Elephant on the Tightrope: The Self-Reliant India Initiative and its Implications for Cooperation with Korea

Abstract

The “Self-Reliant India” initiative is India’s national vision for fostering the manufacturing industry. It presents a multifaceted approach to enhancing the country’s manufacturing sector and alleviating the country’s chronic trade deficits. In implementing the policy provisions of this overarching strategy, the government has actively promoted designated manufacturing sectors through production-linked incentives (PLIs) to attract investment while at the same time shielding these industries from global competition with trade remedies and import restrictions. As the recent elections saw Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) cling to power, the government is likely to continue these and other efforts to rectify the country’s lopsided balance of payments and realize its vision of a self-reliant India.

For one, India is expected to expand the scope of industries and products eligible for PLIs. In August 2023,the government announced that it would provide PLIs for information technology (IT) hardware, including laptop, tablet, and desktop computers, as well as servers. Later this year, toys, textiles, and steel should join the list of eligible products. This means that the central government may attempt to curb imports to protect these newly PLI-boosted industries. The government in fact tried to do so in the IT hardware sector in August2023, announcing that it would restrict imports going forward, but quickly canceled the policy following backlash from the United States and other major industry players. But the government seems poised to try to curb imports of IT hardware again this year. Furthermore, India is likely to invoke safeguards, such as tariff rate quotas and the lesser-duty rule, to guard against spikes in steel imports.

As India’s industries continue to modernize, Korea needs to present it with a model of what a mutually beneficial partnership looks like in order to maintain productive ties with the world’s fastest-growing economy. Korean policymakers need to prioritize establishing channels of communication through which they can quickly identify India’s needs and develop corresponding models of industrial cooperation.

Keywords: India, Self-Reliant India, Make in India, manufacturing, industrial policy, Production-Linked Incentives, PLIs, Narendra Modi, Bharatiya Janata Party, BJP, protectionism, trade barriers, economic security

JEL Classification: L52, L50, L53, L60, L61, L63