It's a good time for India to revise its industrial policy

New Delhi could supplement the PLI scheme with efforts to ease doing business and strike useful trade deals

- RAHUL JACOB

Recent reports that India's production-linked incentives (PLI) introduced in 2020 have been the subject of an exhaustive internal government review must count as welcome news. If true, a Reuters report suggests this programme will not be expanded. This would represent a quick rethink of a major government initiative. It quoted two senior government officials as saying that the scheme will not be expanded beyond its 14 pilot sectors and production deadlines won't be extended in spite of requests from some participating firms.

Less emphasis on the PLI scheme ought to create room for a new industrial policy. Let's call it 'NIP' as a marker of the speed needed in rethinking our approach on several issues that bedevil the economy. These include India's overvalued exchange rate, which should be routinely measured against a basket of our export competitors' currencies, and concluding key bilateral trade treaties over which negotiations have dragged on for years.

The Reuters report suggests governments need to avoid the temptation of becoming venture capitalists. To be fair, there is hardly a major economy that hasn't made a similar effort to pick winners and determine what is strategic. Every large economy is seeking to boost manufacturing, even as Beijing games the global trading system to its benefit. In response to the Reuters article, the government said that the PLI scheme had been a success and that participating firms had produced $163 billion worth of goods, or 90% of the target for 2024-25.