The dilemma for a government is who to listen. The bureaucrats in the government are all generalists. The politicians are supposed to be representatives of people – not domain experts.
So the govt relies upon consultants and academicians. But who will oversee them. And eyesight is 6/6 in the rear view mirror and we are all blind going forward.
Thus the government brings in a new genre of experts who work for the government. So whether it is a Sanjeev Sanyal or a Neelkanth Mishra – they are inducted in the govt and play that role.
I actually like Sanjeev Sanyal and being the son of a senior IAS officer and son in law of an IB expert – he brings a unique world view. More about upbringing than about banking. His father really invented the SEZ framework.
Neelkanth Mishra on the other hand is a really bright engineer. But knows nothing about innovation.
The problem with bankers is that they have never done any business. And economists in banks do not even know banking.
The middle income trap is something that is well understood and the way around is not risk capital but frugal innovation. It is wrong to suggest that money can solve problems or lead to breakthroughs.
I see bureaucrats suggesting one subsidy after another hoping they will latch on to one of those gravy trains. Ayushman Bharat, ebus subsidies, iPhone mfg are all Rs 50,000 cr each misadventures. And the only purpose they served was to prove what doesn’t work.
If money could solve everything and governments had all the answers – then America would not be the disaster it is. And ChatGPT and Claude should have come out of CIA labs.
The first thing to understand is that innovation is NOT about money. It is about ecosystems. Money is necessary in small quantities but is not sufficient by itself. A lot of serendipity is involved. It is easier to predict failure than to predict success.
And it is complete nonsense for any politician, bureaucrat or one of their advisors to claim that they know what to do or have done what is required.
Industry after industry, subsidy is a scam. Because when you discriminate to give subsidy to four bad actors out of ten players – you essentially put the six good actors out of business. No one will fund or support the players who have not got subsidy.
Further it is not the job of governments to gamble with tax payer money – whether it is ai subsidy or other gambles. Gambling is for venture capitalists. And they generate enough returns to be able to raise their own money.
The other issue about creating entry barriers is that you kill downstream industries. By stopping Chinese solar cell imports, solar cell prices have gone from 6 cents to 25 cents making power more expensive. And this killed power dependent industries. Capital and steel prices have made all mfg uncompetitive.
I am sure Narendra Modi ji will correct all this soon. Point is how soon.
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