(wl-6995)-Reversing India’s Industrial Decline - Need for Redesigning Policies

In the 2010s, India’s industrial output growth and fixed investment rates have declined, compared to the previous decade, with clear signs of premature deindustrialization. Policy efforts such – Make in India (2014) and Atmanirbhar Bharat (2020) – failed to stave off the hollowing out of manufacturing, with an unabated rise in India’s import dependence, especially on China. Production Linked Incentives (PLI, 2020) is a work in progress, continuously fine-tuned, warranting a clear road map. There is a need to reconfigure industrial policy beyond tariffs and subsidies to acquire a dynamic comparative advantage in strategic industries and retake labour-intensive sectors for employment generation. The strategy needs to have four pillars: Boost fixed investments both in public and private sectors pragmatically to create domestic capabilities and promote modernisation; align trade and industrial policies to promote and incentivize domestic value addition; offer location-specific infrastructure and technical support for small firms (MSMEs); and boost R&D investments to support Indigenous production —all of which call for development banks to supply long-term credit at low and stable interest rates to socialize the risks catching up with the industrial frontier.