Swadeshi is passe - Indian businesses must learn to compete or fail

WhatsApp uncles have been out in force after the Prime Minister’s clarion calls to buy swadeshi. Sorry, maybe we should call them Arattai uncles after a domestically developed messaging and calling app that they are urging on members of WhatsApp groups. The reaction of the other members of one group is telling:

 

WhatsApp/Arattai Uncle — out of the blue: “Hello All, can we shift this group from WhatsApp to Arattai. Thanks.”

 

Respondent 1: GOOD (preceded by a large thumbs up emoji)

 

Respondent 2: What are the benefits!

 

Respondent 1 sends a long list of Indian equivalents of US-branded apps. Mostly, they offer domestic equivalents of Chrome, Gmail, MS Word, PowerPoint, and so on.

 

Respondent 2 repeats: Benefits?

 

Respondent 1: Swadeshi

 

After that, all is silence.

 

That’s no surprise. The concept of Swadeshi in all its many-splendored variations has moved a long way from its original historical roots in the colonial struggle. Today, it remains an issue feverishly debated in the realm of politics and competition-averse Indian business. Immediately after economic liberalisation in 1991, it had been mobilised by a Bharatiya Janata Party, wrong-footed by the initial swiftness of economic reform, and the Left bastion, viscerally opposed to any policy that loosened state control. Both entities earned grateful contributions from businesses struggling to cope with the mild winds of globalisation that blew across India’s shores. Indeed, as long as the Left opposed foreign investment in retail, it received generous funding until the entry of the online giants rendered the issue moot.  

 

But the purchasing middle class? It couldn’t care less about these rarefied doubts and never did. Suddenly exposed to choice and variety like never before, the Indian consumer, whether of saffron political persuasion or otherwise, lapped up Samsung, Hitachi, Sony, Whirlpool, Hyundai, Mercedes, BMW, Black & Decker blithely forgetting all about Onida, Ambassador, Premier Padmini, Videocon and even popular brands by so-called “Indian” multinationals (ie: those foreign conglomerates that had been operating in India for yonks.)

 

When new-age businesses such as mobile telephony opened up, no consumer stopped to ask about Indian mobile phones or Indian service providers. Instead, Nokia, Apple, Samsung or Motorola led the stakes. Some Indian brands such as Lava and Micromax made gallant stands, cheaply assembling phones from China until the Chinese themselves overtook everyone with their value-for-money Vivo, Oppo, and Xiaomi. When India and China had a confrontation in Ladakh in 2020, the occasional looney decided to burn Chinese-made TVs by way of a patriotic tantrum. A commentator on social media wryly pointed out that, unfortunately, there were no Indian TV brands to replace the Chinese ones.

 

Now, five years later, China has edged away from forward positions in the glacial north, but Vivo, Oppo and Xiaomi still bestride the mobile handset market like colossi. And the inconvenient truth is that China remains one of India’s top two trading partners, less out of policy choice than sheer competitiveness. Indian exports to China are roughly a tenth of China’s exports to India.

 

Indian consumers are not the only ones unconsciously opting for foreign/Chinese options. Even businesses that wear their patriotism on their sleeves are hapless buyers of a range of Chinese intermediates and finished goods that India should have been able to produce had it latched itself on to global supply chains decades ago. Likewise, no Indian brand has emerged yet despite the introduction of an “import management system” designed to promote domestic IT hardware production. Consistent policy inclination towards the soft option of protecting domestic business, which has reached a peak under the current government in the form of ever higher tariff walls, has chipped away at India’s ability to compete globally or become a significant part of the global supply chains.

 

Today, as a result, India’s ambitions to become a global electronics hub, its position as “pharmacy to the world” and its climate change-driven Net Zero objectives are all dependent on Chinese intermediates for electronics, active pharmaceutical ingredients, and solar panels. For instance, roughly 80 per cent of the Apple iPhone, the cynosure of India’s productivity- linked incentive scheme is still imported.

 

As Indian negotiators tough it out in Washington, it took NITI Aayog Chief Executive Officer B V R Subrahmanyam to point out that reducing import duties on raw materials and strengthening trade relations with east Asia in general and China in particular are critical to enhancing India’s manufacturing exports. China is a $18 trillion economy, it cannot be ignored, he pointed out. These are among the world’s most competitive economies today — and competitors in the various trade deals being hammered out in the West.

 

In this scenario, a defensive economic policy embedded in Swadeshi, however interpreted, is way past its sell-by date. Pragmatism dictates that Indian businesses, no matter how big or storied, must compete or fail. Indian consumers have been pretty much signalling that message for at least 30 years.