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Debate on Electronics Manufacturing Scheme UPSC NOTE

 


  • Raghuram Rajan (former RBI governor) and Rajeev Chandrasekhar (Minister of State for Electronics) clash over the success of a Central government scheme to boost electronics manufacturing.

  • Rajan, along with two economists, released a paper suggesting the scheme doesn't lead India towards self-sufficiency but creates low-level assembly jobs reliant on imports.

  • Alleges that the government uses taxpayer funds to establish an ecosystem of assembly jobs, lacking self-sufficiency.

  • Chandrasekhar dismisses the paper, calling it a concoction of "half-truths" built on "shoddy comparisons."

  • Argues that only around 22% of mobile phone production in India is supported by the scheme.

Production-Linked Incentives (PLI) Scheme

  • Government's approach to promote manufacturing by raising import duties (stick) and offering subsidies and incentives (carrot).

  • PLI scheme rewards companies, foreign or domestic, that manufacture goods in India based on a percentage of revenue for up to five years.

  • Smartphone manufacturing particularly enthusiastic about the scheme; e.g., Micromax, Samsung, Foxconn.

  • Mobile phone exports surged from $300 million in FY2018 to $11 billion in FY23; imports dropped from $3.6 billion to $1.6 billion.

  • Imports of mobile phone components (screens, batteries, etc.) increased alongside the surge in exports.

  • Suggests that India's manufacturing lacks self-sufficiency; companies import parts for assembly, not full-scale manufacturing.

  • Low-level assembly work offers limited well-paying jobs and has a weaker multiplier effect.

  • Chandrasekhar Challenges Rajan's assumptions, indicating imported components might be used for various products.

  • Clarifies only around 22% of mobile phone production is supported by the PLI scheme.

  • Acknowledges low "value-addition" in mobile manufacturing but believes it will improve over time.

  • Dispute centers on whether the PLI scheme will create lasting jobs and establish India as a value-adding manufacturing hub.

  • Chandrasekhar believes the results will take time to show.

  • Rajan emphasizes the opportunity cost, suggesting funds could have been used for other economic improvements like education.

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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Debate on Electronics Manufacturing Scheme UPSC NOTE
Debate on Electronics Manufacturing Scheme UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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