The double dilemma of “Made in India”

As the only giant post-development country in the world with a population of 1 billion outside China, it is not an exaggeration to say that the industrialization process is the most important endogenous variable that determines India’s future development. Small countries often only need to have certain industrial sectors, certain industrial links and even some non-industrial industries to integrate into the international division of labor system and support the development of the entire national economy. However, for a big country like India and China, if there is no industrialization process that is promoted as a whole, it will not be able to liberate a large number of agricultural laborers from the traditional social structure, and gain endogenous motivation for sustained economic growth. It plays a key role in major issues such as national security, shaping the nation-state, and coordinating domestic development.

The road to industrialization in India is tortuous. Inheriting the legacy of British colonial construction and the construction of imported alternative industries that were vigorously promoted during the planned economy period, India once established a relatively complete industrial system, but later gradually abandoned this system due to the mismatch of the political and economic system, and did not play its role. The role of the mast and the lead. Although the reforms of the 1990s have greatly increased the economic vitality of India, they have not stimulated their comparative advantages in the cost of employment, land and other factors. Industrial development is still structurally dysfunctional and faltering. Since the Indian People’s Party government came to power in 2014, Narendra Modi’s “Make in India” initiative is the latest move to promote the industrialization process. Although it has achieved partial success, it has yet to stimulate the entire national economy. The system produces a positive chain reaction. India’s industrialization process is still full of difficulties and obstacles, and repaying industrial debts remains a daunting task for the Indian government.

1. The historical stage of industrialization in India

(1) Initial germination of industrialization before independence (colonial period to 1947)

Unlike China, Turkey, Africa and other “colonial colonies” that were simultaneously encroached by multiple European powers, India has become the “exclusive colony” of Britain since the mid-18th century. As an exclusive colony, India gained more attention and investment from the sovereign state, which laid a good foundation for its industrialization. For example, as early as the middle of the 19th century, the United Kingdom began laying railways in India as a tool for maintaining military colonization and a tool for economic exploitation of raw materials and commodities. [1] By the early 20th century, Britain had built a railway network throughout India across the subcontinent, and the British Indian Railway Network became the fourth largest railway system in the world at that time. [2] In addition, relying on strategically located geographical locations and abundant natural resources, India has also become one of the UK’s important combat readiness industrial centers. In view of the blockade and rising war pressure in the UK, India developed a strong steel and metallurgical sector during the First World War, and developed the automobile, chemical, and mechanical sectors during the Second World War. [3] According to Indian economist Battle, during the Second World War, India was the world’s tenth industrial country in terms of industrial production. [4] Before independence in 1947, India had achieved industrialization bases and productivity levels far beyond the general colonies and semi-colonies, and cultivated a relatively complete domestic market, basic industries and infrastructure, capable of producing raw coal, electricity, and A series of important industrial products such as crude steel, pig iron, cement and sulfuric acid. [5]

The industrial achievements that India gained during this period are not so much a product of the colonial subjective goodwill, but rather an “accident” of colonial plunder policy under special geopolitical conditions. In order to avoid competition between the colonies and the sovereign countries around the supply of goods and the supply of raw materials, the United Kingdom severely suppressed India’s local industries and fixed India as a source of raw materials and dumped goods by various means. For example, in order to meet the British military needs in World War II, India was forced to urgently transfer a large amount of resources for consumer goods to the production of defense products, even if the Great Famine in eastern India in 1943 took away 3.5 million to 400. The lives of thousands of people, the United Kingdom also refused to lend a helping hand. [6] Therefore, although Britain’s centuries-old rule has left India with a good industrial base, it is even more unforgettable for Indians to humiliate their country as a colony. Therefore, the establishment of an economic system that enables people to live in prosperity and is not subject to Western aggression and control from international capital has become an urgent desire of India’s post-independence leaders. To promote industrialization is to break away from colonial bondage and establish national self-respect. And the most important way to achieve political and economic independence.

