India needs a 'Third Way' to deal with new economic challenges

The overall participation in the economy need to be boosted.

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

US President Donald Trump’s economic policies in his second term have rekindled the debate between protectionism and globalisation. The way Trump has been threatening to impose tariffs is being watched cautiously in India.

Ashwani Mahajan, co-convener of Swadeshi Jagaran Manch (SJM), an organisation inspired by the Rashtriya Swayamsevak Sangh (RSS), recently wrote in the latest edition of its monthly journal Swadeshi Patrika that Trump’s stance on higher tariffs on imports and plans to abolish income tax would lead to a massive fiscal deficit, as the US doesn’t have enough capacity to produce a number of goods that it imports. So, higher tariffs would make imports more expensive.

Mahajan further added that higher inflation would compel the US authorities to impose higher interest rates. This could, in turn, lead to a decline in demand.

The SJM co-convener has also questioned Trump’s decision to withdraw from the Paris Climate Agreement. Trump’s decision to favour the traditional automobile sector over renewable energy-driven automobiles could have serious repercussions, both for climate change and for the USA. The US would have been a beneficiary of the development of climate change technologies, but now it won’t be able to harness that advantage, says Mahajan.

Trump administration's new policies have forced Indian policymakers to reconsider their stance. Do we need to return to Swadeshi economics? Perhaps, that is the only way out.

A traditional approach might not help India navigate the economic minefield, especially with an increasingly volatile geopolitical situation and a protectionist Trump administration.

Trump’s economic agenda is an outcome of the failure of globalisation. A section of Indian economists, led by SJM, has already been highlighting this fact for the last several years: globalisation creates more problems than solutions for not only the Indian economy but for most economies worldwide.

Way back in 2017, the SJM had passed a resolution titled Time to End Globalisation at its national council meeting in Guwahati. The resolution quoted statements by its founder and RSS stalwart Dattopant Thengadi: “Internationalisation is merely a momentarily stable phase and the nation alone is stable.”

Recognising that the days of aggressive globalisation are over and that possibilities in international trade are weakening, India will now have to take meaningful steps, the resolution said.

It further added, “The Swadeshi Jagaran Manch appreciates the nationalistic sentiment of the present (Modi) government in giving primacy to government purchases of domestically produced commodities. But the time has now come for the government to promote domestic investment instead of encouraging foreign direct investment.”

The SJM has consistently maintained that India’s large domestic demand provides a significant opportunity. That is why, instead of providing opportunities to multinational companies to profit, an economic model based on domestic demand should be constructed. This stand was reiterated in the 2017 resolution, and the SJM has vocally supported it since then.

The RSS also passed a resolution in 2022 which said, “The thrust is to be given to the Bharatiya economic model that is human-centric, labour-intensive, eco-friendly, and lays stress on decentralisation and equitable distribution of benefits, augmenting village economy, micro-scale, small-scale, and agro-based industries. The areas like rural employability, unorganised sector employment, employment for women, and their overall participation in the economy need to be boosted. Efforts are essential to adapt new technologies and soft skills appropriate to our societal conditions.”

Both the RSS and its ideological mentee, the SJM, have shown great concern about employment generation, which remains a major challenge for the Indian economy.

The RSS laid a broad roadmap for creating more jobs without being affected by either globalisation or protectionism in its 2022 resolution, where it said, “It is noteworthy that there are many successful models of employment generation based on the above lines available in every part of the country. They have also taken into account local specialities, talents, and requirements. In many such places, entrepreneurs, businessmen, micro-finance institutions, self-help groups, and voluntary organisations have initiated endeavours in the areas of value-added products, the cooperative sector, direct marketing of local products, and skill development, etc. These initiatives have encouraged ventures such as handicrafts, food processing, homemade products, and family enterprises. After sharing their experience with others, replicating them in other places wherever required should be earnestly considered. Certain educational and industrial institutions have contributed to employment generation efforts in a significant way. Efforts to inculcate the spirit of ‘Swadeshi and self-reliance’ in society would give the right impetus to the above initiatives.”

The RSS and SJM both have said earlier, and continue to maintain, that neither globalisation nor protectionism can pave a brighter future for the Indian economy. What we need is a ‘Third Way’ based on the philosophy of ‘Swadeshi’ and the ideological framework of ‘Integral Humanism’. The current global geopolitical crisis and the unorthodox approach of Trump 2.0 make it necessary for India to find a new way to deal with its economic challenges. Maybe the ‘Third Way’ is the right way.

Earlier Sanghnomics columns can be read here.