Should India have an Industrial Policy? Reasonable people can honestly differ on this question. There are several sub-questions: Does India have the state (and labour force) capacity to come up with, and deliver on, such a policy? What has been the experience in other countries, and indeed in India, when there was implicit or explicit policy in place?
Perhaps more fundamentally, is manufacturing important, or should India jump straight into services? Does India need an explicit Industrial Policy that identifies strategic industries and picks winners and losers, or is it enough to put in place regulatory, antitrust and related mechanisms to provide gentle guidance? What about incentivising R&D and radical innovation? How can taxation be made a tool of Industrial Policy if not also used for social justice?
In the wake of the recently introduced Production Linked Incentives in various sectors, and the immense efforts being made to jump-start the semiconductor ecosystem, these questions take on some urgency. There are a number of factors, including the putative ‘demographic dividend’, and the fact that India is in the $2000+ GDP per capita range, which is often a takeoff stage.
Industrial Policy now has another driving force: national security, from at least two perspectives. The first is that India was for quite some time the world’s biggest buyer of defence equipment. It is a huge risk because of potential embargos. Second, it is clear that depending on others for crucial components can be potentially disastrous: remember US technology denials in supercomputing, and cryogenic engines, as well as China’s sudden decision to deny Japan rare earth supplies.
But there are some downsides too. India’s earlier flirtation with state-guided growth, as in the Five Year Plans, ended up in the debacles of the License-Permit Raj, large-scale nationalisation, and a ‘hybrid economy’ which was the worst of both worlds, capitalist and socialist. More recently, the ‘Make in India’ lion mascot has been quietly shelved, and despite Atmanirbhar Bharat, our trade deficit with China continues to soar.
The ghosts of the mai-baap sarkar and the ample mammaries of the welfare state continue to loom over India. Just a week ago, aspiring railway employees set fire to trains out of general frustration: it is reported that 1,25,00,000 people applied for 35,281 positions. The attractions are obvious: government jobs mean no accountability, no performance reviews, no chance of dismissal, plus baksheesh and pensions. This breeds mediocrity, as in the Soviet Union.
Read More at https://swarajyamag.com/ideas/is-industrial-policy-the-right-answer-for-india
Comments