Two Routes to Atmanirbharta

Context: In the decline in global trade, China is following India by focusing on the domestic market.

Reasons for China’s inward focus:

• To reduce vulnerability to trade sanctions: by hosting critical technologies and strategic production facilities within its territory.

• Decline in external trade: China’s trade fell from 64 % in 2006 to 36% of Gross Domestic Product (GDP) in 2019.

• Limited absorption of Chinese exports by the world: especially of manufactured goods, since they stunted domestic manufacturing, led to a loss of quality jobs and income inequality in other nations.

• Limits of trade surplus: Rising forex reserve ($3.2 trillion) have increased the incomes in China, leading to less competitive and labour intensive environment as compared to Bangladesh and Vietnam.

Reasons for India’s inward focus:

• Declining Merchandise exports: which have hovered above or below the $300-billion mark since 2011-12.

• Issues with over-emphasis on services exports: While India has enjoyed success in services exports, but it is merchandise trade which has more forwards and backward linkages.

• Services exports tend to create a greater concentration of wealth because of better margins and the valuation game.

Conclusion: As a step towards Atmanirbharta, India needs to focus on merchandise trade for increasing the external trade in relation to the GDP.