(II) State-led industrialization after India’s independence (1947-1991)

After the independence of India, the leaders of several generations attached great importance to industrialization. They were largely the “post-traumatic stress response” and “institutional reaction” of the colonial experience. First, in order to safeguard political independence and maintain economic autonomy, India began to become independent. Emphasizing the industrialization led by heavy industry and basic industry; the second is to ensure that India is protected from the exploitation of foreign capital and the suppression of foreign goods. After India’s independence, it chooses a closed and self-contained inward-oriented development path to implement import substitution; the third is to overcome the huge rich and the poor. In the issue of differentiation and widespread extreme poverty, India chose to restrict private enterprises after independence and turned to a publicly-owned planned economy.

Although India chose political mode of parliamentary democracy after independence, it abandoned the free market economy advocated by the West and turned to the Soviet-style planned economy. The government planned the scale, speed and proportion of economic development. , structure, etc. [7] At that time, the Indian leaders hoped to learn from the Soviet Union on the one hand, and to complete the national strategy catch-up in a short period of time by prioritizing the development of heavy industry, but they also hated the rule of the Soviet totalitarian state; on the one hand, they maintained the Western-style parliamentary democracy. However, they are worried that private capital will become bigger and form an oligarchy group that influences politics. [8] In the face of the dilemma, Nehru chose the middle road and embarked on the so-called “Fabian Socialism” road.

From the independence to the “three-five” (1961 – 1966) plan, India entered the era of state-led industrialization. In 1956, Prof. Mahalanobis, the chief economic adviser and famous statistician of Nehru, proposed the industrialization strategy: First, the mixed economic system advocated public-private partnership, and the development of the public sector through the adjustment of the national plan. Control private sector investment and production; secondly, advocate the overall development of the economy by increasing the overall investment rate; third, highlight the investment in capital goods (production materials) industry, and believe that in order to obtain long-term consumption growth, it must be in the short term. Strengthen investment in the capital goods industry. [9] Starting from the “Twenty-Five” (1956–1961), the Central Government of India mobilized resources to prioritize the development of heavy industry and basic industries that play a key supporting role in industrialization, through investment in electricity, steel, mining, machinery, petrochemicals, and fertilizers. And other departments, thus forming a relatively complete industrial system. When the Bhakra Dam in northern India was unveiled in 1954, Nehru, who was extremely proud of the achievements of the new industry, even claimed that “the dam should become a temple of modern India”,[10] he also pointed out that “ The basic fact is that if you want to develop, you must have more steel and have the ability to make machinery yourself.” [11] After nearly 40 years of development, by the end of the 1980s, India’s economic development had achieved certain results, initially establishing an industrial base and improving the self-sufficiency of key industrial products.

Although India built a large-scale state-owned economy through planned economic means during this period, it did not establish a strong social and political system to cooperate, resulting in insufficient stamina. For example, although state-owned enterprises have the name of “state-owned” but do not listen to government assignments, they become interest groups that can influence decision-making and become the worst combination: Indian state-owned enterprises are not too concerned about market reactions, but also for governments. The executive order “immunized” and also swallowed up a lot of economic resources. Over-regulation and the combination of inefficient operation of state-owned enterprises and democratic politics have led to institutionalized, normalized, and institutionalized corruption in India, and have formed a cluster of profit-sharing groups and resistance groups that have blossomed everywhere, dragging down the industrialization process that was already bottlenecked. . In addition, due to the lack of national capacity and insufficient social penetration, India cannot adopt the high-intensity organization like China to replace capital investment with large-scale human input and share the pressure of industrial capital accumulation.

Due to political considerations and social constraints, India did not carry out thorough land reforms like the Soviet Union and China, but generally retained the private ownership of land that was more unevenly distributed. This directly reduces the efficiency and scale of India’s resource mobilization, making it impossible to supplement the large-scale investment, borrowing foreign debt and deficit finance that large-scale industrialization relies on through industrial and agricultural “scissors difference”. This problem is not obvious at the beginning of the industrialization process. However, once the industrial scale rises, especially the economic income cycle of many heavy industry projects and infrastructure projects is extremely long, the central government of India cannot mobilize sufficient economic resources and political capital to “fill the pits”. The early projects are easily reduced to black holes that devour financial resources. Form a systemic risk. [12] Therefore, India is often caught in a lack of resources leading to periodic policy reversals and swings. Once the environment fluctuates, the national economy is prone to stagnation or even retrogression. [13]

