An ISI okay for luxury labels: What’ll we think of next?

Such certification is impractical. As happens so often, it is unclear what it’s protecting, since Indian footwear factories overwhelmingly focus on the mass market. Just recently, Maruti Suzuki’s R.C. Bhargava said that his company had no problem with a free trade agreement with the EU as Maruti’s cars were more than competitive on value-for -money with European cars. In any case, the prospective buyer for a Benz or a BMW is unlikely to be sizing it up against a Baleno.

Industry insiders say the latest quality certification move on shoes is directed at imports from China. So much of our industrial policy, from import licensing for computers to shutting the door on trade agreements that would make us part of East Asia’s supply chains, is influenced by this goal with little effect thus far on our bilateral trade deficit with China.

Treating the relatively small imports of stilettos as collateral damage in this larger battle overlooks the huge benefits from these luxury brands that are increasingly seeking to use India’s gifted artisans. Less than a year ago, a show by Christian Dior, which has collaborated with Mumbai-based atelier Chanakya School of Craft, at the Gateway of India was a free advertising blitz for Indian craftsmanship, with its photos splashed across the Western luxury press. Influential Vogue and the Financial Times’ HTSI glossy magazine devoted cover stories to it. Work from India was described as “mind-blowing" and “insanely detailed haute couture textiles that are magicked up."

Aside from the reputational damage to the ease of doing business and growing collaborations between European luxury brands and Indian artisans that will hopefully get the artisans the recognition and revenues they deserve, at the ground level, a lengthy certification process is likely to lead to an inventory build-up of expensive shoes. An Indian exporter of expensive women’s shoes to Europe says he has never faced a similarly arbitrary certification regime overseas. He says it has already meant that inventory has run up ahead of the New Delhi decree taking effect. The irony is that Indian shoe factories in Bhiwandi and elsewhere have been ramping up production, not least because there is plenty of business serving the local Indian market.

It is, of course, too early for a thorough cost-benefit analysis of the production-linked incentive (PLI) scheme. But the whiplash effects on business of such arbitrary firmans from New Delhi, which include the now somewhat diluted licensing regime announced last year for foreign-made computers and countless tariff increases over the past few years, must eventually be part of that computation. In fairness, there has been plenty of interest in PLIs. A Business Standard report this week on a government review of the targets and achievements in different PLI sectors found that investment in most had been more than anticipated. Notable exceptions are arguably the most labour-intensive sectors, ranging from textiles to automobiles and auto components, where investment is a fraction of what was targeted.

There are other anomalies: the 12 successful suitors for PLI subsidies for solar photovoltaic modules include—wait for it—11 with partners from China. Now, it has always seemed silly to me that given the abundance of sunshine India is blessed with, it should be so reliant on coal-fired power plants that add to our air pollution problem. A quick remedy would have been to allow Chinese imports, but we alleged China was dumping solar panels here. Now, the cartwheel of public policy has come full circle: New Delhi will in effect be subsidizing Chinese solar firms after having blocked imports of solar panels that were subsidized by Beijing. Freer imports would also have radically speeded up our green transition.

But, the illogic is richer still. This week, the Wall Street Journal reported that China is on course to meet its target of capping greenhouse gas emissions six years before schedule. “China installed 217 gigawatts of solar power last year alone, a 55% increase," according to WSJ. “Wind energy installation last year was more than the rest of the world combined." There are many problems with China’s command-and-control economic system: in the past decade or so, President Xi Jinping has ratcheted up arbitrary state actions, targeting tech firms one moment and foreign consulting firms the next, while also seeking to deflate China’s property bubble, a more defensible goal. Still, China’s transition to green energy is yet another East Asia-style miracle of industrial policy.

There remain plenty of opportunities for India in shifts of production away from China, but our bureaucracy may need a mindset shift. Reading the new certification rules for high-end shoes, I wondered if the Indian-made leather slippers that women often wear with sarees, and which almost certainly contribute to knee problems, would now be mandated to have cushioning and arch support worthy of a Birkenstock. I would guess not.