Return of rent-seeking

Context: The government push towards “Make in India” through Production-linked incentives (PLI) schemes have failed to attract manufacturing.

Concerns related to PLI Scheme

• Similar attempts had failed in India before: This comes with a dangerous tendency to become self-sustaining, causing a permanent drain on the treasury without really improving competitiveness.
• Multiplication of undeserving lobbying sectors: g. PLI sectors were augmented in by the addition of LED lights and air-conditioners, which already have a huge demand and do not need support.
• Rent-seeking behaviour: Demands by existing players to tweak the PLI scheme to help them or that interest subvention should be for the entire value chain, and not just for exporters.

Conclusion: For improving investment in manufacturing, the government needs to ensure that the regulatory and tax climate is such that investors are more comfortable rather than giving direct subsidies and picking winners that serves the interest of bureaucrats and vested interests.