WIREDGOV

EXPERT COMMENT

Respected economists believe New Delhi’s priority should be developing the services sector. But geopolitical competition with China will keep manufacturing at the forefront.

However bruised he has been by the election result, Indian Prime Minister Narendra Modi will need to think hard now about the best path to Viksit Bharat, or ‘Developed India’. This is the government’s centennial goal for the republic, which sets 2047 as the year by which the country will have shaken off its status as an emerging economy.

To get there – to accelerate GDP growth sufficiently to provide jobs, end poverty, create wealth and enhance India’s global influence – one basic question needs an answer: should India tilt more towards excellence in manufacturing, or should it devote more effort to developing its services industries?  

There might be some decent arguments to bias the Indian economy in favour of services. But the reality is that Modi will maintain a fairly uncompromising focus on boosting India’s manufacturing prowess.

The government’s bias towards manufacturing is most evident in the array of subsidies it has put in place to support the sector. 

At the centre of this is a set of Production-Linked Incentives, which offer a total of $28 billion of subsidies for firms in fourteen sectors as a way of encouraging increases in output. 

The semiconductor industry has also been on the receiving end of government largesse, for which an additional $10 billion has been made available.

Click here to continue reading the full version of this Expert Comment on the Chatham House website.