Unmaking of India

Context: The recent direction by the Department of Promotion of Industry and Internal Trade to the e-commerce companies to identify the country of origin is discriminatory and troubling development.

Critique of government’s step: 

• Misguided shift towards protectionism: Clamor for boycotting Chinese products has resulted in import substitution to boost manufacturing, but with the following setbacks:
• High economic costs: Could end up undoing the benefits and reverse the gains of last few decades.
• It promotes lobbying: and facilitate rent-seeking.
• Difficulty in execution: With no rational economic purpose, defining “country of origin” is complicated:
• Raw materials or components are often sourced from several other countries and China only assembles them into a final product.
• E.g. Iphone’s components such as touch screens, memory chips, and microprocessors come from a mix of US, Japan, Korea, and Taiwan based companies.
• Thus, a distinction between “assembling” and “manufacturing” is missing.