PLI scheme biases resources towards capital-intensive projects than labour-intensive, says Arvind Panagariya

Is increasing protectionism endangering growth? CNBC-TV18 analyses India's trade policies in a very special edition of Indianomics. CNBC-TV18’s Latha Venkatesh spoke to Arvind Panagariya, former VC of NITI Aayog, and David Rasquinha, MD & CEO of India Exim Bank, on the problems with India's production linked incentive (PLI) scheme and why India turning protectionist will not bode well for GDP growth.

On the PLI scheme, Panagariya said, “This poses the same dilemma -- are we substituting PLI scheme for genuine reforms that need to be done? Certainly, between tariffs and PLI, I would prefer PLI, tariffs are more damaging. But what happens even with PLI is that - is that going to bring in truly global scale firms into play? As far as our own domestic firms are concerned, I fear that we will end up bringing in firms that are still not of global scale and therefore they will never become truly export powerhouses.”

He further added, “Also these schemes really are about how much investment you can do, then automatically biases the scheme towards highly capital intensive sectors and so the job creation then gets the back seat in that kind of process so those are the kinds of reservations that I have.’