Recently, I finished reading Breaking the Mould: Reimagining India’s Economic Future (2023), co-authored by Raghuram Rajan, former Governor of the Reserve Bank of India, and Rohit Lamba, an assistant professor of economics at Pennsylvania State University.

This, interestingly, coincided with the heated debate triggered by the MeitY’s (Ministry of Electronics and Information Technology) new PLI (Production-Linked Incentive) scheme aimed at boosting electronics manufacturing. Both the book and the debate revolve around one of the most critical issues concerning India’s economic future against the backdrop of great geoeconomic flux: What should India do to best secure its economic rise? Should India focus on manufacturing over services?

As a policy analyst from China with some first-hand experience in the country’s economic planning and industrial regime, a few thoughts that popped in my head may turn out helpful and relevant in India’s case.

In the above-mentioned book, the authors celebrated that India had diverged from the standard development model, the one followed by China — from agriculture to low-skilled manufacturing, then high-skilled manufacturing and, finally, services — by leapfrogging intermediate steps. They also argue that India must not turn back now, as pursuing a manufacturing-led growth path is a dead end.

Instead, they believe, India should focus on building a nation based on the services sector. They provide a broad array of points to support this argument, which can essentially be summarised in three key ideas.

First of all, the value-added in the manufacturing sector is too low. The authors refer to the “smile curve” theory, which posits that in the value........

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