'It's Not Modi's Rupee That Benefits. It's India's Rupee That Benefits'

'In all these years of rupee depreciation, of rising oil prices, of inflation caused by import dependence, not one leader had the courage to look the people in the eye and say: Please do this for your country.'

In the concluding part of this interview with Prasanna D Zore/Rediff, Dr Ashwani Mahajan -- economist, Delhi University academic, national co-convenor of the Swadeshi Jagran Manch, and long-time advocate of economic self-reliance -- explains why opening up to foreign investment may be weakening India rather than strengthening it.

• PART 1: 'Oil Is Not The Problem. The Bigger Problem Is Gold'

'India can achieve meaningful energy self-reliance within five to six years'

What concrete measures can India adopt to reduce its dependence on oil imports and save foreign exchange?

The core of the problem is straightforward -- if we want to reduce crude imports, we have to reduce our consumption of petrol, diesel, and gas. And we already have the tools to do this, many of which are either underutilised or completely neglected.

Take ethanol blending. We have been blending ethanol with petrol since 2002 -- this was actually announced by Ram Naikji, the then petroleum minister, at a conference our organisation held on the subject. Today blending is at 15% to 20% and has already made a dent in crude consumption. But that is just one piece.

The much bigger, largely untapped opportunity is biogas. We are using less than 5% of our total biogas potential as a country. I recently visited Shabri farm in Sawai Madhopur where they are processing 3 tons of cow dung daily into biogas -- and their combined monthly electricity and fuel bill, which was Rs 1.5 lakh, has come down to zero.

The residual waste becomes bio-fertiliser, which surrounding farmers are buying, so the farm earns additional income while those farmers reduce their dependence on expensive chemical fertilisers. This one experiment solves multiple problems simultaneously -- energy costs, import dependence, and farm input costs.

Professor Vijendra Vijay of IIT Delhi has been running his personal car on biogas for 25 years. The technology is proven. What is missing is political will and scale.

On electricity, something significant has already happened quietly. The mass transition from incandescent bulbs to CFL and now LEDs over the last decade has freed up so much electricity that we actually have surplus power during non-peak hours today.

That surplus can be redirected to replace domestic cooking gas -- directly cutting our LPG import bill. And with electric vehicles, the savings are real and immediate. I have been using an EV for three years and saving approximately Rs 25,000 a month on fuel alone.

The government is now building solar-powered EV charging stations along national highways, which means the energy powering these vehicles will increasingly come from the sun, not imported crude.

On top of this, India has restricted Chinese solar panels, which is pushing domestic manufacturers -- Vikram Solar, Adani, and others -- to build their own solar cells. Within two to three years, most solar capacity being deployed in India will be Indian-made.

The policy framework is also falling into place. The government's Manufacturing Mission, announced in the Union Budget, dedicates special focus to clean tech -- EVs, batteries, motors, solar panels, wind energy equipment, and nuclear power. Three full paragraphs in the budget were on clean tech manufacturing alone.

There is a strong possibility the prime minister will personally lead this mission, which would give it real teeth. Put all of this together -- biogas at scale, surplus electricity replacing gas, a growing EV ecosystem powered by domestic renewable energy, and a manufacturing mission building indigenous clean tech capacity -- and I genuinely believe India can achieve meaningful energy self-reliance within five to six years, not ten.

You argue that FDI is not going to strengthen India's foreign exchange reserves. That seems counterintuitive. Can you explain?

I know this surprises people -- but nobody looks at the data. In 2024-2025, the total outflow from India by way of income transfers abroad -- royalties, technical fees, dividends, and other remittances by foreign companies operating here -- was $101 billion. That is money going out of India. And it will keep going out, and growing, as more FDI comes in.

Now, look at what kind of FDI is actually coming in.

Most of it is brownfield -- foreigners acquiring companies that are already running in India. That does not add any additional productive capacity. It just changes ownership. And wherever FDI has come into manufacturing, our foreign exchange outflow has often multiplied -- because these companies import their capital equipment, raw materials, and intermediaries from their home countries.

If a foreign automobile company sets up here, where is the engine coming from? Abroad. The components? Abroad.

There was a recent case involving Volkswagen and Kia (a subsidiary of South Korean chaebol Hyundai) -- they were importing completely knocked-down vehicles and not paying appropriate tariffs. They were caught.

So if CKD kits are being imported and assembled here, how does that save foreign exchange?

But without FDI, how does India finance development? Surely some foreign capital is necessary?

Initially, yes -- more money was coming in than going out. But as a student of economics, I had been saying for years: Slowly and steadily the outflow will grow and eventually exceed the inflow. We are reaching that point.

And in a world where globalisation itself is being questioned, India should be rethinking its attitude to FDI. It is not the panacea that mainstream economists present it as.

True reform -- and I want to say this clearly, because 'reform' has become a dirty word in our policy circles -- true reform is for the people, not for corporations.

When you open up to FDI, that is not reform.

When you give employers the right to hire and fire, that is not reform.

Land acquisition for private companies -- that is not reform.

Reform is when you build houses for the poor.

When you take electricity to homes that never had it.

When you provide clean cooking fuel to women who were burning wood.

When you supply potable drinking water.

That is reform.

Are you saying that FDI is actually one of the reasons India's forex reserves are under pressure?

That is exactly what I am saying. They bring in a small amount initially -- and a huge amount goes out in perpetuity through profits, royalties, and purchase of raw materials. It is not an exaggeration to say: They bring in $100, they take out $200.

