Patralekha Chatterjee | Swadeshi 2.0: India’s Sentiments & Strategy

The contradiction at the heart of the current “swade-shi” narrative is stark. While political messaging grows louder, the machinery meant to support local enterprise remains riddled with inefficiencies, exclusions, and blind spots. Even small exporters face crippling US tariffs — up to 50 per cent — even as they are asked to uphold national pride.

As India once again rallies around the call to “Be Indian, Buy Indian”, the Swadeshi movement is no longer a nostalgic refrain — it is a political and economic imperative. Prime Minister Narendra Modi urges ordinary Indians to buy swadeshi, but sentiment alone cannot substitute for strategy, systems and global competitiveness. In the face of global supply chain disruptions, punitive tariffs, and rising geopolitical uncertainty, the idea of self-reliance has returned to the political centrestage. Swa-deshi must be reimagined as a system: one that empowers local producers, embeds resilience in India’s manufacturing architecture, and positions Indian products not as patriotic choices, but as globally competitive offerings.

The Modi government’s announcement of next-generation GST reforms — promised as a “Diwali gift” — marks a significant step towards easing the burden on small enterprises. By reducing the number of GST slabs to just two, 5% and 18%, and eliminating cess on most goods, the reforms aim to simplify compliance and lower costs on essentials. Pre-filled returns and streamlined registration processes are expected to reduce friction for small traders and manufacturers. The success of these reforms will depend on execution, especially in reaching semi-formal and rural enterprises that often fall through the cracks.

Swadeshi must evolve to meet the demands of a world defined by crises — from pandemics and climate shocks to financial volatility and geopolitical fragmentation. In this era of cascading disruptions, resilience is a must. Swadeshi must be more than a response to external threats — it must be a proactive architecture of preparedness. That means embedding resilience in supply chains, decentralising production and investing in adaptive capacity across sectors.

India’s automotive sector offers a compelling case study in Swadeshi as a strategy. “There was a time when Indians only knew of the Ambassador and the Fiat — assembled under licence in the 1950s and 1960s,” says Vinod Kumar, president of the India SME Forum, a small business champion. “These vehicles laid the groundwork for domestic manufacturing capacity, even as their technology came from abroad.” The real transformation came in the 1990s, when liberalisation sparked partnerships like Maruti-Suzuki, redefining “Buy Indian” as a choice rooted in quality, affordability, and innovation. These collaborations catalysed thousands of MSMEs in auto hubs like Pune, Chennai and Gurgaon, enabling them to absorb global best practices and integrate into international supply chains.

“We need something similar to the automobile industry’s revamp moment,” Mr Kumar said. “We entered collaborations with those who had the best industrial processes. Today, collaboration is the key. We should collaborate with anyone — be it China, Vietnam, South Korea, or others. This can happen only if there is a proper mechanism for collaboration between Indian MSMEs and international partners. We have a list of nearly 10,000 MSMEs which are fit for collaboration.”

Yet, as P.V. Ramesh, former IAS officer and Andhra Pradesh’s commissioner of industries, cautions, the current approach risks being more rhetorical than strategic. “Genuine and sustainable economic nationalism entails absorbing global best practices, promoting domestic innovation, and strengthening institutions that nurture entrepreneurs producing for India and the world. Manufacturers must produce for all Indians, especially the bottom 50% — the real India — for mass consumption, which entails revitalisation of MSMEs, concerted effort to resolve the last-mile challenges for workers and small-scale operators, access to credit, technology, skilled workforce, ease of access to markets both domestic and global. Without these measures, economic nationalism will remain a slogan without a concrete outcome.”

He cites the example of shrimp exporters from AP and coastal states. “The big companies may withstand the crisis with fiscal and monetary support, but what about the small players and workers? Despite all the talk about micro and small enterprises, where is the real help in terms of technology infusion, skills upgradation, and marketing? Unless we resolve last-mile challenges for workers and small-scale operators, economic nationalism will remain a slogan without a concrete outcome. We will not be globally competitive by maintaining a protectionist window to the world.”

India need not start from scratch. Valuable lessons come from countries that have balanced local resilience with global integration. Vietnam responded to trade shocks by supporting SMEs — streamlining compliance, offering subsidies, and investing in export readiness. Its economic nationalism is strategic: the government aims to raise the textile sector’s localisation rate (domestic input sourcing) to 51-55% in 2025. South Korea’s rise as a manufacturing powerhouse stemmed from coordinated industrial policy that nurtured local champions, built skills, and ensured global market access.

India’s approach, by contrast, remains fragmented. Schemes like the Production Linked Incentive are promising, but typically skewed toward large firms with the capacity to navigate complex compliance regimes, while MSMEs, which account for nearly 30% of India’s GDP and 40-45 per cent of exports, are frequently left out.

Rebranding Swadeshi requires a shift in both mindset and machinery. Government procurement should prioritise local producers through transparent tendering, timely payments, and simplified eligibility criteria. Compliance must be radically simplified. Many small businesses operate in semi-formal environments, with limited digital literacy and access. Policies must be designed for inclusion, not just efficiency. That means multilingual support, offline access and proactive outreach. Infrastructure must match ambition. Without last-mile logistics, cold chains and market linkages, it remains aspirational. Rural entrepreneurs need reliable electricity, affordable transport and access to warehousing.

India must invest in domestic capacity across critical sectors. In electronics, over 85% of components used in smartphones are imported. In pharmaceuticals, India remains dependent on China for Active Pharmaceutical Ingred-ients, with nearly 70-75% of bulk drug imports sourced from China. Without full capabilities in semiconductors, precision tools, and advanced materials, “Make in India” will be more like “Assemble in India”. Trade policy must reflect real-world conditions. MSMEs are rarely part of trade talks, yet they are hit hardest by tariff changes and shifting rules. Their voices need to be heard through regular feedback and open consultation.

Swadeshi 2.0 should not be just about nationalism. It must be a marker of quality, sustainability, and creativity. As Vinod Kumar puts it: “When we push people to buy Swadeshi, we should make the Swadeshi brand synonymous with the best — and at affordable prices. That will make us globally competitive too.”

The writer focuses on development issues in India and emerging economies. She can be reached at patralekha.chatterjee @gmail.com