To Build Indian Champions

Union minister for electronics & IT critiques Raghuram Rajan’s critique of PLI

- Rajeev Chandrasekhar

Raghuram Rajan, who held powerful positions in the Congress government, has recently been critical of the PLI scheme, suggesting that India should focus on services rather than manufacturing.

He co-authored a piece in TOI (‘Making in India. But how?’ bit.ly/3RhCH2v) critiquing PLI. But there are several problems with that argument.

He cites the most expensive smartphone in the world and goes on to argue that the 14 PLI schemes are some kind of ill-planned largesse that represents short-term thinking, forcing consumers to pay more without any upside.

Here is a fact check.

That consumers are paying more due to higher taxes is factually incorrect. That applies to very few.

The iPhone model for which he cites a 40% price difference between India and Chicago, constitutes less than 0.5% of the 300 million mobile phones sold in India. Customs duty plus GST are the taxes.

In 2014-15, after UPA’s Nokia debacle, India was forced to import nearly 80% of mobile phones.

Today, nearly 97% of all phones sold in India are made in India.

So, 97% consumers don’t pay the taxes – customs duties – Rajan says they do.

Less than 3% consumers – the richest of the rich – pay.

Rajan’s argument is akin to suggesting that consumers pay more for scooters in India because the government levies customs duty on imported Rolls Royce cars. Rajan seems to suggest that PLI is a largesse aimed at foreign companies. Again, not true. PLI complements the Phased Manufacturing Programme (PMP) of 2017, aimed at import substitution. PLI also aims to build exports from India.