Is PLI The Magic Pill?

The government's ambitious manufacturing scheme has set the private capex in motion but economic outcomes will take their time coming.

- V. KESHAVDEV

SRI KRISHNA Matha temple in Udupi, Karnataka, holds a special place in the hearts of millions of devotees, one of whom is the country's 63-year-old finance minister. "It is the blessings of Sri Krishna of Udupi that gives me strength in life," Sitharaman remarked on a visit to the temple last year. But unlike Lord Krishna, who inspired a crest-fallen Arjuna to carry on with his duties during the great battle of Mahabharata, the finance minister chided India Inc. at an event late last year about its duty to invest alongside the government in spurring growth in the world's fifth-largest economy. "Is it, like Hanuman, you do not believe in your capacity, in your own strength, and there has to be somebody standing next and saying, 'Hey, you are Hanuman, do it'. And who is that person to tell Hanuman? That certainly can't be the government," Sitharaman had told a gathering of industrialists.

The minister's angst is understandable as despite incentives - slashing of corporate tax from 30% to 22% without exemptions and from 18% to 15% for new manufacturing units - corporates have stayed away from fresh investments. As a result, India has seen its longest investment cycle downturn with the share of the private sector in gross fixed capital formation falling from a record high of 27.5% in FY08 to 21.8% in FY20.