Indian government sucks at industrial policy
Raghuram Rajan on industrial policy:
I’d say that I am not against the government’s actions; I am very much for the government’s actions on dealing with the fundamentals. So let’s focus on public goods such as education and healthcare, let’s focus on building good roads, let’s focus on creating a good business environment, let’s focus on utilities, let’s focus on water, electricity, logistics. These are areas where you have a much better chance of success improving things rather than [picking winners and sectors].
Whenever our government showers a sector with love, it has not ended particularly well except for the areas I just mentioned. Kudos to the current government for building out Indian infrastructure. That’s great. But I think if you test them on manufacturing, have they really created more manufacturing jobs? The line is flat [on the chart]. Look at the line. I’d say that just the evidence suggests that we have not been great. Maybe some other countries have seen success.