Tender loving self-care

India on Wednesday banned global tenders for government procurements worth up to ₹200 crore. This was in line with Prime Minister Narendra Modi’s clarion call a day earlier to be “vocal about local”, and was part of the first tranche of special measures announced by Finance Minister Nirmala Sitharaman in the country’s effort to mitigate the impact of covid-19 on the economy.

A ban on small global tenders should help India’s small suppliers, the focus of Wednesday’s sub-package. These companies have been exposed to competition from foreign entities that were not necessarily more productive or efficient, but aided and subsidized by their governments—such as China’s. Beijing is believed to have provided dollops of cheap capital and other inputs to industries to help them compete globally, and small Indian manufacturers have been hit especially hard by unfair rivalry. India’s ban, however, could easily be interpreted as a protectionist shield, which would seem to contradict the country’s averring that a self-reliant India is not isolationist—or signifying a reversal of an open economy. Government tenders under the limit cannot be issued to a company based anywhere else, observers have pointed out, not just China.

Practically speaking, all such arbitrary limits have an inherent problem. If critical medical supplies are needed, say, and if no Indian supplier has the requisite expertise for them, then a government body might either ask for a long-winded exception or be tempted to inflate the size of its order to escape the limit. Second, an ideal market-oriented way to turn self-reliant is to have Indian companies compete with global firms on quality and price. Of course, we need reforms—the kind that grant market forces more space—on various fronts for that to happen. Meanwhile, if there is evidence of dumping or state subsidized exports by China, then there are special trade provisions against that. Self-reliance, in general, is a worthy concept. Autarky is not.

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