Key messages on economy from external affairs minister

On Friday, this newspaper carried a report (‘India’s growth cannot be built on Chinese efficiency, says Jaishankar’) about a speech by the Minister of External Affairs. In that speech, the minister sent some important messages about the government’s thinking on several critical issues. 

The first message was that the government will support manufacturing. Second, the government will continue to pursue its protectionist policies.  Third, the government will help create a domestic value chain. Fourth, the government seeks to energise the economy and motivate the businesses to believe that it is possible to manufacture in the country through the production-linked incentive (PLI) scheme. Fifth, strong business is not only about economics, but also a critical segment of national security. Sixth, it is important for India to move to a strategic economy, have a clear sense who are our partners, where are our opportunities, where should we focus on our technology tie-ups. Seventh, Make in India is a strategic statement and not just an economic or manufacturing programme. Eighth, the focus on services is actually an elegant excuse for being incompetent in manufacturing. Finally, business or economics is too serious to be left to the businessmen and economists. In other words, the government knows best.

Just to make sure that he is taken seriously as someone who speaks for the entire government, the minister said that he was speaking as someone in the government, and as someone in the Cabinet Committee on Economic Affairs. It is not clear in what context the minister said that Indian economic growth cannot be built on Chinese efficiency and there is a need for businesses to stop looking for a ‘China fix’. Only a study of the entire text of the speech can help appreciate the context and perspective. 

A plain reading of the report conveys a lot of belligerence that we have now come to expect routinely from the minster. All one can say is that it is doubtful if any businessman or economist said that we needed a ‘China fix’, or that we must build on Chinese efficiency. Incidentally, the minister was speaking at a book launch and not to a group of businessmen or economists. 

The minister’s assurance about the seriousness of the government to support manufacturing must be music to the ears of many analysts who have been pointing out that the share of manufacturing in the country’s gross domestic product has remained stagnant since the last ten years. Their main premise is that it is the manufacturing sector that can generate enough good jobs for our young people. The minister, however, referred to another aspect. 

“There is no major country in the world which has sustained or enhanced its global position without some commensurate build-up on manufacturing,” he said. 
 

There would be no dearth of economists and commentators who are convinced that protectionism does not help the Indian businesses get globally competitive, and that India must integrate closely with other economies, especially in East Asia, to be a part of global value chains. 

Some are also convinced that we have greater global opportunities in the services sector.  They have to now reconcile with the reality that the government has different views. 

It is remarkable that the Minister of External Affairs has so clearly articulated the government’s thinking on economic affairs. 

Email: tncrajagopalan@gmail.com