There is a particular kind of policy reversal that happens without announcement. No government formally declares that it is abandoning the Washington Consensus. No finance minister gives a speech entitled “why we changed our minds about industrial targeting.” What happens instead is that a subsidy appears in one sector, then a production-linked incentive in another, then a sovereign investment fund for a third. The theory of economic management doesn’t change publicly. The practice does. That is roughly what has happened across much of the Global South over the past five years, and it has happened faster than most observers anticipated, driven not by a revival of developmental ideology but by a series of events that made the costs of strategic passivity visible in a way that economic theory alone had never quite managed.
The pandemic was the most immediate of those events. When hospitals ran short of ventilators, when pharmaceutical supply chains failed, when the production of personal protective equipment turned out to be concentrated in factories thousands of miles away from the populations that needed it, the case for some domestic capacity in strategic goods became politically obvious in a way it had not been before. Then came the semiconductor shortage of 2021 and 2022, which idled automobile factories in Germany, the United States and India because modern vehicles require chips that are overwhelmingly manufactured in a handful of facilities in East Asia. Then came the energy price shock of 2022, which revealed how deeply embedded import dependency had become in economies that had assumed global commodity markets would always clear smoothly. Each of these disruptions added another layer of political consensus behind the idea that strategic self-sufficiency, or at least strategic redundancy, was worth paying for.
The global scale of the response has been substantial. Industrial policy subsidies globally are now estimated at approximately $1.1 trillion per year according to IMF and Global Trade Alert data for 2024, a figure that does not include the implicit fossil fuel subsidies estimated by the IMF at $7 trillion annually when environmental costs are included. This is not a marginal adjustment to the architecture of global capitalism. It is a systemic feature.
The timeline matters. The 1990s and early 2000s saw the high-water mark of trade liberalisation and capital account opening across the developing world. Industrial policy did not disappear entirely, but it operated in an environment where the intellectual consensus, the conditionality of international financial institutions and the preferences of capital markets all pushed governments toward restraint in direct sectoral intervention. There were exceptions, most notably in East Asia, where South Korea, Japan and Taiwan had long maintained hybrid systems that blended market allocation with state guidance in specific technology sectors. But these were treated as historically contingent cases, products of the Cold War strategic environment and the particular developmental state capacities of those societies, rather than as models for general application.
What changed after 2016 was not primarily intellectual. It was geopolitical. The US-China trade dispute introduced the concept of supply chain security into mainstream policy discourse. The United States, the most prominent advocate of open markets and minimal industrial intervention, began imposing tariffs, restricting technology exports and, eventually, passing the most significant industrial policy legislation in a generation. The CHIPS and Science Act, signed in 2022, authorised $280 billion in spending, with approximately $39 billion in direct manufacturing incentives committed to companies including Intel, TSMC and Samsung according to US Department of Commerce CHIPS for America data for 2024. The Inflation Reduction Act, estimated initially at $369 billion in clean energy incentives and revised upward to between $600 billion and $1 trillion as the scope of uncapped tax credits became clearer according to US Treasury and Congressional Budget Office data, represented a scale of public industrial investment that had not been seen in the United States since the mobilisation of the Second World War.
When the world’s largest economy, the one that had most forcefully championed open markets, moved this decisively toward industrial activism, the argument for remaining purely laissez-faire became harder to sustain in emerging economies. If Washington was picking winners, it was difficult to argue that New Delhi, Jakarta or Brasília should not. The intellectual permission structure changed. Industrial policy lost its stigma not through persuasion but through precedent.
India’s Production-Linked Incentive scheme is the clearest single window into what Global South industrial policy looks like when a large economy decides to use it seriously. Launched across 14 sectors including mobile phones, pharmaceuticals, medical devices, speciality steel, textiles, food processing and white goods, the PLI scheme offers financial incentives to companies that meet incremental production thresholds above a base year. The total approved outlay is ₹1.97 lakh crore, approximately $23.7 billion, according to DPIIT’s PLI Scheme Progress Report for 2024-25. Seven hundred and thirty-three companies have been approved as beneficiaries. The scheme has committed employment of approximately 9.5 lakh, or 950,000 direct jobs across its approved applicants.
