bring India Shenzhen-style enclaves of manufacturing and trade, but it will concentrate economic power in fewer hands, something that worries liberals. They’re moved by the suffering of India’s low-wage workers, who have borne the brunt of the Covid-19 shutdown.
Slogans like Modi’s vocal-for-local stir the pot and thicken the confusion. The value-conscious Indian consumer couldn’t give two hoots for calls to buy Indian, but large firms will know how to exploit economic nationalism. One day soon, I’ll get my mangoes — from them.