Therefore, India’s industrial development during this period lags far behind the newly industrialized countries and regions in East Asia. From 1950 to 1980, the average annual growth rate of India’s population was about 2.3%, while the average annual growth rate of GDP was 3.5%, and the average annual growth rate of GDP per capita was only about 1%. This slow growth The rate is called the Hindu Growth Rate. [14] India also fell from the global ranking of the tenth industrial country after the Second World War to the 27th, and its industrial output accounted for a global share from 1.2% in 1950 to 0.7% in 1980, a significant decline. [15]

(III) The tortuous development of industrialization in the era of India’s reform (1990-2014)

In 1990, years of borrowing caused huge pressure on India’s debt service, and the high oil prices caused by the Gulf War led to the deterioration of the current account. India experienced a serious balance of payments crisis, and its foreign exchange reserves were once only able to pay for a week of imports. [16] The balance of payments crisis coincided with the ideological panic caused by the disintegration of the Soviet Union, coupled with the structural adjustment pressure brought by the IMF bail-out loan, which made the determination of the Rao government of the Congress Party in 1991 to break with the traditional Nehru model. With a major adjustment in the economic structure, India has entered the era of economic reform. In response to India’s original planned economy, state-owned economy and inward economy, the Rao reform proposed a strategy of liberalization, privatization and openness, and no longer deliberately emphasized the importance of industrial manufacturing for economic development. With the goal of establishing a mature market economy system, the Indian government has completely relaxed the unified economy, comprehensively promoted opening up to the outside world, and implemented reforms in key areas including financial reform and public enterprise reform. The reform of marketization, openness and privatization has indeed brought considerable economic momentum to India, which has achieved an average annual growth rate of about 5.5% in the first 10 years of opening up, and has successfully ranked among the fastest growing in the world. One of the largest economies has also become one of the main representatives of emerging economies. [17]

Although the Indian economy achieved rapid growth during this period, the industrialization process in the same period has stagnated or even reversed. This is because the reforms in the industrialization sector have touched on the vested interests, and many key reforms cannot be implemented, resulting in strict employment standards, difficulties in land acquisition, and slow progress in infrastructure construction. India’s industrial development has therefore been unable to enter the fast lane of large-scale development. A large number of labor forces can only stay in the inefficient informal sector, and a large number of projects are forced to shelve because of land acquisition problems.

Due to the slow progress in reforms in key areas, India has adopted a “jumping” and “dislocation” development that is quite different from the “agriculture-industrial-services” model of traditional industrialized countries, hoping to directly lead from the (agricultural-led) primary industry. Leading to the tertiary industry (service-led), thus avoiding the industrial-led secondary industry. During this period, India’s service industry, rather than manufacturing industry, became the pillar industry of its national economy. It showed the characteristics of the “post-industrial” industrial structure that was only present in developed western countries, and even the phenomenon of “de-industrialization”. Between 1990 and 2003, the proportion of services in India’s gross national product rose from 40.9% to 51.2%, while the industrial share in the same period fell from 27.6% to 26.6%. [18] (see the table below) It is not so much that India has actively chosen the service-led economic development model as it is a passive result that India’s manufacturing industry is difficult to advance.

Regarding India’s “post-industrialization” development path, the affirmative side believes that India relies on high-tech and high-end service industries to bypass industrialization and embark on a new development path from agriculture-led to service-oriented, and believes that this is In line with India’s special national conditions and Indian-style development model, India can accomplish the historical task of economic rise. The other side believes that for a populous country like India, it is difficult for the service industry that does not produce material production to provide sustained momentum for economic development, and industrial manufacturing that can develop the real economy and large-scale employment is the source of power.

