Fostering self-reliance in select manufacturing sectors can lead to import substitution of more than US$ 186 bn: Exim Bank Study

This weakness in the domestic manufacturing sector has translated into greater dependence on imports to meet the growing domestic demand over the years.

Sep 18, 2020 08:09 IST India Infoline News Service

According to a study published by the Export-Import Bank of India (India Exim Bank), the recent performance of the manufacturing sector in Indiais indicative of an underlying inertia, with the share of manufacturing in India’s gross value added declining to 15.1% in 2019-20, as compared to 18.4% in 2010-11, despite the strong and growing private consumption demand in the country. This weakness in the domestic manufacturing sector has translated into greater dependence on imports to meet the growing domestic demand over the years.

The Study titled ‘Self-Reliant India: Approach and Strategic Sectors to Focus’, identifies select sectors for import substitution and enhancing domestic production including electronics, defence equipment, machinery, chemicals and allied sectors, pharmaceuticals, and select agricultural products. The Study has also included sectors such as autocomponents, and iron and steel where, though there is overall trade surplus for India, but in some sub-categories, there is trade deficit, particularly with China. Further, the Study has included Rare Earth Elements in the scope, as securing these strategic minerals is important for India to enter high-tech manufacturing.These sectors account for more than US$ 186 billion of imports by India, with a share of nearly 39% in overall imports and 50% in the non-oil imports by India.

The Study analyses the performance of these sectors in terms of production and export capabilities and highlights the import dependence in these sectors.  The Study recommends several sector-specific strategies for reducing import dependence by enhancing domestic production, based on an assessment of the specific needs and issues faced by each of the sectors. For instance, in sectors like agriculture and rare earth, there is a greater need for strategies that enable collaborative arrangements and encourage outward investments into partner countries for meeting domestic requirements, while in technology-intensive sectors the strategies are focused on creating domestic capacities for reducing import dependence. Some of the other strategies suggested by the study include:specific interventions for encouraging innovation-led manufacturing, addressing deficiencies in tax and duty structures, encouraging joint ventures, revisiting government regulations and programmes, among others.

The Study also highlights certain cross-cutting strategies which can incentivize indigenization across the entire manufacturing sector. The Study was released during an interactive webinarorganized by India Exim Bank on the theme ‘Strategies for Self-Reliant India’ on 16thSeptember 2020.

The Study was released by the Chief Guest for the webinar, K Rajaraman, Addl. Secretary, Department of Economic Affairs, Ministry of Finance. Speaking on the occasion, Shri Rajaraman highlighted the efforts taken by the Government of India to reduce import dependence and foster self-reliance, thereby paving way for the economy to recover quickly from the pandemic-induced slowdown.

David Rasquinha, Managing Director, India Exim Bank, in his welcome address, noted that building competitiveness in the manufacturing sectorwould be the focal point of the narrative of “Atmanirbhar Bharat”. Rasquinha observed that with the current international attention on India’s tremendous potential for economic growth, international trade and global value chain participation, it would be an opportune time to push for rapid progress on structural reformsto increase domestic capabilities.

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