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Not swadeshi, samarthya is the answer to India’s economic nationalism

Swadeshi has found a new wind in Indian politics as a form of popular resistance to China. But raising barriers to Chinese imports only affects those lower down the income pyramid.

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The roots of swadeshi lie in the triple whammy encountered by 19th century India.

First, European colonialism resulted in the loss of political power to a foreign race and a sense of being dominated by the British overlords. The Raj was resolute in keeping Indians as subjects and away from the corridors of political, bureaucratic and military power. Britain saw itself as lord and the Indian colonies as subject – and the people of India were clearly aware of it. The seeds of Indian economic nationalism lay in the resistance to being ruled by foreign overlords and in the rejection of their norms.

Second, the era of globalisation and free trade of the mid-19th century affected economic players in different ways. Traders from communities that were capable and did not impose social restrictions on travel could benefit from national and international trade. The majority of the population, however, was unable to adapt to the changes in the international economic pattern and faced intense competition from foreign imports. The colonial government was unconcerned about helping this population make the transition and improve its productivity and competitiveness.

Third, the Industrial Revolution transformed the relative competitiveness of goods produced in Britain and India. Not only were imported goods better than domestic products, they were cheaper. India did not industrialise in the 19th century because the colonial government either actively discouraged it, or failed to create the environment for it. Another reason is that Indian society was unable to create effective mechanisms to convert savings into capital and allocate it effectively.

It was in this broad context that the disempowered elites of a subordinate polity sought to change consumer preferences – the only area they had influence over. We see this in the early phase of swadeshi, which was mostly pursued through increasingly organised social mobilisation.

Also read: Make ‘swadeshi’ uniforms and food items a must in schools, RSS affiliate tells Modi govt

The paradoxical political power of the swadeshi narrative

Swadeshi was – and remains – a political argument. Economic nationalism is nationalism applied to the economy. Its proponents accepted that it would result in costlier products of lower quality. They argued that the price is worth paying in order to achieve nationalist goals.

This came out starkly during the Swadeshi Movement of Bengal when the boycott of British goods was designed to hurt British economic interests and coerce the Curzon administration to reverse the partition of Bengal. Social scientist A.K. Biswas criticises the movement for coercive tactics and argues that farmers, lower castes, and Muslims suffered disproportionate losses on its account. After observing its descent into political extremism and communalism, a disenchanted Tagore wrote that “peasants were expected to buy inferior and costly goods and face Gurkha lathis in the bargain for the sake of a cause that must have seemed rather distant and abstract to them, and they were being asked to do all this by ‘babus’ who had treated them so long with contemptuous indifference or at best with condescension’ (Lahiri 2011).

As historian Sumit Sarkar concludes: “A sense of anticlimax is in fact bound to haunt any historian of swadeshi Bengal. Partition was revoked, it is true, after six years; but by then Curzon’s original folly had become a minor issue for most patriots. The reforms of 1909, too belated and paltry to really satisfy even the moderates, were vitiated by the simultaneous encouragement they gave to Muslim separatism. Boycott had come and gone, leaving hardly a dent in the rising curve of foreign imports; swadeshi industries and national schools petered out…”.

Even so, in the subsequent years, swadeshi became an even more important instrument of anti-colonial political mobilisation and an essential part of Gandhi’s toolkit. Apart from doubting its economic rationale, Tagore also criticised the technique as being “spiritually empty” and the charkha – which became a metaphor for swadeshi ideology – as a symbol of unreflecting cultishness.

Ambedkar, who took an independent line in politics and remained a fierce critic of Gandhi’s politics to the end of his life, made his position clear when he made it a point to appear in Western attire and famously used foreign fountain pens (Debroy 2020). His refusal to don homespun was as much a political statement as was Gandhi’s espousal of khadi. The swadeshi narrative encountered political resistance in Bengal and Bombay Presidency from social groups that bore its disproportionate burden and did not identify with many of its purported benefits.

Swadeshi also faced resistance from sections of indigenous traders and capitalists at least until the mid-1930s. Aashish Velkar points out that Bal Gangadhar Tilak’s initiatives to promote swadeshi goods and reject foreign imports “were generally ignored by local textile millowners”, and that Tilak and the mercantile elite shared a mutual antipathy. The attitude towards swadeshi was split along caste, religious and class lines, with non-Hindu communities and elite Hindu merchants staying away, and Marathi and Gujarati lower middle classes embracing it with great enthusiasm. Attitudes changed in the 1930s after swadeshi began to enter the policy phase, its meaning changing from demand-side rejection of foreign goods to supply-side industrial policy protecting indigenous firms from foreign competition.

If swadeshi and self-reliance has enjoyed enduring popularity over the past century, it is because it appeals both to popular sentiment and the commercial interests of Indian firms.

By 2020, swadeshi found a new wind in contemporary politics as a form of popular resistance to China’s geopolitical power. While there is no evidence that Beijing’s foreign policy is vulnerable to these actions, raising barriers to Chinese imports not only eats into India’s consumer surplus, but disproportionately affects those lower down the income pyramid.

The paradox of political swadeshi lies in its continued popularity despite there being little evidence of its political effectiveness, and full knowledge of the burden that it imposes on the weakest segments of society.

Also read: India’s local economies lie outside innovation zone. Can’t chase Modi’s Atmanirbhar dream

Quo Vadis 

Swadeshi’s greatest success has been in its ability to mobilise public opinion towards a political objective. It can be argued that swadeshi sentiment resulted in the promotion of Indian crafts and industries in the late 19th century, and that independent India’s pursuit of self-reliance created a modern industrial core. Now as in the past, the sentiment has sparked a spirit of entrepreneurship and spurred investment in manufacturing. Counterfactual arguments are impossible to prove. It is difficult to prove whether swadeshi and self-reliance created new investment or merely shifted it to import substitution.