The debate on the development model has not been conclusive. However, the actual performance of the Indian economy shows that the debt of industrial development has brought serious systemic problems. First, India’s economic development level is simply not enough to support the development of endogenous modern service industry. Too much reliance on the development of service industry has brought about external dependence. Unlike the international supply of industrial products, India’s international service industry cannot supply. Matching local demand, if the external market fluctuates, it will seriously disrupt the Indian economy. Second, the service industry, especially the high-end service industry, has limited ability to absorb employment. It cannot provide employment opportunities for the new 10 million-level labor force in India every year, and it is even more difficult to reach the low-skilled and low-skilled rural poor. The problem of poverty. Third, the service industry does not involve material production, so it cannot derive industrial ecosystems represented by industrial clusters and industrial chains. This makes it difficult for India’s economic structure to iteratively evolve and obtain the inclusive productivity gains brought by new technologies.

(4) Phased results of “Made in India” (2014-present)

Although many Indian experts are still proud of the service-oriented approach of “cutting the road”, the Indian government has regarded the economy that relies too much on the service industry as a structural problem that must be resolved. Since the Indian People’s Party government came to power, it has launched a number of policies aimed at promoting the development of the manufacturing industry. This is to achieve higher speed, more stable and more sustainable economic growth, and truly enable India to achieve the goal of “the rise of the great powers”; On the other hand, it is also to gain political achievements and win votes by expanding employment, reducing poverty, and increasing welfare.

In September 2014, Modi, who took office as prime minister for less than half a year, launched the “Made in India” strategy. Modi promotes industrialization in India by encouraging foreign direct investment, lowering industry access standards, improving the domestic business environment, and inciting India’s huge market potential and enriching cheap human resources, in order to achieve an optimized domestic industrial structure and overall improvement. Its economic strength and the goal of social development level. For example, in order to achieve the goal of “net import zero” for electronic products in 2020, the Modi government approved a special award plan (MSIPS) totaling US$1.5 billion and a key “stage manufacturing promotion project” (PMP) in early 2017. . [19] According to the extension sequence of machine assembly, accessory manufacturing, common device manufacturing, and high-value device manufacturing, PMP gradually promotes the formation of the mobile phone industry from easy to difficult by gradually adding different tariffs to each stage of the product. Finally, cultivate a complete industrial ecology. In the first phase of the 2015 PMP, India imposed a 13.5% tariff on the entire imported mobile phone, but all exempted from the assembly of parts, parts and components, so there was a 13.5% between locally assembled and imported mobile phones. The cost difference will induce and coerce international manufacturers to build and assemble factories in India; in 2017, PMP enters the second stage, India not only imposes additional tariffs on imported machines, but also on some assembled parts, but for high-value components. In addition to the construction of the whole machine assembly plant in India, international manufacturers will also be located in the upstream of the industrial chain, and higher value-added parts factories will move to India.

Due to the implementation of MSIPS and PMP, India, which has long been stagnant in industrial manufacturing, is expected to produce more than 500 million mobile phones in 2019. In 2018, it has become the world’s second largest mobile phone producer after China and sold in its domestic market. The localization rate of mobile phones is also over 90%. The mobile phone industry has become the star industry of Modi’s “Made in India” program: in terms of production scale, the Indian mobile phone factory has risen from 4 in 2014 to more than 120 in 2018; from the perspective of local added value, from 6 in 2014 % rose to over 30% in 2018. Xiaomi and Samsung have established high value-added component factories in India and plan to continue to build other key components.

In essence, the prosperity of the mobile phone industry is a “human advantage” created by the use of market mass and industrial policies, rather than the “natural advantage” that India has gained from the low cost of labor. The reason why international manufacturers invest in factories in India is neither the attractiveness of the Indian market itself nor the competitiveness of its factor costs, but more of the artificial cost difference caused by industrial policies such as PMP. The Indian government has used the international companies that have already entered the market to give up the existing market share. With the phased industrial policy of PMP, the various stages of the mobile phone industry chain will be gradually introduced, and the production scale will be large enough. The industrial ecology with low production costs and self-consistent production links.

