RPT-BREAKINGVIEWS-Make in India could do with a dose of MAGA energy

By Shritama Bose

MUMBAI, April 1(Reuters Breakingviews) - Prime Minister Narendra Modi spoke of his mission to "Make India Great Again" when he met Donald Trump in February, leaning on the U.S. president's motto to "Make America Great Again". For both leaders, the vision counts on spurring domestic manufacturing. But India's mission is faltering. Modi may want to copy some of Trump's aggression to put that right.

Modi first articulated his Make in India vision to turn the country into a manufacturing hub a decade ago. The government may now let its $23 billion flagship scheme to achieve that goal lapse, Reuters reported last week, citing four unnamed government officials. The production-linked incentive scheme, launched in 2020, offered cash payouts to firms in 14 sectors meeting specified output targets. The goal was three-fold: increase local production, cut imports and create jobs. Five years on, its track record looks patchy.

While success in churning out smartphones led by Apple's AAPL.O iPhone helped raise the country's share of global exports to 2.4% in 2022 from 0.1% in 2017, the PLI failed in most other sectors. Even corporate giants including $200 billion Reliance Industries RELI.NS and Adani Enterprises ADEL.NS were unable to meet targets. The government withheld some payouts. Ultimately Vietnam and Mexico gained more from the China-plus-one opportunity. Manufacturing's share of India's GDP stood at 13% in 2023, well behind the PLI's original 25% target.

Small pivots are afoot: a new subsidy for making electronics components announced on Friday set a target for jobs and capital investment in addition to turnover. Trump may also force some changes required. To preempt U.S. tariffs, India removed levies on inputs for electric vehicle batteries, among other things, for example.

Modi's top economic adviser in January identified the government "getting out of the way" as the key to cutting the cost of doing business. A uniform set of labour laws, speedier land supply, and power connections for new factories would help. To achieve that, Modi will have to persuade the country's 28 provinces to agree on adopting common terms for business.

The Indian leader withdrew proposed legislation on acquiring land in his first term but he can push the issue again and make progress if he can marshal the will with which he introduced a single tax code and a real estate law in 2017. There will be a political cost but it may be a small price to pay to avoid the wrath of swathes of unemployed people.

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CONTEXT NEWS

India will offer subsidies worth $2.7 billion to boost electronics components manufacturing. The plan, announced in a statement on March 28, will aim to add nearly 92,000 direct jobs.

Prime Minister Narendra Modi's government has decided to let lapse a $23 billion program to incentivise domestic manufacturing, four years after it launched, Reuters reported on March 24, citing four unnamed government officials.