It is important, however, to ask what the opportunity cost of swadeshi was – and is – before arriving at a definitive judgement. Nationalists must be concerned with economic outcomes, rather than be wedded to dogmatic policy prescriptions. Strengthening a nation requires the rapid acquisition of widespread material prosperity, and swadeshi and self-reliance must be subject to critical examination. India’s economic trajectory clearly shows that Mahadev Govind Ranade was right: Self-reliance is best achieved in an open economy.

The burden of boycotts and import restrictions falls disproportionately on those with lower incomes, subtracting a bigger share of their disposable incomes and savings. Neither nationalism nor patriotism can condone hurting the most vulnerable members of one’s own population in the expectation that doing so will coerce a foreign government. The imperative against import controls is categorical even if the distributional effects are ignored. If the latter are included in our analysis, import restrictions amount to coercive transfers from consumers to domestic capitalists. Where the latter are relatively better off than the former – as is the case in India – such transfers are regressive in nature.

India’s experience over the past century offers the strongest argument against protectionism, even of “infant industries” in the interest of self-reliance. Import controls are sought to buy time for domestic firms to gain scale and competitiveness. However, the “right time” for opening up never arrives, because the world moves ahead in the meantime. As Jagdish Bhagwati and Padma Desai showed as far back as 1970, sheltering domestic firms from international competition only imposes higher costs on consumers, reduces savings and investible surplus, and coddles the holders of licenses to diversify into other protected industries. The fate of the automobile industry before and after the liberalisation of 1992 offers stark evidence of the relative performance of protectionist and open economy policies. A new form of the protectionist argument projects ambition to create national champions, along the lines of South Korean chaebols. Unfortunately, scale doesn’t change the fundamentally flawed logic, only exacerbates it. If protectionism increases rent-seeking and corruption, promoting national champions risks policy capture. As Shenoy warned, the risk is to liberal democracy itself. It is possible to end up in unintended Korea. After all, juche (“self-reliance”) is the state philosophy of North Korea.

Geopolitically too, it is an open-economy that offers the pathway to greater power and influence (Baru 2002). A protected economy holds little interest for other countries, and thus loses the ability to promote its interests. Its foreign relations are characterised by economic disputes and conflicts, and before long, its elites become caught up in a siege mentality. India’s experience before and then in the years following the 1992 reforms is instructive: Until the 1980s, India was considered a Third World ‘developing country’; by the late 1990s, it became an emerging economy and a rising power.

If swadeshi does not do too well in the economics test, is there – as Gandhi asserted – a moral case for it? Individuals are entitled to live by their own values, but if swadeshi is to be a public virtue, the case for it must be made on non-arbitrary grounds, employing reason. Utilitarianism indicates that there is no special morality in preferring local products. On the contrary, intentionally subjecting others to avoidable suffering is little moral justification. If there is a moral argument, it is in favour of rapid economic growth that raises incomes, living standards and life expectations of the people of India. Ramachandra Guha highlights a letter to Gandhi by one Kantilal Amratlal, accusing the great leader of hypocrisy and chauvinism. Rejecting the notion that it was sinful to use imported goods, the correspondent stated that national pride “is not the ultimate sentiment” and Gandhi’s vision was narrow for “country and life are transient, not eternal”.

Swadeshi, like satyagraha – the other famous instrument of the Gandhian toolkit – needs to be reviewed in the context of a liberal democracy. Ambedkar described protests and civil disobedience as a “grammar of anarchy” in a free republic, where constitutional methods are available. Similarly, the political case for swadeshi is weak in an independent liberal democracy where there is no colonial power to resist, where foreign companies do not enjoy special privileges, and where trade policy is in the hands of a popularly elected government.

Furthermore, few proponents of swadeshi are clear about exactly how local it should be. India is a subcontinent and each region has its own cultural consciousness and identity. Should the swadeshi principle operate at the sub-national level? Only Gandhi is intellectually honest in answering this question in the affirmative, and his answer undermines national unity. If states, districts and villages enact laws or socially determine to prevent trade across their boundaries, India will turn into a mere geographic entity. Not only does protectionism, nativism and localism result in inefficient, sub-optimal, and unsustainable firms and polities, but – as Tagore feared – they lead to the shrinking and the closing of the mind.

Does swadeshi have a place at all in the future life of a liberal democratic republic? Yes, as a form of social consciousness, freely held, promoted, and acted upon by individuals to whom it appeals. Consumers and private investors have the economic freedom to exercise their choices and preferences. Recall that “National” Nabagopal and his patrons did not need the permission or the support of the Bengal government to produce, promote, and consume swadeshi goods. Market economies have numerous ways of changing consumer behaviour and driving consumer preferences towards desired causes. As with, say, organic products, voluntary swadeshi also allows the discovery of the premium people are willing to pay for their preference. However, other than in strategic areas, there is no case for promoting self-reliance through tariffs and import controls.

Two centuries on, the compass of economic nationalism is better pointed to samarthya (capability) rather than swadeshi. Capability does not mean everything must be produced within the borders of one’s own country, even if it can be. Rather, it suggests the power to access whatever is desired regardless of where it is produced. Samarthya is more than self-reliance. It is achieved through rapid economic growth and free trade. “We must think, therefore, in terms of the world.”

Nitin Pai is the director of the Takshashila Institution, an independent centre for research and education in public policy. He tweets @acorn. Views are personal.

This is an edited excerpt from the author’s paper ‘A Brief Economic History of Swadeshi‘, first published in the Indian Public Policy Review journal. Read the full paper here.

(Edited by Prashant Dixit)

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