This article first appeared in the Livemint. The views are of the author(s).
The department of industrial policy and promotion (DIPP) has released a substantive discussion paper on industrial policy which identifies several key policy aspects, constraints on industrial growth, and a range of objectives and policy targets. The paper provides a basis for the government’s consultations to “formulate an outcome-oriented actionable industrial policy that provides direction and charts a course of action for a globally competitive Indian industry which leverages skill, scale and technology”.
Such a focus on industrial policy is not new. Previous industrial policies emphasized import substitution and restrictive trade policies, a focus that was significantly replaced by the “Washington Consensus” and open market-oriented policies. There was, however, a renewed interest in industrial policy, with evidence that both developed and developing economies had relied on this, and that several high-growth economies (particularly China) had used it actively for their development process. Detailed studies of recent industrial policy strategies show that these more recent initiatives have been different from the import substitution era. Moreover, some important lessons have emerged from these studies on steps to enhance the effectiveness of these policies.
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