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Thursday, July 02, 2020

Self reliance and FDI dependence

Privatisation does not make a self-reliant nation. A decentralised, people-centric approach to development will help

Written by Surabhi Agarwal | Updated: May 28, 2020 6:08:07 pm
covid relief package, coronavirus economic package, atmanirbhar bharat abhiyaan, fdi, corporatisation, NITI Aayog, nirmala sitharaman, indian express In the fourth tranche of the Atmanirbhar Bharat initiative, Finance Minister Nirmala Sitharaman has announced corporatisation of Ordnance Factory Board (OFB) and raising FDI limit in defence manufacturing under automatic route from 49 per cent to 74 per cent. (Photo: PTI)

Written by Surabhi Agarwal, Bobby Ramakant and Sandeep Pandey

Mahatma Gandhi’s conception of self-reliance was of simple living and self-sufficiency. The basic idea was to use local resources and a local workforce for the production of commodities for local consumption to the extent possible, with minimal dependence on the outside world. But the Indian government’s clarion call for “Atmanirbhar Bharat” (self-reliant India) has not been matched by steps towards either simple living (especially for the middle and rich classes) or local self-sufficiency. And, after one of the biggest and strictest lockdowns in the world, following the COVID-19 pandemic, the recently announced relaxations and relief measures aimed at rebooting the economy are likely to take us even further away from the Gandhian value of self-reliance.

In the last couple of months, COVID-19 has shown us how inextricably public health and the economy are linked. Despite the private health sector in India having more ventilators, doctors and hospital beds than the public healthcare sector, it has essentially been public healthcare which — though chronically underfunded and neglected — has been bearing the brunt of the pandemic. The private sector has either been found playing it safe by “distancing” itself from its patients or busy making profits even in this time of humanitarian crisis.

The lockdown has been in force — in varying degrees — for over two months now, albeit, with little consensus on its effectiveness in the absence of concerted government action to build greater healthcare capacity to fight the disease. Because of this disruption, the economy is in a state of chaos. Businesses and industries are failing, and unemployment, hunger and destitution are on the rise. With no clear resolution to the problem in sight, some people are predicting economic catastrophe. The pandemic has demonstrated how the sustainability and resilience of any economy are linked to the strength and equitability of its public health system.

The only rational long-term response to this crisis would be to make foundational changes in both our economy and our healthcare system. We must build an economic system which is geared towards distributing wealth and resources more equitably to ensure the rights of all people to a secure and dignified life. We must develop a healthcare system which provides access to quality health services to all, irrespective of social or economic standing. Both will require discarding neoliberal policies and the capitalistic logic underlying them, which inevitably puts profit over people, even when the very survival of humanity is at stake.

It is therefore ironic that the government’s plan to revive the economy includes spending Rs 8,100 crore to boost private sector investment in social sector infrastructure including hospitals and schools. The gates have been opened even wider for private sector investment in the defence, power, space and coal and mining sectors. Despite a strike last year by workers of the Ordnance Factory Board — the world’s largest government-operated defence production organisation — which had stalled attempts at its privatisation, the government recently declared its decision to corporatise the company while announcing a string of economic stimulus measures. Several state governments have moved to suspend labour rights in the hope of attracting investment and recovering lockdown losses. In a bid to improve healthcare facilities, the NITI Aayog has asked states to accelerate the process of setting up of medical colleges on the PPP model and augmenting district hospital facilities with help from private partners. A move which had been criticised as counterproductive even when it was originally proposed a few months ago.

To add to the all-round absurdity, Prime Minister Narendra Modi described this economic stimulus package as part of his “Atmanirbhar Bharat Abhiyan”. It is unclear what stretch of imagination allowed him to view upgrading the foreign direct investment (FDI) limit in defence manufacturing from 49 per cent to 74 per cent as a move towards self-reliance. Former health secretary K Sujatha Rao, in a tweet chiding the NITI Aayog for further privatising public health facilities, asked if their definition of “atmanirbhar” was “handing over government hospitals to private sector along with our tax money”, and exhorted them to “wake up” and “look out of your window”.

