The Narendra Modi government’s flagship “Make in India” programme is not the first attempt to goose Indian manufacturing. Import substitution hasn’t worked and is unlikely to do so. Industrial policies can introduce significant distortions. Policy decisions made in New Delhi often don’t survive the journey to manufacturing plants. Corruption and deal-making between the state and businesses meant that across the nations, a handful of companies could obtain clearances and permissions far faster than the law suggested, while other companies took far longer than prescribed. This makes it clear that a company’s regulatory experience is a product of its deal-making ability, not of a neutral governance mechanism. These are fundamental problems that define the business-state relationship in India, and extend considerably beyond it. Plainly, improving the regulatory framework is no panacea. Breaking the cycle will take far deeper transformations.

(Live Mint)