A monster from the past

The global turn to industrial policy defies history and logic

- MIHIR S SHARMA

Over the past few years, a monster long thought vanquished has once again reared its ugly head: Industrial policy. The notion that a government can play favourites across the various sectors of the economy has never of course gone completely out of style. What matters is the scale of this intervention, its purpose, and its chosen instruments. On each of these, there has been a reversion to past levels, which is deeply disturbing for anyone with even a rudimentary knowledge of economic history. It is particularly troubling when industrial policy spills over into trade policy and causes the erection of anti-competitive walls of one kind or another.

For Indians to imagine that our state is capable of conducting an effective industrial policy is particularly puzzling. I know we are a young people, but surely in a country of 1.3 billion people there are enough voices around that remember what a mess the government has made in the past when it tries to pick winners? It is all very well to do this at the boutique level - ensuring that two or three sectors of strategic or national-security importance are well-funded and have locally dominated supply chains. But when such thinking begins to percolate across sectors and infects even such supply chains as refrigeration or toys, then one has to wonder whether everyone making policy was born after 1991.