And then there is the disbursement figure. As of 2024-25, actual incentives paid out amount to approximately ₹9,700 crore, roughly $1.17 billion, a disbursement rate of about 4.9 per cent against the approved outlay according to DPIIT’s PLI Performance Dashboard. That number deserves careful reading, because it would be easy to read it as evidence of failure and equally easy to misread it as evidence of success. It is neither straightforwardly. The PLI mechanism pays out against verified production increments that accrue over time. The fact that 4.9 per cent has been disbursed in the early years of a multi-year programme reflects partly the disbursement structure and partly the genuine pace of industrial investment. The real test is whether production commitments are translating into factory floors, supply chains and export orders. On that question, the data is more mixed than the approved outlay figures suggest, and that honest complexity is precisely the kind the source document is right to flag.
India’s semiconductor ambitions illustrate a different dimension of the challenge. The India Semiconductor Mission has approved $10 billion in total investment across five major projects according to MeitY’s Semicon India Programme data for 2025. The most prominent is the Micron Technology facility in Sanand, Gujarat, with a total investment of $2.75 billion and approximately 5,000 direct jobs, currently under construction. This is a genuine industrial policy success in the announcement phase: attracting a leading global semiconductor company to establish a presence on Indian soil required the combination of financial incentive, regulatory facilitation and sustained diplomatic engagement at the highest levels. Whether it translates into a broader domestic semiconductor ecosystem depends on supply chain development, skills availability and the continued willingness of global chip companies to see India as a viable manufacturing destination rather than solely a market.
In defence, the numbers are more directly encouraging. India’s domestic defence production reached ₹1,54,000 crore, approximately $18.5 billion, in FY2024-25 according to Ministry of Defence data, reflecting a sustained indigenisation push that has been one of the more durable commitments of the past decade. Defence exports reached ₹23,622 crore in FY2024-25, with a target of ₹50,000 crore by FY2028-29. Manufacturing’s share of GDP at 14.3 per cent in FY2024-25 remains well below the Make in India target of 25 per cent, a gap that the PLI scheme and related initiatives are designed to close, though the timeline for closing it grows longer the more honestly one reads the disbursement data.
If India’s industrial policy story is primarily about incentives and disbursements, Indonesia’s is about something more coercive and, in its own terms, more immediately effective. On 1 January 2020, Indonesia banned the export of unprocessed nickel ore. The decision attracted immediate criticism from trading partners, including the European Union, which brought a dispute settlement case to the World Trade Organization. Indonesia lost the initial ruling and appealed. It continued the ban regardless.
The reasoning was downstream logic in its most direct form. Indonesia holds one of the world’s largest nickel reserves. For decades, it exported that nickel as raw ore, capturing the mining value but ceding the higher-value processing and refining stages to facilities in China and elsewhere. By banning unprocessed exports, Indonesia forced the value addition to occur domestically or not at all. The result, according to Indonesia’s Ministry of Energy and Mineral Resources data for 2024, was more than $30 billion in downstream processing investment attracted into the country. Nickel smelters, battery precursor plants and stainless steel facilities followed the raw material rather than the other way around. This is industrial policy working through restriction rather than subsidy, and its effectiveness provides a template that other resource-rich emerging economies are now studying carefully.
The nickel ban’s success does not mean it is costless or universally replicable. The WTO dispute remains unresolved and signals a tension between the rules-based trading order and the right of developing economies to add value to their own natural resources. And Indonesia’s leverage derived from the specific combination of reserve concentration and strategic importance in the emerging EV battery supply chain. Not every commodity in every country carries that strategic weight. But the principle is clear enough: when you control a chokepoint in the supply chain of a strategically important industry, the state has instruments beyond subsidies available to it.
Not every form of industrial policy requires an export ban or a subsidy scheme. Some of it happens through geography and timing, through a country being in the right place at the right moment when supply chains are being reorganised by forces largely outside its control. Vietnam and Mexico illustrate this version of the story, and they illustrate it with numbers that are striking in their scale.
