India’s big bet on manufacturing may fall flat unless we fix what subsidies cannot

The time is long past when textile mills could draw workers straight off paddy fields; the level of skill required to become a factory hand back then wasn’t an entry barrier for anyone with the will to work.

A decade ago, a factory worker needed at least a diploma in engineering to join a globally competitive business. Today, with the arrival of artificial intelligence and zero-latency networks to coordinate machines on the shop-floor, automation has evolved to a level that reduces the labour headcount for operations but raises the need for specialized personnel. If we persist with labour-intensive factories, we risk ending up in an autarkic shell.

If we aim to be competitive in global markets, manufacturers will need to catch up with—and take on—the world’s most advanced players. This means that the way out of agriculture for farm workers would still be through service jobs more than factory employment.

That said, dynamism in the services sector rides on the back of manufacturing strength to quite an extent, even if the latter’s job intensity is in decline. The factory sector matters. But can a state subsidy scheme spark off a boom? We have had production-linked incentives, which have worked in a few fields.

As reported, the National Manufacturing Mission is now looking at viability gap funding in sunrise industries as well as support measures for small businesses. On its own, this can hardly be expected to suffice. Other efforts include a hydrogen mission and electronic component manufacturing scheme.

The first must come good for climate action, while the latter is a key to self-reliance in an industry vital to success in countless others. Basic reforms that ease industrial activity would need to run alongside, even as power tariffs are driven down.

For a global edge on cost, bulk users like factories must not be made to pay punitive rates, as our industrial users currently do. Crucially, local manufacturers must be exposed to foreign competition, not shielded by tariffs that reduce their incentive and ability to compete with the world’s best.

Also, without a major R&D thrust that can generate locally owned intellectual property, our manufacturers could get locked in a struggle to produce yesterday’s top-sellers today, even as global market leaders move on.

Sustained industrial R&D demands a ready pool of talent. It also needs what Nobel laureate Joel Mokyr calls ‘propositional knowledge,’ or a clear grasp of the theory and science of it, and an experimental culture that converts ideas into products.

These, in turn, call for an education system that goes beyond teachers going through the paces to promote curiosity, a zest for enquiry and lifelong learning above all. Such pedagogy must go with hands-on familiarity with a variety of tools.

In short, education would call for significant investment. Innovation is likelier if students are equipped to challenge received wisdom and the workplaces they join are receptive to oddball ideas. India does need a manufacturing revolution and it is not beyond the country’s reach, but it is unrealistic to pin hopes on a clutch of subsidy schemes.