The government has clearly learnt nothing from this crisis and is keen to go ahead with business as usual. In fact, it appears to be taking advantage of the crisis to push its neoliberal economic agenda much further than would have been possible in normal times, with the full support and encouragement of the capitalist lobby.

Inviting foreign direct investment is part of the economic policies of privatisation, globalisation and liberalisation which are responsible, if not directly, for the spread of the virus, certainly for the mismanagement and insensitivity which have characterised the response of many countries around the world. One striking example of this is how the Indian migrant workers had to undertake gruelling journeys on foot on highways, or worse, railway tracks. The power and influence of the dehumanising capitalist ideology, even in the face of the harsh truths brought to light by the current crisis, should set the alarm bells ringing for all of us.

The example of the medical equipment manufacturing industry is a particularly apt one in the present scenario to illustrate how FDI and conventional neoliberal policies are counterproductive in the pursuit of self-reliance. The medical device manufacturing sector has been open to 100 per cent FDI since 2015. Since then, most of the FDI that has come into the country has been to finance imports and trading, build storage and distribution infrastructure, but not to augment domestic manufacturing capabilities. This has allowed international medical equipment manufacturers to reap huge profits by selling their products in the Indian market without making any contribution to the local industrial development.

Even today, close to 80 per cent of the medical equipment used in our country, including in government hospitals, is imported. Though there is some manufacturing capacity in non-electronic medical equipment, over 90 per cent of medical electronic products are imported. From the equipment used for the computed tomography (CT) scan, magnetic resonance imaging (MRI), ultrasound scan, cath lab for heart procedures — like angioplasty, endoscopy, colonoscopy — and radiation therapy and drugs for chemotherapy, to even the knives and scissors used in surgery are all procured from countries like Germany and the US.

Customs duty on imported medical device products has been very low (0-7.5 per cent) and 40 per cent of the medical electronic products imported are pre-owned (that is, used, refurbished products which are sold at prices much lower than the market rate). It has also been reported that in government purchases many MSMEs in the sector are not given timely payments, with delays of several months not being uncommon whereas importers are paid promptly. These policies and practices give foreign companies which export medical devices to India a big advantage over domestic manufacturers.

Further, even the equipment currently manufactured in India is often found to be substandard. Because of the unreliability of Indian equipment and medicines, doctors prefer their foreign-made counterparts. In what seems like a mockery of the idea of self-reliance, they sometimes invite tenders for the purchase of these items with restrictions which disqualify Indian companies from even applying.

For years, medical equipment manufacturing bodies such as the Association of Indian Medical Devices Industry, have been demanding an increase in customs duty, a ban on the import of pre-owned products, preferential pricing of domestically manufactured products and regulation of the MRPs of imported devices in order to boost domestic manufacturing both in terms of quality and quantity — but to no avail. Reportedly, importers’ lobbies have exercised their influence to block any policy changes.

As the defective rapid antibody test kits from China have shown, not all imported products are of high quality. Further, it is difficult to impose quality standards on products which are being manufactured abroad. There is no reason why India cannot locally manufacture products which meet the highest quality standards.

One important way of improving production quality would be to promote indigenous research and design. Especially in the case of medical research, indigenous research is important because it can help us develop medical technologies which are adapted to local problems in healthcare and relevant to local populations. Currently, medical research in India is severely neglected. According to a study analysing research output from 579 Indian medical institutions and hospitals between 2005 and 2014, only 25 (4.3 per cent) of the institutions produced more than 100 papers a year. Compare this with the thousands of research papers published every year by top-notch international institutions like the National Institutes of Health, USA and the Chinese Academy of Sciences. Clearly, the government needs to invest more in improving the quality of our public research institutions as well.

The case of the medical devices industry reflects how FDI is not an effective mechanism to promote indigenous manufacturing. The government’s new motto of self-reliance does correctly identify the problem of our excessive reliance on imports, which contributes to the fragility and inequity of our economic system. However, the proposed solutions will only worsen this situation. Self-reliance can only be achieved through policy changes that de-prioritise the interests of multinational corporations and embrace a people-centric, decentralised approach to industrialisation that improves local economies, drives job growth and supports public research and innovation.

Pandey is a Magsaysay Award winner and vice-president of Socialist Party (India); Agarwal and Ramakant are associated with Socialist Party (India)

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