Cabinet opens right growth drawers

Research Development and Innovation (RDI) Scheme, cleared earlier this week by the Union cabinet, is aimed at nudging industry to ramp up research, accelerate development, and foster innovation in strategic and sunrise sectors. The offer of ₹1 lakh cr risk capital is not tied to outcomes. The scheme will need to be monitored for progress in areas such as energy transition, biotech and AI. Of particular importance is the 'Deep Tech' fund to acquire transformative technologies that is likely to draw private capital into strategic areas. To the extent that the scheme seeds an ecosystem of innovation, it will be considered a success. But results are unlikely to be uniform across the target sectors.

The employment subsidy scheme draws justification from benefits of connecting the target group to unsubsidised employment. Work experience and income support enhances long-term employment prospects much beyond duration of the scheme. There are second-order effects on the expansion of small enterprises, the main creator of manufacturing jobs in India. The programme has an easily identifiable outcome - the number of additional jobs created. The numbers being projected officially are grossly more than jobs being created in the formal economy. It also matters at what point of the business cycle the scheme is introduced. To gain traction, the employment subsidy may have to be extended beyond its original duration (read: beyond its original intention before elections).

In sum, though, the two schemes are a strong signal of India's attempt to upskill and push up labour productivity. Alongside targeted PLIs to select industries, GoI is nudging manufacturing up the value chain. India needs to drive the next wave of strategic innovation to become a global manufacturing base. Industry must consistently grow faster than the broader economy for equitable development. Along the way, it must reverse the trend of jobless growth. Sunrise industries offer a clear pathway provided adequate investments are made in research and skilling.