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India's PLI scheme favors capital-intensive sectors over labour-intensive industries struggling with China
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Auto industry benefits from high tariffs, while labour-heavy sectors face intense competition from China
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China dominates one-third of global labour-intensive goods despite being a tech giant
India's Production Linked Incentive (PLI) is not offering enough cutting-edge to the country's capital-intensive industries and is actually leaving labour-intensive sectors struggling to compete against China, according to Trinh Nguyen, Senior Economist at Natixis.
In an exclusive interview with NDTV Profit, Nguyen warned that the push for manufacturing may need to broader out in order to address India's job crisis even as headline growth shows robust growth.
"Most of the money has gone to bigger sectors that are already well protected," Nguyen said, citing the auto industry’s high import tariffs. "They don't necessarily need as much help as, for example, labour-intensive sectors (that) are currently being crushed."
The economist went on to highlight that despite a 50% tariff wall, Indian manufacturers are losing market share to China. She pointed out that even though China is viewed as a tech giant, the country still makes up for one third of the world's labour-intensive goods.
This leverage that China has in terms of manufacturing could greatly impact India's 'Make in India' push.
"A country as big as India shouldn't focus on just the Silicon Valley of India," she said. "The sustainability of (growth) will depend on the ability of India to broaden out the income growth."
Nguyen also addressed the ongoing impasse between US-India surrounding the trade deal, attributing it to geopolitical friction and domestic political constraints. She added that Washington is pressuring India to adopt changes New Delhi is resisting.
"The US is trying to press India to change, and India changes in its own way," she said.
That being said, Nguyen is hopeful that the tailwinds of a potential deal between India and the US next year are already there. Meanwhile, Trump is expected to appear much softer on India, especially on affordable issues ahead of the 2026 midterms.
Nguyen also defended the Indian Rupee’s recent underperformance against the Euro and other currencies, describing it as a necessary shock absorber.
"The Rupee is not strengthening against the dollar because we need to also help these labour-intensive sectors," she said.
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