In recent years, India has aggressively promoted the “Atma Nirbhar Bharat” (Self-reliant India) initiative to boost domestic industry and reduce dependence on imports. At the same time, India has also entered into several free trade agreements (FTAs) with trading partners to open access to foreign markets. This has led to an ongoing debate around whether these two approaches contradict or complement each other.
Understanding Atma Nirbhar Bharat
Background
- Launched in May 2020 in response to COVID-19 crisis
Key Objectives
- Make India self-reliant across diverse sectors
- Boost efficiency through competitiveness
- Create jobs and develop skill capabilities
Strategic Pillars
- Economy: Promote local manufacturing and exports
- Infrastructure: Advance state-of-the-art infrastructure
- Governance: Adopt minimum government, maximum governance
- Vibrant Demography: Empower youth through education and skills
Approach
- Not aimed at protectionism or import substitution
- Focused on integrating with global supply chains
- Leveraging capacities to become globally competitive
Outcomes
- Rise in public procurement from domestic players
- Policies supporting MSMEs and incentivizing local manufacturing
- Development of megaprojects under PM-GatiShakti National Master Plan
Understanding Free Trade Agreements
Background
- Reciprocal agreements to expand trade and investment
- India has comprehensive FTAs with ASEAN, South Korea, Japan
Key Aspects
- Phased elimination of tariffs on traded goods
- Streamlining of customs procedures
- Relaxation of norms for trade in services
- Cross-border investment rules and protections
Benefits
- Access to larger global markets for exports
- Cheaper imports for consumers and downstream industries
- Opportunity to integrate into global value chains
Concerns
- Risk of premature deindustrialization of emerging sectors
- Threat of dumping goods at cheaper prices
Compatibility Between Atma Nirbhar Bharat and FTAs
Balancing Trade Interests
- Atma Nirbhar Bharat does not mean excluding all foreign trade
- FTAs enable Indian firms to become competitive globally
Safeguarding Key Industries
- Sensitive sectors can be protected by excluding from FTAs
- Timebound exemptions limit impact till ready to compete
Attracting Investments
- FTA provisions attract foreign firms to set up production
- Brings job creation and integration with supply chain
Furthering Self-Reliance
- Using FTA incentives and leveraging demographic dividend to build domestic capacities
Key Differences Between Atma Nirbhar Bharat and FTAs
| Basis of Difference | Atma Nirbhar Bharat | Free Trade Agreements |
| Primary Focus | Boosting domestic industry competitiveness | Expanding trade by reducing barriers like import duties |
| Approach | Not about import substitution or isolating from global economy | Based on reciprocal commitments to open market access |
| Objective | Building indigenous capabilities across sectors | Leveraging competitive advantages through trade |
| Risks | Potentially being overly protectionist | Risk of premature deindustrialization from sudden import competition |
Impact on Domestic Industry
Atma Nirbhar Bharat
- Focus on supporting domestic manufacturing through PLI schemes, FDI policies, and tax incentives provides a boost to local industry
- Forced import substitution in some sectors generates artificial monopolies – risk of over-protectionism
- Upgrades capability and efficiency of firms to make them competitive
Free Trade Agreements
- Immediate threat from tariff cuts leading to cheaper imports that hamper local sectors
- Spurs domestic firms to advance efficiency and engage internationally
- May incentivize foreign firms to set up local manufacturing to leverage FTA benefits
Impact on Domestic Consumers
Atma Nirbhar Bharat
- Ban on imports of select goods reduces consumer choice
- Limited competition allows inefficiencies in local industry, risking higher prices
- Developing high-quality indigenous goods takes time – imports bridge gap
Free Trade Agreements
- Provides wider choice of international brands at reduced costs
- FTA partners may dump low-quality goods through predatory pricing
- Gradual tariff cuts balance consumer interests and local industry impact
Impact on Indian Exports
Atma Nirbhar Bharat
- Increasing economies of scale improves viability in foreign markets
- Does not directly boost exports but creates foundation
- Global firms may prefer other manufacturing destinations with fewer barriers
Free Trade Agreements
- Tariff concessions immediately open up opportunities for exports
- Rules of origin criteria ensures gains for Indian manufacturers
- Facilitates linkages with supply chain networks across the world
Both Atma Nirbhar Bharat and FTAs shape distinct opportunities and challenges across Indian markets.
- Adopting the two strategies in a balanced manner with robust safeguards addresses multiple stakeholder interests through a mix of self-reliance and global integration.
- Atma Nirbhar Bharat aims to realize India’s potential through enhanced competitiveness, not isolationism or protectionism.
- FTAs provide opportunities for Indian firms to access global markets and integrate into value chains.
- While tensions persist, China demonstrates that self-reliance initiatives and leveraging global trade are not necessarily at odds.
- India must craft a strategic balance across policies like Atma Nirbhar Bharat, FTAs and greater integration into the global economy.