In the case that the labor system, land system, infrastructure and other industries that restrict industrialization cannot be fundamentally solved, the Indian mobile phone industry is a special case by implementing PMP to prosperity, and it is not universal. On the one hand, India’s own huge market and fast-rising mobile phone penetration rate have brought huge market imagination to international manufacturers investing in India, which enables them to temporarily implement local production despite the low competitiveness of printed mobile phones. On the other hand, the mobile phone industry itself has many characteristics such as multiple links, multiple components, high added value, labor-intensive and capital-intensive technology, and partially circumvents the disadvantages of poor land, labor and infrastructure reform. Under this circumstance, the success of PMP in the mobile phone industry is difficult to replicate to other industries, especially labor-intensive, export-oriented industries that are more sensitive to factor cost. Without deep reforms, the PMP policy will not only be able to effectively promote India’s overall industrialization process, but also reduce the overall operational efficiency of the Indian economy due to the distortion effect of tariff policies and return to the old path of “import substitution”.

Second, the problems and challenges of industrialization in India

Although India has achieved high economic growth in recent years, successive governments have paid more attention to industrial development issues, but India’s industrialization is still stagnant. According to estimates by the US Central Intelligence Agency, the contribution of India’s agriculture, industry, and services to GDP in 2016 was 15.5%, 23%, and 51.5%, respectively, but employed 47%, 22%, and 31% of the labor force, respectively. [20] From the perspective of industrial structure, compared with other countries with similar development stages, India’s industrial sector accounted for a significant decline, while the service sector accounted for close to developed countries. However, for India, the glamorous appearance of its high-tech industries is difficult to conceal its insurmountable structural problems. The overall employment opportunities in the Indian economy are insufficient, the overall efficiency is low, the industry lacks linkage, and the social integration is weak. . For example, although India experienced a historical climax of 9% annual GDP growth between 2004 and 2009, due to poor economic structure, only about 1 million jobs were created each year,[21] and India needs at least 10 million a year. job opportunity. This “no job growth” has brought enormous economic and social pressure on India. Therefore, how to create employment opportunities on a large scale by promoting industrialization and improve overall production efficiency through inter-departmental labor transfer has become a core issue that the Indian government needs to address.

(1) Insufficient resource mobilization leads to capital scarcity

From the perspective of economic principles, the process of industrialization must be a process of capital increase. It is impossible for a country to complete industrialization without the endogenous raising of capital and external input. Western countries that have completed industrialization in history have mostly completed the primitive accumulation of capital through the looting of foreign colonies. However, India, China and other large developing countries are no longer likely to repeat this approach, so it is necessary to find new ways to complete capital accumulation. From this perspective, India, which did not find a suitable way to obtain capital, has always been accompanied by insufficient resource mobilization at various stages of its industrialization.

(1) Inadequate land reform leads to insufficient accumulation of industrial capital

Nehru initially hoped to follow the industrialization model of the Soviet Union, first carry out land reform and agricultural organization to cultivate and accumulate resources, and then draw the capital of industrialization from the agricultural sector through the “work and agriculture scissors”. However, because India did not establish a strong administrative system, Nehru’s reform policy of “Land Holding Maximum Law” was fiercely resisted by landlords and rich peasant groups, and was not implemented in the end. The land is still concentrated in a few In private hands, the government cannot integrate and use it. In the case of poor land reform, the Indian agricultural sector is unable to provide adequate support for industrialization. It is also for this reason that after the rapid advancement of the first three “five-year plans”, India’s industrialization has fallen into a slow-growing bottleneck because the Indian government has not been able to successfully draw sufficient resources from the agricultural sector for industrial investment. In addition, the failure of land reform has also led to the inability of India’s vast agricultural sector to increase production efficiency and the prevalence of poverty, which has made it impossible for India to form a domestic demand consumer market that is sufficient to support its industrialization.

(2) Excessive investment restrictions lead to inaccessibility of foreign capital

India’s 1990 reforms gradually eased investment restrictions on domestic capital, but there have been more restrictions on foreign investment, and it is difficult for all parties to reach an agreement on this issue. The emergence of this phenomenon is mainly due to ideological reasons: on the one hand, the left-wing parties including the Congress Party pursue the principle of socialism, and believe that the essence of introducing foreign capital is to allow foreign capitalists to exploit the Indian people, and therefore oppose this. On the one hand, the center-right party represented by the Bharatiya Janata Party pursues economic nationalism. They oppose the introduction of foreign capital, which is believed to squeeze the living space of small Indian producers and small shopkeepers. [23] Modi relaxed the conditions for foreign investment after he took office in 2014. However, due to the embarrassment of land, labor and other policies and regulations, the scale and effectiveness of attracting foreign investment in India still has much room for improvement.

