Workshop on Industrial Policy in Indian States, 2024
There has been a resurgence of Industrial policy across the world. While economic rationale and policy instruments proposed may vary given the needs of each country, Industrial policy is back in development discourse.
The Inflation Reduction Act in the United States, the European Green Deal and China’s Belt and Road Initiative are some examples. Industrial policy flourishes. India’s Atmanirbhar Bharat and PLI schemes resonate the country’s direction towards industrial policy. However, the standard rationales and instruments of industrial policy widely vary between Global South and Global North. While India cannot go back to its interventionist strategy of the 1980s rooted in reckless protection, black markets, and rampant rent-seeking, it certainly needs to embrace a new industrial policy. India is today under-industrialised and deindustrialized given its per capita income. Contrary to received academic wisdom, opening up India’s economy didn’t result in labour-intensive industrialization. Manufacturing technologies have instead become more capital and skill-intensive. Integration with the global economy has only intensified competition resulting in “premature deindustrialization” as is the case with many lower income countries.
The Make in India strategy came up with the objective of increasing the share of manufacturing to 25% and generating 100 million jobs but did not take off. The strategy at best worked in improving India’s position in global ranking in ease of doing business. Instead of augmenting value addition, India has now become an import-dependent economy. Evidence suggests that the emphasis was more on fintech and IT than manufacturing. Indian manufacturing is suffering from low value addition as India is increasingly becoming a place for assembling rather than real manufacturing by producing parts and creating value addition. For instance, on average, a mobile phone made on our shores has around 80-85 per cent of imported content (India Cellular and Electronics Association, 2022). There is now a real danger India may get locked into a structurally-dependent position in the world economy unless the appropriate policy environment is created.
During COVID, India launched Atmanirbhar Bharat Abhiyan—and restricted Chinese imports—but soon reversed it, as it hurt its domestic production. Even the foreign direct investment (FDI) India received goes to acquiring existing productive assets, firms and brands, rather than augmenting new investment.
India’s tryst with New Industrial policy has to take into account these challenges. But it also requires its own vision rather than a mere return to the policies of the past or a mere copying of practices in East Asia. The Madras Institute of Development Studies (MIDS) in collaboration with Indian Institute of Technology (IIT-B) and Guidance, Tamil Nadu proposes to organise a day-long workshop to deliberate on the following themes.
To deliberate on this, we are organising a closed door workshop with academics working on questions of industrial policy, civil servants (from central and state governments), and industry representatives. This workshop was organised under Chatham House rules to open up and create space a multi-stakeholder dialogue.
Convenors: Kalaiyarasan Arumugam, MIDS and NPEI, IIT Bombay, Gaurav Daga (Guidance Tamil Nadu), Anush Kapadia, NPEI, IIT Bombay