Budget Suggestion For The FM
I’ve been an investor in the Secondary market for over 45 years, initially through shares and subsequently through Mutual Funds; I’ve always advised my children, friends and relatives to invest to do so too. So, my stand will hurt my own interests, but it’s in the national interest.
India’s Persistent Import Dependence on Makeable Goods
India continues to import tens of billions of dollars of products it can manufacture at home. Shipping containers are only the most visible example that have come into focus now.
The same pattern repeats across plastic household goods, footwear components, furniture, basic tools, toys, cutlery, storage products and a long list of everyday items that require neither advanced semiconductors nor exotic chemistry. Only scale, consistent quality, specialized tooling and working capital are required. These are labour-intensive goods.
Manufacturing them domestically would create jobs, reduce the current-account burden and deepen industrial capacity across districts rather than just a few coastal hubs.
The Opportunity Already Mapped by Government Data
Government data already maps the opportunity.
There are reports about one recent internal exercise that identified 1,272 products worth nearly $189 billion in annual imports that meet a basic threshold for domestic production potential.
A tighter critical list of about $51 billion focuses on items ranging from footwear value-chain products to textiles and certain components.
Within this universe sits a substantial low-to-medium technology segment that remains heavily import-dependent despite India’s steel base, polymer capacity, labour surplus and existing clusters. Plastics articles, furniture, footwear, toys and related intermediates are in this list.
China still supplies a disproportionate share of many of these items because of superior scale, specialised and sophisticated ecosystems and cost competitiveness, not because the technology is beyond Indian reach.
Targeted Policy Has Worked Where Tried
The policy response has been uneven.
Specific schemes (higher duties and quality controls on toys, the new ₹10,000-crore container manufacturing push) show that targeted intervention works. Imports of toys have fallen sharply while exports have risen.
Containers are now being brought under a structured capacity-building programme with local-content requirements.
These successes prove the point: when capital and policy focus on actual production, substitution happens.
Capital Is Not Flowing to Industry at Scale
The larger problem is that capital itself is not flowing in the same direction at scale.
Public infrastructure spending and consumption have supported headline GDP growth.
Private industrial investment has lagged.
In the absence of very distinct and substantial differences in incentives between investment in the secondary capital market per se and investment in industry, even traditional business houses prefer investment in safer, hands-off, and rewarding secondary markets.
Household savings flood secondary markets and mutual funds.
Banks remain risk-averse after past NPAs.
The result is a capital-market depth that often runs ahead of real industrial breadth.
Valuations rise on a relatively narrow set of large companies while the factories that could absorb low-tech imports and generate widespread employment remain under-funded.
The Core Imbalance
This is the core imbalance.
So, incentives for investment in the secondary capital market not only divert potential investment from industry, but also actively work against the growth of industry, job creation and national interest, beyond a point.
An incentive, once given, is difficult to withdraw. If withdrawn, the negative consequences will be much more than not having given them in the first place.
Capital markets do not need preferential tax treatment to rise; they rise when underlying earnings and the number of investable industrial companies expand.
What does need deliberate encouragement is primary capital, equity and debt that actually builds capacity.
Treating secondary-market investment (including mutual funds) and primary industrial investment as equivalent for incentive purposes risks deepening the mismatch.
The market will reward successful manufacturing companies. It will not automatically create them.
A Clear Corrective
The corrective is straightforward and already partially visible in successful sector schemes.
Differentiate incentives. Prefer primary issuance, industrial mutual funds focused on MSMEs, co-operatives and manufacturing clusters, and performance-linked support for capacity creation over undifferentiated capital-market sops.
Anchor large domestic groups as patient co-investors rather than operators of every new venture.
Use the existing product lists as operational targets: state-level land, power and single-window clearances tied to actual production of the identified items.
Address the real bottlenecks, such as molds and tooling, consistent quality at volume, logistics and working-capital access for smaller units, rather than hoping financial-market liquidity will trickle down into factories.
The Choice Before the Finance Minister
India does not lack demand for these goods. It does not lack labour. In many cases it does not even lack the basic technology.
What it has lacked is a capital allocation system that treats factory-building as a higher national priority than secondary-market activity.
The containers, the plastic goods, the footwear components and the rest of the makeable import bill are not inevitable. They are a policy choice.
Redirect primary capital toward manufacturing them, and both jobs and market breadth will follow.
Continue to prioritise financial-market incentives without distinction, and the opportunity will keep arriving in foreign containers.
So, the Finance Minister should desist from giving any more sops to secondary capital markets, and give as much incentives as possible to investment in industry, as explained in this article.
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