Opinion
India’s latest tariff cuts chime with its PLI market defiance
Summary
- An import duty cut from 15% to 10% on mobile phone inputs is part of a ‘Make in India’ incentive experiment that defies the primacy of market-led resource allocation. Are all the right bets being placed by the new central planners of this era?
Just before Thursday’s budget, the Centre cut import duty on some parts used for making mobile phones to 10% from 15%, helping lower their cost of domestic assembly. The move bolsters an incentive scheme in a “Make in India" field that has shown high export promise. There’s no word yet on a wider lowering of tariffs.
India’s policy focus, after all, is on champion sectors. As these happen to be hand-picked, however, the broad idea defies what free-market champs would recommend. A lesson of the Soviet failure was that markets mostly know better than central planners how resources are best allocated. In this view, market distortion is a hidden risk that outweighs the apparent gains of factory-booster subsidies, overall, and so the state should not intervene. Yet, China’s rise and the world’s climate imperative have spurred rethinks. Intervention is in, even in the US.
But it doesn’t mean all the right bets are being placed by central resource directors. Supporting diverse sectors can mitigate our policy-portfolio risk, of course, and success in just a fraction of them can justify budget props. Their use must not go awry, though, even if the smartphone story is more widely replicable.
