Creating and sustaining growth in India

Excellent study material for all civil services aspirants - begin learning - Kar ke dikhayenge!

 Creating and sustaining growth in India

---

Read more on - Polity | Economy | Schemes | S&T | Environment

---

• Sustainable growth: Three eminent economists have asked an important question and presented an analysis. a) The question is “What would make India’s growth sustainable?” b) The analysis points towards the key obstacles that need to be removed and steps that need to be taken for sustainable growth. c) Rural-led growth strategy could be the first step.
• Recent growth: Investment occurs when investors see potential for demand that generates return on investment (ROI). Growth for most poor countries that grew rapidly in the last few decades was export-led. Increasing protectionism and now the pandemic is making that kind of growth less viable.
• India and the case for rural-led growth: The benefits of India’s IT export-led growth in the 2000s cascaded to other parts of the economy but the small well-off segment of the population enjoyed the gains. India’s rural population is huge and so is its appetite to consume. Only increase in demand for mass-consumption goods and not just luxury goods can fuel domestic investment. 
• Rural-led strategy: This requires a shift from grains to higher value-added farm products such as fruits, vegetables, milk, eggs, meat and fish and products such as wine, cheese and flowers. Such production will increase rural income, purchasing power and demand for manufactured products. 
• Obstacles to remove for rural growth: Current grain procurement system locks farmers in a low-income low-risk strategy of supplying the public distribution system (PDS). Investment in agricultural infrastructure, extension services for unfamiliar crops, marketing and risk management facilities, and entrepreneurship training is also not sufficient. 
• Rural growth is just one step: Increase in rural income (with programs like NREGA) in the past has resulted in higher purchase of cheap Chinese manufactured goods. Hence, focus cannot be on agriculture and rural products alone. 
• Three other issues to address: a) Inadequate support for new and efficient small firms b) Limited access to markets & marketing c) Non-inclusive growth
• Inadequate support for small firms: There is restricted access to investment and working capital due to a) structural reasons b) large non-performing assets of banks c) pandemic and lockdown conditions. Large firms don’t always pay small firms on time. Small-firm finance reforms will also benefit the rural segment since many farmers become entrepreneurs.
• Access to markets and marketing: There might be an ongoing trend of protectionism and restrictions due to the pandemic, but the need to reduce reliance on China and growing niche markets such as healthcare and environment-friendly products will drive export-led growth. In agriculture, Punjab should serve West Asian markets, and other rich domestic markets like Delhi.
• Non-inclusive growth: The analysts’ recommended approach is based on cross-industry coordination and oligopolistic supplier markets. India is moving towards a trend of concentration of economic and political power in the hands of a few industrial houses. This doesn’t help increase incomes of a large part of the population. 
• Summary: Export-led growth is waning amidst protectionism and pandemic-led concerns. For sustainable growth, India needs an inclusive growth strategy of which rural-led growth through value-added products and agricultural investments could be the first step. Insufficient support to small firms, inadequate access to markets and marketing support and domination of a few industry houses in economy and politics are other areas that need be looked into. 

Read more on - Polity | Economy | Schemes | S&T | Environment

Join UPSC Self Prep course | Online Course (PT Gurukul)  | Covid Special Course | Join PT courses

* Content sourced from free internet sources (publications, PIB site, international sites, etc.). Take your own subscriptions. Copyrights acknowledged.