(3) Higher inflation rate leads to insufficient savings rate and investment rate [24]

Because India’s economic operation lacks the co-ordination of a powerful regime and the lack of market forces, its supply and demand are seriously unbalanced. Except for the “First Five-Year Plan” period, there have been relatively serious inflationary pressures. Due to the strong price hike, the Indian people’s willingness to save has been low for a long time, which has seriously affected India’s capital formation rate. Although the Indian government has adopted a method of raising consumption tax, encouraging savings, and even compulsory savings to increase the savings rate, it has had little effect.

(2) Interest groups are too strong

The problem of insufficient resource mobilization capacity in India is that the various interest groups are too strong, which hinders the government from integrating the society and hinders the spontaneous integration of the market through the market forces. For example, the reform of the land expropriation system involves a large and widely distributed peasant class; the reform of the labor system involves well-organized trade unions and public employees in various industries with concentrated votes. Subject to strong vested interests, the Indian government is unable to introduce policies that are most conducive to industrialization. The power of capital cannot be freely optimized according to market rules. It has been difficult to form a synergy that is sufficient to promote industrialization.

Throughout history, a country will inevitably have interest groups in the process of development. Interest groups are not terrible. What is terrible is the institutional problems behind interest groups. Most of the institutional problems encountered in India’s industrialization belong to what the Indians regard as “correct”. Since the protection of land property rights, labor rights and small business owners is irrefutable “political correctness”, then reform cannot be discussed. . If these “correct” institutional problems are to be reformed, political mobilization must be carried out, but the Indian government lacks such operational capabilities and political determination. Specifically, interest groups that hinder the advancement of industrialization in India can be broadly classified into the following categories.

(1) The land acquisition problem caused by the powerful “land class”

Promoting the development of agricultural productivity through reforming and redistributing highly concentrated land in traditional societies is a necessary prerequisite for industrialization. However, after the failure of the land reform in Nehru, the private property rights of the land were further consolidated. Under the protection of the spirit of “sacred property rights”, the “landed class” sat on the ground and caused land acquisition problems, which became one of the key obstacles to the development of industrialization in India.

(2) Employment problems caused by “labor aristocracy”

India has a large population base, low labor quality and relatively lack of capital, but it has not adapted its resource endowments and comparative advantages to develop labor-intensive industries. The reason for this dislocation is the “labor aristocracy” group in India. Once Indian workers work in factories above the scale, they can enjoy all-round labor rights and protection; workers in the formal sector often form various trade unions, and then trade unions form political alliances. This strict organization is combined with vote-winning democracy. Form a political group that no political force can dare to underestimate. Rigorous and rigid employment laws and strong trade union power have not only greatly reduced India’s industrial production efficiency, but also hindered the transfer of labor from the agricultural sector to the industrial sector, making it difficult for India to form an effective labor market.

(3) The scale problem brought by the “small owner alliance”

The efficiency improvement brought about by scale is an important source of industrial development. However, in the context of the fragmentation of India’s economic development, the small owners, represented by small shop owners and small factory owners, have made political mobilization through vote-democratic democracy because of the large number of people, and prompted the government to introduce policies conducive to small-scale production. For example, in order to protect small grocery stores in India, the Indian government has imposed restrictions on large supermarkets. [25] Under the influence of such policies, India has actually entered a “reverse elimination”, making most of India’s enterprises lack small and micro enterprises that expand their scale. The difficulty of expanding the scale means that Indian companies cannot increase efficiency and competitiveness by expanding production, which has become one of the key factors for the long-term impediment of India’s industrialization process.

Third, the enlightenment of India’s industrialization process

(1) The superstructure must match the economic base, otherwise it will generate huge institutional resistance.

