ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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‘Atmanirbhar Bharat Abhiyan’

A Smooth Drive to Self-reliance?

Over the last two decades, India’s participation in global value chains and international production networks have improved, but the domestic value added embodied in gross exports has exhibited a fluctuating trend. In 2020, India launched the “Atmanirbhar Bharat Abhiyan,” where enhancement of the DVA content of exports can be considered as an underlying objective. The impact of various factors of production and other drivers on India’s DVA content in select manufacturing exports have been identified in this paper with help of trade in value added data for 2000–18. The empirical results indicate that the focus on export and FDI promotion policies by itself will not lead to either self-reliance or address employment worries in India. A coordinated effort towards labour skill augmentation along with technology transfer will be instrumental in this regard.

The growing literature on global value chains (GVCs) and international production networks (IPNs) reveals that during the last two decades, the fragmentation of production processes and the associated international dispersion of tasks and activities have resulted in borderless production systems (Coe et al 2008; Taguchi 2014). The globalisation of production and the vertical disintegration of production stages by transnational corporations have improved industrial capabilities in a wide range of developing countries, resulting in greater focus on innovation and product development strategy (Gereffi et al 2005). Baldwin and Venables (2013) defined two main archetypes of IPNs, namely “spiders,” in which final goods are produced by assembling inputs simultaneously imported from different source countries, and “snakes,” in which there is a linear and sequential cross-border production pattern. Following the GVC–IPN literature, the total exports originating from a country therefore can be decomposed into two core components—first, the pure domestically produced and sourced components (for example, raw material, semi-processed and intermediate products, embodied labour, domestic capital, infrastructure costs, and other resources), which are collectively known as the domestic value added (DVA) content in exports. Second, the import components embodied in the export (for example, imported intermediate inputs and energy products, foreign capital, royalty payments for accessing foreign technology or service link costs) is termed as the foreign value added (FVA) content.

The rising imports of parts and components, leading to higher FVA in exports (Goldar et al 2017), have already caused a major challenge for Indian manufacturing sectors (Chaudhuri 2015). The growing manufacturing trade deficit has been a major reason behind India’s pullout from the Regional Comprehensive Economic Partnership (RCEP) negotiations involving 15 partners spread over East Asia and Southeast Asia and the Asia-Pacific in 2019 (Dhar 2019). The “Atmanirbhar (self-reliant) Bharat Abhiyan” was launched in May 2020 by India (GoI 2020), which envisages to consolidate domestic manufacturing sectors, and it needs to be viewed in a wider context. As the manufacturing sector of the country consolidates and becomes able to replace the imports of parts and components as well as intermediate products, this in turn is expected to improve the DVA content in exports in the long run. Otherwise, a major objective of the “Make in India” scheme (launched in 2014) to increase the contribution of the industrial sector in the country’s gross domestic product (GDP) to 25% by 2025 cannot be realised.

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Updated On : 9th May, 2023
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