As expected, the ambitious national manufacturing policy is facing teething troubles. The government’s efforts to boost manufacturing by providing incentives were, to begin with, in the wrong direction.
On Wednesday, entrepreneurs voiced concerns against incentives leading to distortions in the choice of locating units.
Administering these incentives could quickly degenerate into another kind of licence and quota system. In theory, there are no grounds why one industry or one firm should get preference over another when it comes to doling out incentives. In fact, experience shows that it is impossible to align administered incentives with performance: these incentives can soon turn into rents, and an altogether different and unproductive type of “competition” can emerge. The government should provide infrastructure and leave the rest to markets.