The potted plant approach also endangers the massive co-benefits of growing sectors that do not appear complementary at first glance. One example is the growing convergence of technology and textiles. New generations of garments could have built-in sensors to track health and other factors. Success requires being pretty good in both electronics and textiles. Another example is India’s fast-growing set of policy incentives for the build-out of data centers. Considering the components of a data center build, this effort could also unlock greater local investment in strongly related industries like efficient cooling and industrial water systems purpose-built for data centers.
Enterprising companies, either Indian or multinational, would be smart to build these aligned industries in proximity to their customer base. But this requires overcoming the known industrial hurdles in India—stifling labor regulations, opaque land acquisition, high cost/ low quality power, etc. The costs of these hurdles are not offset by targeted incentives related to the “prime target”- in this instance, a data center.
Examples of these potted plant policies at the Union Level include:
Compare that to the reforms the Union government has unleashed in the last five years that would improve the general business environment. This list is far smaller, and in two instances- is cleaning up “unfinished business” from earlier reforms:
Similarly, at the state level, we reviewed all the key reforms we track through our Indian States Weekly digest over the last year. At this level, too, it is clear- states prioritize incentive programs specific to individual industries, as opposed to wider reforms that will help all sectors grow.
The main exception is labor regulation, where 11 states relaxed their “Shops & Establishments” laws as part of the national enactment of the long-awaited “Industrial Relations Code.”
The “potted plant” versus “unleash the jungle” is not a black and white choice. Recent supply chain disruptions, either due to weather, pandemic, or security, require countries to ensure reliable access to certain products. But for India to truly unlock job-creating growth, choosing a widening range of sectors that are “winners” while allowing other sectors—including ancillary sectors—to languish will stifle the larger growth opportunity.
