While the PLI will succeed for the higher end of manufacturing investments, it will ultimately make no big difference to India's overall manufacturing sector. Come back to this comment in 10 years and i will bet the manufacturing % of GDP will still be around 20%. For India's manufacturing to take off, there needs to be dedicated industrial banks that set certain lending targets each year and give away cheap credit. To prevent an NPA crisis, there should be severe penalties for those who take loans and dont deliver (eg. taking a loan to set up a factory but instead putting the money into real estate). Ultimately India's MSME and smaller industrialists simply don't scale up, And there is very little capital being invested into different industrial sectors. For example, why are there still 0 new Indian companies that are trying to be our own Xiaomi or Huawei.
I am not sure it is always about the capital. 99% of Indian MSMEs have not integrated themselves into global supply chains which is what brings best practices and capital from the procurer. This is because they have mostly catered to low quality Indian consumer expectations. Also, there has always been a severe lack of quality engineering talent in India. Until recently, logistics was non-existent. Militant trade unions, bureaucratic red tape, corrupt nationalized banks with huge NPAs due to agricultural loan freebies all combined to wreak havoc. Remember most things changed only after Modi took over in 2014. Prior to that it would be impossible for most MSMEs especially those in backward states to even think about integration into global supply chains. Entire concepts like multi modal logistics parks, ease of doing business, multi modal transportation, insolvency and bankruptcy code, etc simply did not exist. Plus the Congis gave rise to corrupt, crony capitalists that all cheated one way or the other. Think about all the companies started in Congi era:
- Deccan airlines
- Jet Airways
- Sahara
- GMR airports
- Satyam IT
- Cafe Coffee Day
- NDTV
- Sterlite
- various Jewellers
- various 2G companies
- ICICI Bank
- Videocon
- various agricultural societies
- various home appliance companies like Khaitan, Crompton Greaves, Keltron
and so many more.
None of them have survived or are struggling or their former CEOs arrested for frauds. Many fraudulent loans were given by banks to Congi chamchas during UPA rule resulting in massive NPAs. Maun Mohan Singh was totally played by Sonia & Company. Proper lending by banks to MSMEs to facilitate integration with global supply chains must have commenced as early as 2001 when China was actively doing so. But the Congi fools failed to quickly build infrastructure and capitalize on the globalization of manufacturing. Now we are playing catch up in a global economy wrecked by the Wuhan virus and Russia-Ukraine war. The bankruptcy in 1991 followed by chaotic administration of India for 20+ years by anti-development parties including the UPA pretty much let China race ahead of us. Only IT, which did not have much government intervention, thrived. Manufacturing was toast. No FDI, no global expertise, nothing. Just massive brain drain out of India.
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