Vietnam’s electronics exports reached $132 billion in 2024, representing approximately 33 per cent of the country’s total exports according to General Statistics Office data. Samsung alone accounts for a substantial fraction of that figure, having made Vietnam the centre of its global smartphone production over the past decade through a series of investments that transformed the country from a low-wage assembly location into a genuine manufacturing hub. The Vietnamese government’s role in facilitating this was real, involving industrial zones, tax incentives, infrastructure investment and a degree of social stability that made long-horizon manufacturing commitments feasible. But the scale and speed of Vietnam’s electronics integration also reflected the decisions of private capital reacting to rising costs in China and the desire for geographic diversification in sensitive technology supply chains. The state set the conditions. The market moved the capital.
Mexico’s manufacturing revival has a different driver. In 2023, according to US Census Bureau Foreign Trade Statistics, Mexico surpassed China as the largest single source of US goods imports, accounting for 15.4 per cent of total US import flows. This is the arithmetic of nearshoring: US companies reconfiguring supply chains to reduce their exposure to long transoceanic logistics, geopolitical disruption and the tariff uncertainty that has characterised US-China trade relations since 2018. Mexico’s advantage is geographic and legal, through its participation in the United States Mexico Canada Agreement rather than through particularly generous industrial policy. The lesson is that supply chain geography is itself a form of industrial strategy, even when the immediate driver is a trading partner’s political decisions rather than domestic policy.
The sectors receiving state attention across the Global South are not random. They cluster around a small number of strategic properties: they sit at the intersection of national security and economic value, they involve technologies that have long-term growth implications, or they produce inputs without which other industries cannot function. Semiconductors, batteries, critical minerals, pharmaceuticals, green hydrogen and defence manufacturing share the characteristic that they are simultaneously economically valuable, strategically sensitive and concentrated in ways that make import dependency a genuine vulnerability rather than merely an efficiency choice.
The concentration data is worth sitting with. China processes approximately 90 per cent of global rare earth production according to USGS Mineral Commodity Summaries for 2024. Taiwan produces approximately 92 per cent of the world’s most advanced semiconductor chips below 10 nanometres according to SEMI and SIA data for 2024. China manufactures approximately 80 per cent of global solar photovoltaic panels according to the IEA’s Renewables 2024 report. These numbers explain why industrial policy in the Global South is no longer primarily about protecting nascent domestic industries from import competition. It is about reducing exposure to supply chain chokepoints that are themselves the product of earlier, highly successful industrial policies elsewhere. The competitive landscape that today’s emerging economy industrial strategists face was itself created by state-directed investment in semiconductors in South Korea and Taiwan, in solar panels in China and in rare earth processing in China. The state was there first. The question is whether it can be effective a second time around, in a more crowded and contested field.
“China processes ~90% of global rare earth production. Taiwan makes ~92% of the world’s most advanced chips. China manufactures ~80% of global solar panels. These numbers are not anomalies. They are the cumulative result of two or three decades of exactly the kind of patient, state-directed industrial investment that Global South governments are now attempting to replicate — in a field those earlier investments have already shaped.”
There is a tension embedded in the new industrial policy that deserves more direct attention than it usually receives. The sectors being prioritised are strategically valuable, and in some cases economically transformative. But they are not, by and large, labour-intensive in the way that the manufacturing expansions of earlier development phases were. Approximately 40 million people enter the global labour force from developing and emerging economies every year according to ILO World Employment and Social Outlook Trends 2024, the overwhelming majority of them in South Asia, Sub-Saharan Africa and Southeast Asia. These are people who need jobs, not technology roadmaps.
A leading-edge semiconductor fabrication plant, based on SIA and McKinsey workforce data from 2023, employs approximately 2,500 to 4,000 direct workers per $10 billion of capital investment. The Micron facility in Sanand represents roughly $2.75 billion in total investment and approximately 5,000 direct jobs. Solar panel manufacturing is somewhat more labour-intensive: IRENA’s Renewable Energy and Jobs Annual Review for 2024 estimates approximately 1,300 jobs per gigawatt of module production capacity. India’s solar manufacturing capacity of around 70 gigawatts for modules would imply employment in that sector of perhaps 90,000 workers, significant but not transformative at the scale of an economy where manufacturing accounts for only 11.4 per cent of the total workforce according to MOSPI’s Periodic Labour Force Survey 2023-24.
