All Things Policy India's PLI scheme - is it working?
Jan 15, 2025
In this discussion, Miheer Karandikar, a fellow researcher at the Takshashila Institution specializing in industrial policy, dives into India's Production Linked Incentive scheme. He assesses whether the scheme is truly enhancing domestic manufacturing or just creating dependency on imports. The conversation uncovers potential hidden costs and unintended consequences of the policy. Miheer also draws comparisons with global industrial policies, exploring lessons from countries like Thailand, all while advocating for more tailored support for small and medium enterprises.
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Industrial Policy Defined
- Industrial policies are targeted government interventions designed to reshape specific sectors or the entire economy.
- These policies aim to promote growth, address market failures, or bolster national security.
South Korea's HCI Success
- South Korea used industrial policy to develop its heavy chemical industry, focusing on downstream equipment for defense, cars, and electronics.
- They promoted exports and consolidated companies, boosting economic growth and employment.
PLI Schemes Explained
- Production-Linked Incentives (PLIs) offer subsidies to 14 select sectors based on their sales of goods manufactured in India.
- The aim is to overcome initial setup barriers, boost domestic production, and create jobs.