And that outflow -- what I would call foreign direct outflow -- is a structural drain that the government has not adequately accounted for in its forex calculations.

'India has two major import dependencies -- pulses and edible oil'

Do you think the government is psychologically preparing the public for a rise in petrol, diesel, and cooking gas prices? Uday Kotak recently warned that the oil shock is still coming.
The petroleum ministry has said oil marketing companies are losing Rs 1,000 crore a day by not passing on costs. Is a price hike inevitable?

Look -- no government can absorb this indefinitely. If the Budget keeps absorbing every rupee of the oil price increase, fiscal deficit will widen, and ultimately that too falls on the people. One way or another, they pay.

That said, my own assessment is that oil prices may not stay very high for too long. Countries are switching to alternatives. Higher prices incentivise greater production from oil exporters. So there is a supply response building, and demand is coming down simultaneously.

A few months from now, the pressure may ease. But in the short run, yes -- a small increase in fuel prices is likely. That would also be in the national interest, because it would accelerate the shift to alternatives.

On the jewellery sector and craftsmen -- if gold imports are cut even 10%, how serious would the impact be on those livelihoods?

As I said earlier -- a very small, minuscule portion of the gold imported is used for jewellery and ornaments. The people working in the jewellery trade would not be significantly affected by a curb on speculative gold purchases in the form of bars and biscuits.

Lab-grown diamonds, by the way, are an interesting development on this front -- as gold becomes less accessible to ordinary buyers because of price, the industry is already diversifying.

Prime Minister Modi also mentioned cooking oil in his appeal. What is the size of India's edible oil import bill?

Approximately $18 billion to $20 billion a year. It is a significant number. India has two major import dependencies that have long concerned me -- pulses and edible oil.

In the case of pulses, we have made real progress. Production in one recent year went up 56% because of sustained government policy support. Our dependence on foreign pulses has come down considerably.

But edible oil -- particularly palm oil -- has been neglected. Cheaper and not particularly healthy, it kept growing as an import because of the limited purchasing power of our people.

The prime minister actually made an appeal about reducing edible oil consumption about a year ago as well, for two reasons: Reduce import dependence, and address rising obesity. That it has had to be said again now, in the context of the war, shows we have not yet acted decisively enough on this front.

'The prime minister finally had the courage to ask people to make a small sacrifice'

Would India have been better placed today had the prime minister made this appeal two months ago, perhaps on the very day the war started? Because from day one, the trajectory was fairly predictable as to how oil prices would react and how it could impact India's import bill and export earnings.

You cannot always anticipate how these things unfold. Earlier, the Strait of Hormuz was open -- then it was closed. Nobody expected Iran to retaliate with the scale and ferocity that it did. Nobody expected this war to go on for this long.

The Americans themselves miscalculated -- they are used to wars that last two, three, four days, quick victories, and exit. But this time, the geopolitical landscape has changed completely.

China is far stronger than it was.

Iran is getting support from both China and Russia. Earlier, it was far more isolated.

And there is also this -- you cannot cry 'sher aaya!' too often.

If a leader makes an emergency appeal every time there is a disturbance, people stop taking it seriously. The timing has to be right. And ultimately, to make as strong and sweeping an appeal as seven specific asks to 1.4 billion people -- that is not something you do lightly or prematurely.

If you were the prime minister's economic adviser today, what would you tell him?

We at the Swadeshi Jagran Manch issued a press statement. We have appreciated what the prime minister has said, but we have also called for faster, more decisive action on alternative energy and clean-tech manufacturing.

The government is doing a great deal -- electric vehicles, solar, wind, green hydrogen, nuclear innovation -- but we need big-bang efforts, not baby steps.

On the political side, I want to say this is not the time for partisan point-scoring. The people making allegations on TV about the prime minister's motives are missing the point entirely.

If the rupee is defended, if we save ourselves from a deeper crisis, it is not Modi's rupee that benefits. It is India's rupee that benefits. It is every Indian's savings, every Indian's future.

And one more thing. It is the prime minister who has finally had the courage -- and the appeal -- to ask people to make a small sacrifice. In all these years of rupee depreciation, of rising oil prices, of inflation caused by import dependence, not one leader had the courage to look the people in the eye and say: Please do this for your country.

That appeal, that 7-point clarion call, we are treating it as nothing less than a call for Swadeshi. And we have been fighting for this for 32 years. So yes -- we are very happy.

Are we, in a sense, returning to Mahatma Gandhi's Swadeshi vision of Indian economic development?

Every Swadeshi is of its time. Gandhi's Swadeshi had its own symbols -- the charkha, khadi, the rejection of Manchester cloth. Those were the instruments of self-reliance in that era. But Swadeshi was never a dogma. It was never a fixed, rigid set of rules. It was a spirit.

Today, the symbols are different. The modern Swadeshi is electric vehicles charged by solar energy. It is green hydrogen. It is nuclear innovation. It is reducing chemical fertilisers and moving towards organic farming.

It is building our own vaccines, as we did during COVID. It is producing 60,000 ventilators in a matter of months when the world said we could not. These are the charkhas of our time.

What remains constant -- what will always remain constant -- is the underlying spirit: We must meet our needs from our own resources. We must not be dependent on foreign capital, foreign goods, or foreign goodwill for our survival. The symbols will keep changing with the times.

But that spirit? That never changes. That is Swadeshi. That is what Gandhi meant. And that is what the prime minister's seven appeals, at their core, are also saying.