India’s Defence Import Ban & A Lookback At Export Orientation of ‘Asian Tigers’

India's Defence Import Ban & Aatmanirbhar Strategy

India recently banned the import of 101 defence items to make the country “Aatmanirbhar” (self-reliant) in defence. However, this is not the first case of restricted imports, with several nations having embarked on the road in their histories to boost indigenous production.

Crux of the Matter

Recent Ban
The Government of India recently banned the import of 101 defence items, including “weapons, platforms, and equipment”. The import ban would come into action by December 2020, and further restrictions on the import of defence equipment might be imposed. The aim of such a step is to make India “Aatmanirbhar” (self-reliant) in the production of defence equipment in the country.

Currently, 60% of the country’s military requirements are fulfilled by import. Contracts worth ₹4 lakh crore are expected to be given to the “domestic industries” within the next 5-7 years. The government also “bifurcated” the defence budget between ‘domestic and foreign capital procurement’, with ₹52,000 crores allotted for domestic capital procurement only.

Will India’s Path Be Like Japan’s?
After World War II, Japan devalued the Yen and imposed restrictions on imports to reduce dependency on imports while also boosting indigenous production. While it decreased the export of food items and textiles, the export of electronics and chemicals was increased drastically which increased the overall worth of Japan in the world business. As a result of its policies, Japan has been in a trade surplus almost every year since the 1960s, and has one of the largest trade surpluses in the world.

Impact Of Electronics
Japan initiated by exporting transistors made by companies like Sony, etc. to the US, and became the largest producer of TVs in the 1980s, producing more than 13 million sets per year.

Role Of Automobile
The Japanese government restricted the import of cars and other vehicles after WWII and began exporting cars to other countries by 1950. The country exported more than a million vehicles across the world by 1970s, which was aided by the ‘oil crisis’ of 1973, which further popularized Japanese cars as they were fuel-efficient and of low prices. The demand for Japanese cars was so high at a time that even the then US President Ronald Reagan restricted the import of Japanese automobiles as most of the local production was unable to compete against them.

South Korea
South Korea developed an export-based economy in the 1960s. While the import of goods was restricted, the import of raw materials was encouraged by the reduction of taxes and the provision of incentives. The period between the 1960s and 1990s was highly productive for the country as its economy grew at a rate of 9% in that period. South Korea had a negligible import of cars but increased the production of automobile at home with an added emphasis on exporting it. Between 1998 and 2005, the home production of automobiles increased by more than 58%.

By taking such export-friendly measures, South Korea has developed into an export-based economy. While the contribution of the exports to the GDP was 25% in 1995, the contribution increased to 56% in 2012. India’s exports as a percentage of GDP were ~19% in 2019.

The bottom line and the persistent question is how will India reduce imports and enhance indigenous production in defence and across required sectors?

Curiopedia
  • “A Time for Choosing” was a speech presented during the 1964 U.S. presidential election campaign by future president Ronald Reagan. The speech was on behalf of the Republican candidate, Barry Goldwater. It launched Reagan into national prominence.
  • By law, when a Korean man turns 18 years old, he is enlisted for “first citizen service”, meaning he is liable for military duty but is not yet required to serve. When he turns 19 years old, he is required to undergo a physical exam to determine whether he is suitable for military service.
  • Park Geun-hye is a former South Korean politician who served as President of South Korea from 2013 to 2017. Park was the first woman to be President of South Korea and also the first female president popularly elected as head of state in East Asia.

Palm oil imports from Malaysia forbidden by India

palm

India has banned the imports of refined palm oil and palm olein earlier this week. This move came as a retaliation against top supplier Malaysia, after its criticism of Indian actions in Kashmir and new citizenship law. The Indian Ministry of Commerce and Industry issued a notification declaring the import of refined palm oil “is amended from Free to Restricted”. Indian crude palm oil, soya oil, soya bean and rapeseed prices jumped after the announcement.

Crux of the Matter
  • Industry Sources said Prime Minister Narendra Modi‘s government is seeking to teach Malaysia a lesson after it’s Prime Minister Mahathir Mohamad criticised New Delhi.
  • Mahathir said in October that India “invaded and occupiedKashmir, a disputed Muslim-majority region also claimed by Pakistan. And last month, he said India was stoking unrest with its new citizenship law, which critics say undermines the country’s secular foundations.
  • Palm oil is crucial for the Malaysian economy as it accounts for 2.8 % of gross domestic product and 4.5% of total exports. State-owned and private Malaysian refineries will likely have to scramble to find new buyers for their refined product.
  • Internationally, this prohibition may hit Malaysia but will help Indonesia, the biggest exporter of crude palm oil.
  • Palm olein is a liquid form of palm oil used in cooking. Back at home, the decision is likely to boost business for Indian refiners of the vegetable oil.
Curiopedia

India’s main imports are mineral fuels, oils and waxes and bituminous substances (27 % of total imports); pearls, precious and semi-precious stones and jewellery (14 %); electrical machinery and equipment (10 %); nuclear reactors, boilers, machinery and mechanical appliances (8 %); and organic chemicals (4 %). The nation’s major import partners are China (16 % of total imports), the United States (6 %), United Arab Emirates (6 %), Saudi Arabia (5 %) and Switzerland (5 %). India imported US$507.6 billion worth of goods from around the globe in 2018, up by 10.5% since 2014 and up by 14.3% from 2017 to 2018. More Info