Best of BS Opinion: PLIs can't succeed without deeper structural reforms

Today's pieces span multiple issues, from overseas acquisitions by PSUs, PLI schemes' success, the proposed India-US BTA, and the debilitating effect of quality issues across sectors

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State-owned Mazagaon Docks Ltd (MDL) last week announced it was acquiring a controlling stake in Colombo Dockyard PLC (CDPLC) in a $53 million deal. Our first editorial notes that this must be seen as an important milestone in strengthening India’s maritime influence in a key Indian Ocean region. The acquisition will help MDL reduce its reliance on a single buyer - the Indian Navy - and expand to markets in such diverse regions as East Asia, West Asia, Europe and Africa, where the CDPLC already has a presence. More importantly, the deal will also be a test of an Indian PSU's ability to manage an overseas venture competently, given the state-owned sector’s patchy record in such arrangements. The success of the acquisition is also critical in a region where Chinese state-owned enterprises dominate.

 

Our second editorial questions whether a proposed Production-Linked Incentive (PLI) plan for garments - separate from the one for textiles - can transform India’s manufacturing ecosystem, given past record of PLIs. It is worth noting that, so far, PLI-induced investments have been unable to create the scale of employment needed, particularly in low-skill manufacturing. It is important for the plan to succeed, considering the textile and apparel industry - which is labour intensive - is the country's second-largest employment generator, and contributes as much as 2.3 per cent to gross domestic product (GDP). The key issues in this industry include limited access to raw materials, inefficient logistics, cumbersome trade procedures, and restrictive labour regulations, and customs bottlenecks. To make PLIs succeed, deeper structural reforms are required to create the kind of competitive ecosystem that allows entire industry to thrive, and not just a few firms. 

 

Ajay Srivastava points out that a recent Niti Aayog paper has called for sweeping tariff cuts on US agricultural imports as part of the proposed India-US trade deal. But he warns that giving in could end badly for India, given its history with earlier tariff rates. Instead, he suggests the Indian government exercise caution before reducing farm tariffs, because once cut, tariffs are tough to raise again even if global prices crash or Indian farmers suffer losses. Tariff flexibility shouldn't be seen as just outdated protectionism; it’s necessary to protect food security, support rural incomes, and manage market shocks. The NITI Aayog paper overlooks this critical point. India must preserve its ability to shield farmers and consumers from global market shocks, considering agriculture, which supports over 700 million people, is the backbone of the rural economy and food system.

 

Our second columnist, Prosenjit Datta, notes the unspoken problems that plague India's development. It is clear that India will need to grow at over 7.5 per cent for a prolonged period of time to become a developed nation and a global economic powerhouse. The current government's infrastructure is of one piece with that goal. But as Datta points out, there are multiple issues that do not get attention but these are genuine problems that lead to reduced efficiency, productivity, and wasteful spending. The primary issue is one of quality across sectors, from manufacturing to services to infrastructure, all of which result in lost time and productivity. Some of these issues  are because of deep-seated corruption, while others are simply a lack of interest in creating good quality products and service. This is a difficult problem to solve but not if the union government and states focus on them. What is required in political will and a national mindset shift. If the first happens, the second will fall in place.

 

Shreekant Sambrani, in his review of Deborah Baker's Charlottesville A study of rage and resistance, finds that it is a thoroughly researched long book, naming names and quoting the good and the bad from the infamous 2017 race riots in this Midwestern American city that marked a turning point, as it were, in US politics. With close to 80 pages of references, sources and notes of research, the book can be an exhausting but ultimately harrowing read for laypersons, especially non-Americans not very familiar with that country's history. She finds that the new American right - whose march in Charlottesviller triggered the rioting - manifests as a Hydra-headed monster, seemingly independent, but united in their espousal of the “combustible mix of fascism, Nazism, white supremacy, anti-Semitism, homophobia, and Lost Cause defiance.”  Trump, with his many authoritatarian diktats, he says, is not the cause of it, but is the distilled essence of this right wing.