Korean media: Why did the "Make in India" plan fail?
On September 15, the South Korean media outlet "Herald Economic" published an article stating that the Indian government implemented a production-linked incentive (PLI) program worth $23 billion from 2020 to March of this year, aiming to make India surpass China as a global manufacturing hub. However, experts have evaluated the program as a failure.
The PLI system involves about 750 companies, with the goal of increasing the share of manufacturing in GDP to 25% this year. However, after the implementation of the system, the share of manufacturing in GDP actually fell from 16.7% in 2014 to 12.5% in 2024, ten years later.
Many companies participating in the PLI were unable to start full-scale production, and even those that met their targets needed a long time to benefit from the incentives.
As of October 2024, the value of products produced through the PLI was $151.9 billion, which only reached 37% of the Indian government's target, and the actual rewards paid accounted for only about 8% of the total allocated budget.
Professor Raghuram Rajan, from the University of Chicago and former governor of the Reserve Bank of India, criticized the PLI, stating, "The PLI failed to localize components in the electronics and hardware industries. Its assembly-oriented structure did not increase actual manufacturing."
He also believes that the PLI only increased income without creating the expected added value, and the government should use the PLI budget for education and talent development. In fact, the import of components such as printed circuit boards, batteries, and displays in India has significantly increased.
Major Indian corporate groups participating in the PLI, including Reliance, Adani, and JSW, also stated that "due to the lack of national infrastructure, government regulations, unpredictable policies, and a shortage of skilled labor, they were unable to meet their production targets."
On the other hand, the Indian government attributed the failure mainly to the lack of ability and willingness of participating companies.
Indian companies have been operating in underdeveloped regions such as Bihar, Rajasthan, and Odisha according to government policies. However, due to poor conditions in roads, railways, warehouses, electricity, and water supply, normal production facilities could not operate or were indefinitely postponed.
Excessive bureaucracy and complex and opaque administrative procedures are also issues. For example, companies need to submit various unnecessary license documents for a long time, or reapply for forms not previously announced. These cumbersome administrative tasks not only increased business costs but also forced companies to make post-hoc modifications to approved applications.
Due to the discord between the central government and state governments, the payment of bonuses was delayed, and the interpretation of payment conditions varied by department, official, and government.
At the same time, the Indian government announced a $2.7 billion incentive program (ECMS) in April, aimed at encouraging domestic production of electronic components to compensate for the failure of the PLI system.
The ECMS will be implemented starting from the 2026 fiscal year for six years. The Indian government's goal is to attract $7 billion in investment, produce $53.5 billion in components, and create 91,600 jobs.
A commerce and industry department official said, "In implementing the ECMS, we hope to take South Korea, Japan, and China as examples to improve the quality of Indian electronic components and products, and create added value through exports."
Industry experts emphasized, "As of July, more than 100 domestic and foreign companies had submitted applications for the ECMS, which is below the expected number. If the ECMS does not end up as the 'second PLI,' the Indian government must commit to providing rewards in a practical and timely manner."
Original: www.toutiao.com/article/1843305390907785/
Statement: This article represents the views of the author."