The essence of India’s economic development is the misplaced development of “superstructure” and “economic base”. During the colonial period, the British set up a parliament in India for the local elite, and the Indian elite used the parliament to deal with the British landlords, big capitalists and big businessmen. In this context, in order to oppose British colonial exploitation, these Indian elites have introduced a number of measures to protect land, labor and small business owners in accordance with the laws of the British system. As part of the anti-colonial movement, India retained these legal legacy after independence. India borrowed from the UK the superstructure of the post-industrial era, but the economic base is still in the early stage of industry. India’s vote for democracy and the “too advanced” legal system make it easy for India to form a large number of interest groups: Indian workers often abuse the labor protection law and resolutely oppose the new rural transfer labor force entering the factory; small landowners form alliances, prefer land ridiculous It is also necessary to ask for price, which makes the cost of industrial land acquisition in India far exceed its economic development level; small owners form a political pressure group, preferring to adhere to extremely low labor productivity and also use administrative licenses to limit scale production. Under this circumstance, even if India has the most abundant cheap labor and land resources in the world, the Indian industrial process still cannot enjoy the factor dividends it deserves and cannot realize its potential.

(2) Promoting industrialization is a highly complex systemic project that requires strong national governance capabilities.

Whether it is the implementation of a planned economy or a market economy, India has always faced the problem of insufficient “national capabilities” and cannot translate the will and goals of the country into reality. This “national capacity deficit” is an important reason why India cannot smoothly promote industrialization. Although India has left colonial rule, it has continued the embarrassment of the colonial era on the political and social levels. The superstructure inherits parliamentary democracy, and the grassroots layer is formed along the fault line of caste, religion, nation, and stratum to form various interest groups. Because its economic control is difficult to adapt to the extremely low level of social and political integration, India’s national capacity has been weak for a long time, and it is impossible to formulate and implement the established industrialization policy.

(3) Industrial development should be in line with comparative advantages, so that seeking truth from facts and adapting to local conditions

India has a large population base, low labor quality and relatively lack of capital, but it has taken the road of developing technology-intensive and capital-intensive industries. For decades, India has been known for its highly competitive technology and capital-intensive industries such as pharmaceutical and IT services. This seemingly glamorous and distorted industrial development path has cost India a huge price: it ignores the huge demand of Indian consumers for industrial manufactured goods, making them have to rely on imports or provide enough employment opportunities. Meet the growing work needs of the domestic workforce. However, rather than India’s initiative to choose, India is forced to embark on this development path that runs counter to its comparative advantage because of various restrictions. Industrial manufacturing has higher requirements for land acquisition, labor systems, infrastructure, and the business environment than isolated high-end services. This is why, although India’s labor costs are low, it is still difficult to convert labor cost advantages into superior production capacity. After all, in the face of the remote land-free land price, the inexhaustible labor system, the supply of high-quality infrastructure with low prices, and the unsuccessful development of rent-seeking, the low labor costs cannot compensate for the huge hidden production. cost. Service industry and high-tech do not involve a large number of land and labor issues, and the requirements for transportation and energy infrastructure are relatively low. Therefore, it has become an industry with low threshold and easy development. From this perspective, the core challenge facing India’s development of manufacturing is how to activate and utilize its resource endowments to better utilize its endogenous comparative advantages in international economic competition.

Fourth, the conclusion

India’s tortuous industrialization shows that the industrialization of the late-developing countries is by no means a logical deduction of the “necessary” popularization of machine production and the “necessity” of economic development. On the contrary, it is a “contradictory” struggle that needs to give full play to subjective initiative. A strong organizational core, continuous operational ability, and appropriate historical social opportunities are indispensable. From this perspective, India’s industrialization is by no means a single economic issue, but a comprehensive challenge involving social, political and economic conditions. Therefore, for the Indian government, specific economic policies are of course important, but it is more important to seek in-depth reforms in the social and political fields and comprehensively improve national capabilities so that industrialization can be truly resolved. This determines the survival and development of more than one billion people in India. important question.

(Author: Development Research Center of the State Council)


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