India’s Atma Nirbhar Abhiyan (ABA) growth strategy has the potential to substantially expand trade, investment, and cross-border manpower flows, as it lays the foundations for higher and more broad-based and resilient growth of the Indian economy.
Given that the Covid-19 pandemic has underscored the urgency of not being over-reliant on one economic partner, and not becoming over-dependent on narrowly- based elaborate supply and logistic chains, India’s post Covid economic recovery plan is already guided by this core strategic concept.
So, what does this means for the prospects of enhancing New Zealand – India bilateral trade in the post-Covid world?
For uninitiated, in 2019, India’s GDP was nearly USD three trillion, fifth largest globally at current exchange rates, and third largest in PPP (purchasing power Parity) terms.
By 2022, the economy is projected to rebound and grow by 11 per cent.
India is already globally well integrated
According to the World trade organization (WTO), India’s total international trade in goods and services in 2019-20 was USD 1202 Billion (about 40 Percent of GDP), of which two thirds was in goods and one-third in services.
India accounted for 1.71 percent of global goods exports, and 2.53 percent of imports. In services, it accounted for 3.52 percent of global exports, and 3.11 percent of imports. India aims to increase its total global trade to USD two trillion before the end of this decade.
By the same token, India’s Foreign Direct Investment (FDI) Inflows from January to June 2020 have resulted in a stock of USD 693.4 Billion. Inflows of FDI into India were USD 44 billion in 2018-19, and USD 50 Billion in 2019-20. The total stock is expected to approach USD one trillion in next several years. India’s net FPI (Foreign Portfolio Investors) flows from April 2000 to June 2020 was worth USD 216 Billion. The stock market capitalization as of early December 2020 was around USD 2.4 trillion, around three-fourth of India’s GDP.
Rahul Sen
India’s global diaspora is around 35 million, and in recent years, India has been the largest recipient of inward official remittances, amounting to around USD 75 to USD 80 Billion.
The above are simple data facts of how deeply India is already integrated with the global economy, and any perceptions to the contrary are unfortunately misplaced.
The thrust of India’s policies, including ABA, is to further expand this integration.
What is India’s Atmanirbhar Bharat Abhiyan strategy?
It literally means a movement to make India (Bharat) more self- reliant. Self-reliance in this context is meant to embark on a path of India pursuing enhanced global competitiveness and competence in sectors and activities of key importance for India’s geo-economic and geo-strategic goals.
ABA intends to enhance the ability of Indian companies to create world-class products and capture the domestic market and then use the strength of the domestic market to penetrate into the global market.
The strategy encourages Indian businesses to move into new technology areas, and to adept existing technology to suit the Indian conditions and context.
India is also attempting to bring about attitudinal and behavioural change to facilitate ABA.
The Principal Economic Advisor, Government of India, Sanjeev Sanyal has argued that “…the idea of self-reliance is about resilience, leveraging internal strengths, personal responsibility, and a sense of national mission (or “Man Making”) to use the late 19th century expression of Swami Vivekananda”.
These are to be applied to the economic sectors, including infrastructure, and business regulation, expanding economic freedom and use of markets; and to social sectors such as education and health care.
The ABA focuses in particular on electronics, pharmaceuticals, medical equipment, and agriculture sectors, with value addition being encouraged by creating conducive business environment to locate in India by domestic and foreign enterprises.
A good example of such thrust is the plans by Tata Sons (2019 turnover USD 113 Billion), a large conglomerate with global presence, to incur capital expenditure of USD 1.5 billion for building manufacturing capacity. Tata Sons plan a capital expenditure of $1.5 billion for building manufacturing capacity in the country to cater to Apple’s sourcing needs for components.
It is looking to secure USD 750 million to USD 1 billion in external commercial borrowings while mobilising the remaining sum through internal accruals. The plant may eventually scale up to meet the requirements of other original equipment manufacturers from South Korea and Japan.
Mukul Asher
Opportunities for New Zealand
As India sustains high growth, diversifies its economy, and increases its middle class, with greater discretionary income, and rising aspirations, there will be potential for business opportunities for New Zealand, even without a formal trade agreement in place. More specifically, three avenues may be briefly mentioned.
First, there is rising demand in India for high-end, quality milk-based products, such as Ghee, Butter, cheese, and yoghurt. New Zealand is globally competitive in these areas. With attractive tax rates for new manufacturing, New Zealand could consider investing more in India in these areas. This window could narrow as attractive tax rates are only up to 2023; and as more and more players are entering in this area.
One such example is that of Fonterra’s partnership with Future Group in India to launch “Dreamery” range of dairy products in 2019 wherein the milk is supplied by Indian dairy farmers that meet New Zealand dairy standards, but Anchor's food service products, such as cheese and cream are imported from New Zealand for the hotel and restaurant sector.
The idea though should be not just for New Zealand businesses to sell products but invest in longer term technological partnership that enhances India’s productivity in its agricultural sector to make it globally competitive. An example is already set by New Zealand horticulture in its partnership with the government of Himachal Pradesh since 2018, targeted to help improve productivity and yield for apple, pear and mango growers in the state.
The project utilizes New Zealand expertise in orchard management techniques, irrigation and water harvesting to achieve this outcome. Such partnerships opportunities are available to food processing industry, as similar incentives are available for it.
Second, India has the scale to help diversify New Zealand’s tourism and education sectors, once the Covid-19 pandemic is over. This would help diversify its service export base and help fill skill gaps. India has been one of the largest education service export destinations for New Zealand, and a recently released report by the Waitakere Indian Association, estimates that nearly NZ $ 0.8 billion was contributed in terms of GDP in 2019 by visiting Indians in these two sectors.
This was notably achieved in absence of direct air connectivity, which should now be a priority, given the untapped potential for bilateral trade and investment in this sector. The same report also estimates that the Indian diaspora of 240,000 (constituting 5 per cent of New Zealand’s population), contributes to nearly $ NZ 10 billion to New Zealand’s GDP, and increasingly towards higher-skilled activities, providing a significant impetus for partnering in India’s growth in the ABA context.
The establishment of New Zealand Centre at IIT Delhi in early 2020 and the recently inked Memorandum of Understanding between Auckland University of Technology (AUT) and IIT Chennai exploring joint research partnerships and collaborations could set up ideal foundations for the same, and spur similar initiatives involving educational institutions from both countries.
Third, as ABA aims to expand India’s manufacturing base, using PLIs (Production Linked Incentives) for pharmaceuticals (including those related to Covid-19 vaccine), electronics, and defence and medical equipment sectors; and expands space services for satellite launching, New Zealand could have an additional reliable trading partner, expanding its options.
In a nutshell, India’s ABA growth strategy should be viewed by New Zealand businesses as a vehicle to develop long term partnerships, which by providing mutual benefits, lays a strong foundation for a bilateral trade agreement between the two countries in the near future.
The authors are Senior Fellow, Executive Education, Lee Kuan Yew School of Public Policy (LKYSPP), Singapore, and Senior Lecturer in Economics, Faculty of Business Economics and Law, Auckland University of Technology (AUT) as well as Fellow, New Zealand-India Research Institute (NZIRI), Wellington respectively. The views expressed here are personal.
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