{"id":119705,"date":"2021-07-19T20:00:38","date_gmt":"2021-07-19T14:30:38","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=119705"},"modified":"2021-07-20T16:43:35","modified_gmt":"2021-07-20T11:13:35","slug":"indias-new-industrial-policy-is-a-replay-of-socialist-era-follies","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/indias-new-industrial-policy-is-a-replay-of-socialist-era-follies\/","title":{"rendered":"India\u2019s new Industrial policy is a replay of socialist era follies"},"content":{"rendered":"<p><strong>Source: <\/strong><a href=\"https:\/\/epaper.livemint.com\/Home\/ShareArticle?OrgId=1972f238a17&amp;imageview=0\"><strong>Live Mint<\/strong><\/a><\/p>\n<p><strong>Relevance<\/strong> &#8211; An analysis of govt&#8217;s Industrial policies.<\/p>\n<p><strong>Synopsis: <\/strong>It took decades for India to shift from its inward-looking and uncompetitive manufacturers. Now the government is again giving importance to inward-looking and uncompetitive companies to produce for the domestic market.<\/p>\n<h5><strong>Background:<\/strong><\/h5>\n<ul>\n<li>One of this government\u2019s first promises was to revive the manufacturing sector.<\/li>\n<li>India had been <strong>de-industrializing since the early part of the century<\/strong>.<\/li>\n<li>Only mass manufacturing could create enough jobs for a workforce growing by a million young people a month.<\/li>\n<li><strong>The \u2018Make in India\u2019<\/strong> slogan quickly developed into a full-fledged government program.<\/li>\n<li>Further, the government is focused <strong>on increasing foreign direct investment<\/strong> and improving the business climate to attract multinational companies.\u00a0It increased India\u2019s rank in the World Bank\u2019s Ease of Doing Business indicators in the five years.<\/li>\n<\/ul>\n<h5><strong>What are the remaining issues?<\/strong><\/h5>\n<ul>\n<li>Firstly, in 2019 the <strong>share of manufacturing<\/strong> in India\u2019s gross domestic product stood at a 20-year low.<\/li>\n<li>Secondly, failure of Make in India.\n<ul>\n<li>Most foreign investment has poured into service sectors such as retail, software, and telecommunications.<\/li>\n<\/ul>\n<\/li>\n<li>Thirdly, even 30 years after the liberalization of the private sector, the government is again <strong>handing out subsidies and licenses<\/strong> while putting up tariff walls.\n<ul>\n<li>The government shut down the 1950s-era Planning Commission, still, <strong>bureaucrats are <\/strong>directing state funding to favoured sectors.<\/li>\n<li>It is done through new <strong>\u2018production-linked incentive\u2019 schemes<\/strong>, in which companies receive extra funding from the state for five years in return for expanding manufacturing in India.<\/li>\n<li>Such incentives were originally meant to support domestic mobile phone production.<\/li>\n<li>Another issue is that a government that has held off on income support during the covid pandemic has budgeted roughly <strong>$27 billion for these industrial subsidies<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li>Fourth, the only thing worse than socialism with central planning is an industrial policy with no planning at all. There\u2019s no logical coherence to the sectors chosen.<\/li>\n<li>Fifth, India\u2019s haphazard industrial policy will fail, just as \u2018Make in India\u2019 did.\n<ul>\n<li>A scheme like PLI is not leading to job growth, leading to more economic dependence on China.<\/li>\n<\/ul>\n<\/li>\n<li>Sixth, all the <strong>major problems of India\u2019s socialist-era past are returning<\/strong>.\n<ul>\n<li>The excessive closeness between bureaucrats and the beneficiaries of industrial policy.<\/li>\n<li>India\u2019s top civil servant recently called for an \u201cinstitutional mechanism\u201d that provides \u201chand-holding\u201d for companies.<\/li>\n<li>Companies that just began receiving subsidies are already asking the government to relax their production quotas.<\/li>\n<\/ul>\n<\/li>\n<li>Lastly, the government\u2019s <strong>manufacturing push never went much further than gaming the World Bank\u2019s indicators.<\/strong>\n<ul>\n<li>No investor believes structural reforms have gone deep enough.<\/li>\n<li>India has a large workforce but few skilled workers.<\/li>\n<li>The rupee is overvalued.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h5><strong>Way forward:<\/strong><\/h5>\n<ul>\n<li>Subsidies should be limited to sectors where China dominates supply chains, as part of a broader, China-focused trade policy that partners with the United States, Australia, and others.<\/li>\n<li>Invest in cutting-edge sectors.<\/li>\n<\/ul>\n<p>Meanwhile, it\u2019s hard-wiring into the economy the kind of connections between industrial capital and policymakers that are nearly impossible to disentangle.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: Live Mint Relevance &#8211; An analysis of govt&#8217;s Industrial policies. Synopsis: It took decades for India to shift from its inward-looking and uncompetitive manufacturers. Now the government is again giving importance to inward-looking and uncompetitive companies to produce for the domestic market. Background: One of this government\u2019s first promises was to revive the manufacturing&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/indias-new-industrial-policy-is-a-replay-of-socialist-era-follies\/\">Continue reading <span class=\"screen-reader-text\">India\u2019s new Industrial policy is a replay of socialist era follies<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[221,216,8488],"class_list":["post-119705","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-economy","tag-gs-paper-3","tag-indias-new-industrial-policy-is-a-replay-of-socialist-era-follies","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/119705","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=119705"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/119705\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=119705"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=119705"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=119705"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}