India's road to swadeshi perdition - The Morning Context

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• The store’s blue display board—which screamed “Vivo” louder than it did “Student Collection”—has been taken down and kicked to the literal curb. The ramifications of the Himalayan border skirmish between India and China have come here to roost in suburban Mumbai.

• “A shopkeeper whose signage was vandalized told me how the attacker was holding an Oppo phone while barking orders to the rest,” he says over the phone.

• India—which, unlike the US and EU, never voiced its distrust of Huawei—is now considering a ban on Chinese 5G equipment, and also on Chinese participation in the 4G tender of government-owned Bharat Sanchar Nigam Ltd.

• India is also delaying clearances for Chinese imports. And China is responding with hold-ups of Indian exports in Macau, Hong Kong and its mainland.

• But people aren’t asking how different Atmanirbhar Bharat will be from Make in India (which, as columnist M. Suresh Babu once said, is “the incongruity of ‘swadeshi’ products made with foreign capital”)

• Most importantly, they aren’t asking what counts as an Indian business. Is it one that’s registered in India, one that manufactures in India, one with (majority) Indian funding or one with a predominantly Indian workforce?

• “India is the second-largest manufacturer of PPEs [personal protective equipment] now, but where do you think the raw materials and machinery to make those come from?” Khurana asks exasperatedly.

• Because between the signage defacing and effigy burning lies a truth moored in plain sight—that we’re walking on roads built by Chinese cranes and travelling in buses hammered into shape by Chinese machinery. The twin flames of nationalism and protectionism won’t beat a fire-breathing dragon. Indian can deny China its data and its business, but only to a degree.

• When US secretary of state Mike Pompeo lauds Reliance Jio as a “clean telco”, he does so without knowing that Jio Fiber routers and set-top boxes were born in China. In fact, virtually all routers and modems the world over are born and brought up there.

• And when Paytm founder Vijay Shekhar Sharma applauds India’s ban on 59 Chinese apps, he withholds that all Paytm user data sits on Alibaba Cloud, which is headquartered in Hangzhou.

• The most sobering realization of this comes from a March 2020 report by Ananth Krishnan, one of the best chroniclers of Sino-Indian relations. The year 2014, he writes, was a watershed for Chinese investments—investments to the tune of more than $26 billion.

• China gives India more value than we give them, and therein lies the rub. How we got here is a function of policy failure and the death of innovation. And it’s the latter that should worry us more than Chinese dumping or tentacle-spreading. Especially when it comes to electronics.

• If only C-DOT had focused on research and development rather than spying, India would have a mobile technology to call its own.

• So one asked him a simple but loaded question: why can’t India source its own components for phones and other electronics?

• That’s where the story of C-DOT, or the Centre for Development of Telematics, took off.

• Before it became an “enemy of the internet” for its incessant spying on Indians, C-DOT was the hub for telecommunications R&D. It started by developing switches for India’s landline phones and, by Mani’s account, died doing just that.

• As the embers of poor funding and lack of direction danced on its corpse, its South Korean counterpart—the Electronics and Telecommunications Research Institute, or ETRI—reached new heights. ETRI would go on to lead Seoul’s mobile technology revolution, the kind that birthed components you now see in Samsung devices.

• Huawei, two years younger than C-DOT, also began life as a producer of telephone exchange switches, in a China that had feeble telecom infrastructure. But unlike C-DOT, its R&D division enjoyed consistent government patronage. What started as a company that reverse-engineered imported equipment is now a behemoth with the most mobile technology patents to its name.

• “We have a history of not taking technological self-reliance to its logical conclusion,” Mani points out. “To be self-reliant down to the components level, you need two things: intellectual property rights and human resources in R&D. India has neither.”

• Mani detailed his findings on India’s mobile phone manufacturing industry in May 2020, in an article published in the Economic & Political Weekly. Notably, he wrote, “Local sourcing of components, which account for over 90% of the bill of materials, is very low. This means that despite the existence of the Phased Manufacturing Programme (PMP), dependence on imported parts is still quite significant.”

• The PMP he mentions is important. Because in early June, the Indian government announced three schemes to boost local manufacturing: the Production-Linked Incentive Scheme, the Modified Electronics Manufacturing Clusters Scheme and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors.

• These new schemes are to PMP what Atmanirbhar Bharat is to Make in India: old wine in a new bottle.

• India’s PMP was supposed to achieve local sourcing goals in four phases, starting from 2016. But all it gave us were battery packs and adapters. Connectors, displays, camera modules and printed circuit boards, which should’ve been produced locally by now for all electronics, are still being imported in large part.

• All this—about India’s C-DOT, and schemes that come and go—should be important placeholders in discussions about atmanirbharta or independence. Because when you don’t walk the talk or allow R&D to come to a slow boil, you nip the knowledge economy in the bud. A knowledge economy is vital for technological spillovers, the kinds that make countries truly self-sufficient. The spillover effect typically starts with foreign direct investments and ends with IP rights and gradual tech domination.

• Spillovers also sowed the seeds for semiconductor fabrication plants or fabs, which produce the chips that control most modern electronics.

• Cut to 2020, Intel still doesn’t manufacture in India. Additionally, two indigenous chipmaking projects—by Jaiprakash Associates and Hindustan Semiconductor Manufacturing Corporation—never took off.

• As Sunil Mani puts it, “Spillovers don’t happen autonomously. You have to engineer them.”

• The US fathered consumerism but China mothered it. It gave newly emerging aspirational classes in developing countries an unending supply of single-use plastic. Such as the cutesy, miniature tricolour flags we’ll see in rickshaws, on school uniforms and on government tables on 15 August.

• How China succeeded in flooding us with nothings and everythings is, again, a function of India failing its people first.

• Did you know why some knick-knacks are exclusively Chinese? Because our factories simply don’t have the moulds to make them. The anti-plastic sentiment and resultant anti-dumping duties on moulding machines pushed Indian manufacturers two steps behind.

• That India’s biggest supplier of plastic raw materials could’ve encouraged Chinese dumping under the establishment’s nose is a serious claim to make.

• “Reliance has aided and abetted Chinese dominance in plastics. This has happened systemically, where India exports more raw and intermediate goods and imports more finished goods. It’s the East India Company all over again,” he says.

• Not giving China Indians’ data is a small start. But the brighter the twin flames of nationalism and protectionism burn, the more India will resemble the neighbour it despises. Until India realizes what it takes to become truly self-sufficient, it will be left with nothing but bluster.