The arithmetic is not a reason to abandon strategic sector investment. The semiconductor plant, the battery gigafactory and the green hydrogen facility are worth building for reasons of supply chain sovereignty and technological capability that have economic value independent of their direct employment contribution. But they cannot, by themselves, absorb 40 million new labour force entrants per year. Industrial policy must therefore be understood as one part of a broader development strategy rather than its totality. The economies that have successfully managed large-scale employment absorption, South Korea in the 1970s and 1980s, China from the 1990s onward, did so through labour-intensive manufacturing that complemented rather than replaced higher-technology sectors. The strategic sector focus of the current revival needs a corresponding policy architecture for labour absorption that the current discussion has not adequately developed.
Industrial policy is not free. Subsidies, incentives, public investment in infrastructure and the administrative cost of running complex compliance programmes all have fiscal counterparts. And the fiscal environment in much of the Global South in 2026 is not generous. Pakistan entered an IMF programme in 2023 and again in 2024. Ghana, Sri Lanka and Zambia all entered IMF programmes between 2022 and 2023. These are not peripheral cases. They are economies that had development aspirations, commodity revenues and, in some cases, functioning industrial sectors, but whose fiscal positions deteriorated to the point where the external accounts could not be managed without institutional support. Industrial ambition requires a solvent state. That sounds obvious. It frequently turns out not to be.
India’s fiscal position is manageable but not comfortable. The fiscal deficit in FY2024-25 was 4.9 per cent of GDP, with a target of 4.5 per cent for FY2025-26 according to the Union Budget 2025-26. These are not crisis numbers. They do, however, represent a context in which every rupee directed toward PLI disbursements, semiconductor incentives or green hydrogen development competes with health spending, education, rural employment guarantees and the interest service on accumulated public debt. The PLI’s 4.9 per cent disbursement rate reflects partly the payment structure of a production-linked scheme. It also reflects the fiscal reality that even a government committed to industrial activism cannot write the cheques until the fiscal space exists to do so.
The asymmetry with advanced economies matters here. The US Inflation Reduction Act’s revised cost estimate of $600 billion to $1 trillion over ten years dwarfs the entire approved outlay of India’s PLI scheme by a factor of roughly 25 to 40. Industrial policy competition between advanced and emerging economies, even when the intent and design are comparable, occurs on an uneven fiscal playing field. The Global South is not outspending Washington or Brussels. It is trying to achieve comparable strategic outcomes with a fraction of the fiscal capacity. Whether targeted intervention can substitute for scale is the live policy question, and the honest answer is that the evidence is still accumulating.
Industrial policy’s revival has regenerated an old debate about governance risk. The question is not whether governments should intervene in strategic sectors. It is whether interventions of this kind can be kept disciplined. The historical record is genuinely mixed. South Korea’s semiconductor industry, developed with direct state support from the 1970s onward, eventually achieved global leadership in DRAM manufacturing and laid the foundation for companies like Samsung and SK Hynix that remain market leaders today. China’s solar industry, which received sustained public investment and access to low-cost finance for two decades, is now the dominant global producer at approximately 80 per cent of global module manufacturing capacity. Brazil’s Embraer, founded with state backing and developed into a globally competitive commercial aircraft manufacturer, is a Latin American example of state-incubated industrial success that held its form even as Brazil’s broader industrial policy track record remained uneven.
But for every South Korea semiconductor story, there is a different outcome. Stranded assets, subsidised companies that never became competitive without permanent protection, industrial parks that filled with politically connected tenants rather than productive enterprises. The difference between strategic coordination and political capture is, as the source document correctly observes, institutional strength. The capacity to set performance benchmarks, enforce them, withdraw support from underperforming beneficiaries and resist the lobbying of incumbent industries that would rather preserve a subsidy than meet a target. That capacity is not evenly distributed across the Global South. India’s PLI disbursement rate of 4.9 per cent reflects among other things the administrative complexity of running a verified, production-linked scheme rather than simply directing money to connected firms. Rigorous systems are harder to execute but they protect against the patronage trap. The difficulty of execution is, in this sense, also evidence of institutional seriousness.
The green energy transition has added a layer of urgency and competitive intensity to the industrial policy revival that was not present in earlier waves of development thinking. Batteries, solar modules, wind turbines and green hydrogen are not only climate solutions. They are manufacturing competitions. The country or group of countries that produces these technologies at scale will capture the economic rents from the global energy transition. China understood this early, invested accordingly and now produces approximately 80 per cent of the world’s solar panels. The question for every other economy watching that outcome is whether to accept the position of buyer or to contest the position of producer.
