In order for you to climb the manufacturing ladder you need to attract foreign companies with advanced tech to come into your country, invest in a factory and start manufacturing and making money in your country. You can then use the fact that upstream suppliers to these foreign manufacturers provides fertile ground for your own company to grow to help grow your country.
China did this in a lot of fields, Tesla for example. China let Tesla into Shanghai and provided a lot of incentives to make them comfortable, with the condition that Tesla Shanghai have to use Chinese parts suppliers. Those supplies can then turn around and also provide parts for domestic EV makers. Tesla makes a lot of money from the Shanghai factory and killed a lot of crappy Chinese EV makers that was barely hanging on from lack of competent competition as well as government subsidy. With Tesla coming in and clearing the field the surviving Chinese EV makers like BYD, Nio and Xpeng all got whipped into shape and became world leading.
This process is necessarily painful for the industry loser and you will need to let the foreign companies earn the money that they deserve to earn. India's protectionism prevents similar process from taking place and will only serve to create an ecosystem of inefficient domestic companies that can't survive on their own on the international market.
This is what so many in the West, ASEAN, and India don't understand about how China suddenly became an industrial powerhouse. They only assume that Chinese companies copied and stole technology to build their industry. But they had forgotten that copying and stealing technology is useless without the understanding and knowledge to use them.
China's High Speed Rail story is a great example. Many haters like to accuse China of stealing HSR Technology from Japan and the EU. But they didn't know that China already had a prototype HST (albeit of inferior design) prior to importing foreign HST technology. That means that the Chinese already had a foundational understanding of HST technology before importing foreign technology.
China allowed foreign HSR firms to enter into China, but with conditions of JV with SOEs and ToT. Yeah it did hurt some of the private players in the local rail industry at 1st. But they would have to adapt to the new standards, lead by the SOEs, or miss out on new business opportunities. In the end it worked. China built an industry around their HSR program and is now a HSR powerhouse.
India on paper sounds like it had done the same thing wrt HSR. But there are many things missing. Instead of thinking about building the foundations and industry around their HSR program. India was busy trying to get it's billionaires to make a fortune from the projects. And just conveniently eaving the builders and suppliers to navigate the Indian bureaucratic minefield.
Indian protectionism benefits only the billionaires and the politically connected. They couldn't care less about the small-medium businesses. The big Indian businesses only want to make money, they don't wanna compete. That is why they love trade protectionism. This is never good for innovation and progress.
It's important to note that China could let Tesla in the way it did only because its industrial and technological strength by that point in time was great enough to compete with Tesla.
If your country is backward, you need forced-technology transfers and joint ventures to slowly build up your domestic tech strength and, over time, facilitate a competitive domestic industry. Otherwise a company like Tesla is just going to perpetually dominate the market. This is what China did in the 80s, and is what many emerging economies like Vietnam and Indonesia are doing today.
The problem for India is that companies require a tradeoff for giving away their technology and equity. Usually this means a cheap but skilled workforce, efficient infrastructure, a large consumer market, and a business friendly environment to tap into. India has horrible infrastructure, a massive population but small consumer market (how many Indians can afford Teslas?), an absolute fustercluck of a bureaucracy, and Indian workers are thoroughly thrashed by their ASEAN counterparts in terms of education level vs. wages they're willing to receive. All this topped off with unpredictable crackdowns and fines on foreign entities for seemingly no reason other than to feed the Jai Hind hindu master race mentality. It's no wonder FDI is fleeing India and pouring into China, particularly China's hi-tech service and manufacturing industries.
That's right. India demands ToT and equity. Not that this is a unique thing or is wrong. But to what benefit for the foreign firm?
To whom do you give that equity to? To the worthy? Or to Modi's billionaire friends? More importantly, is this a profitable deal? The Indian market has many bodies, but very few actual buyers. The Indian workforce is huge, but very few would qualify, or are reliable. The Indian infrastructure is rotten, and in dire need of upgrades. Worse still, the Indian government can suddenly make an excuse to take huge chunks of cash from you. No rule of law.
Malaysia did the same BS as India when it came to FDI. Look at them now, nearly 0 new FDIs coming in. There is a price for greed and stupidity. India is riding on it's reputation as the next China to attract FDI. But the departure of a number of foreign firms is proving that India is and will never be the next China.
