What critics of the govt miss: Not much is lost if the PLI scheme fails

Seeking a repeat of the East Asian model of merchandise export-led growth is a chimera. For India, services drive export growth, writes T N Ninan

Two standard criticisms voiced by market-oriented commentators are that the Narendra Modi government has erred seriously in staying away from regional free trade arrangements, and that its production-linked incentive (PLI) scheme to encourage domestic manufacturing activity behind protective tariff walls is fundamentally misconceived. There is substance to both criticisms. India could get locked out of regional production and supply chains if it is not part of trade facilitation arrangements, and a subsidy- and tariff-driven manufacturing policy risks building an uncompetitive manufacturing sector all over again.

What is more, the macro-economic consequences are potentially serious in that no economy has sustained