India’s answer, through its National Green Hydrogen Mission targeting 5 million metric tonnes per annum by 2030 with an outlay of ₹19,744 crore, and through its 70-gigawatt solar module manufacturing capacity, is to contest. The solar capacity is already substantial; the green hydrogen programme is still in its early commercial stages. The strategic logic is sound: India has abundant solar resource, a growing domestic renewable energy market that provides demand, and an aspiration to become an exporter of both green energy and green hydrogen to Asian and European markets. Whether the economics of green hydrogen at scale become competitive within the Mission’s timeframe is an open question that depends on electrolyser costs, renewable electricity prices and the development of international hydrogen trade infrastructure. The ambition has the right directional logic. The timeline is optimistic.
What has emerged across the Global South over the past five years is not a return to the command economy, nor a repudiation of markets. It is something more pragmatic and harder to categorise. States are using incentives, restrictions, investment vehicles and trade policy in combinations calibrated to specific strategic objectives rather than derived from a coherent ideological framework. The Indonesian government bans nickel exports not because it believes in central planning but because it has calculated that the ban will attract more private investment in downstream processing than any subsidy scheme it could afford. The Indian government designs a production-linked scheme not because it distrusts markets but because it wants to ensure that the incentive structure rewards actual production rather than the mere intention to produce. These are not the instruments of developmental ideology. They are the instruments of competitive pragmatism.
The real challenge is not whether to intervene. It is whether the intervention will be disciplined enough to strengthen industrial capacity without creating the rent-seeking pathologies that have undermined state-led industrial programmes across the developing world for decades. That discipline requires institutions robust enough to enforce performance benchmarks, withdraw support from underperforming sectors and resist the political pressure to protect incumbents who have benefited from public support. The PLI’s 4.9 per cent disbursement rate is, among other things, a signal that the disbursement mechanism is production-linked rather than politically linked. The administrative difficulty is the governance quality. The Global South’s industrial revival will ultimately be judged not by its policy announcements or its approved outlays, but by the gap between those numbers and what actually gets built, employed and exported.
Industrial policy has returned to the Global South not as ideology but as competitive necessity. The IMF and Global Trade Alert estimate global industrial subsidies at approximately $1.1 trillion annually. The US Inflation Reduction Act has been revised to between $600 billion and $1 trillion in clean energy support over ten years. China processes 90 per cent of global rare earths, manufactures 80 per cent of global solar panels, and Taiwan produces 92 per cent of advanced chips. These concentrations are themselves the product of decades of state-directed investment. The Global South governments responding with their own industrial programmes are not making an ideological argument. They are making a supply chain argument: we will not remain structurally dependent on chokepoints we do not control.
The constraints are real. India’s PLI has approved $23.7 billion and disbursed $1.17 billion, a 4.9 per cent execution rate that reflects both the payment structure of a production-linked mechanism and the institutional capacity required to administer one rigorously. Pakistan, Ghana, Sri Lanka and Zambia all entered IMF programmes between 2022 and 2024, a reminder that industrial ambition requires a solvent fiscal foundation. The employment arithmetic is stubborn: 40 million Global South workers enter the labour force annually, and semiconductor fabs create 2,500 to 4,000 jobs per $10 billion in investment. Strategic sectors and labour absorption operate on different scales and require different policy responses.
What the data describes is a revival that is genuine in direction and contested in execution. Indonesia attracted $30 billion in downstream nickel investment through a single coercive instrument. Vietnam built $132 billion in electronics exports by setting conditions that private capital then funded. Mexico became the United States’ largest source of goods imports by being where the supply chains needed to go. India is attempting something more ambitious: a broad-based industrial programme across 14 sectors, a semiconductor ecosystem, a domestic defence industry and a green energy manufacturing base simultaneously. That ambition is proportionate to India’s size and to its developmental objectives. Whether the institutions catch up to the ambition, whether the factories get built and the workers trained and the export orders placed, is the open empirical question of the next decade. Industrial policy no longer needs ideological defence. It needs execution.