Economy

KEY POINTS

·         China first focused on investment in labour-intensive industries to create jobs for its huge labour force—in textiles, garments, toys, etc.

·         The massive increase in employment created the resources from increased consumption and taxes to invest in infrastructure.

·         But, India incentivized capital-intensive industries through its incentives and tax subsidies and discouraged job-creation.

·         It also discriminated against large companies, reserving goods for the MSME.

·         Its labour policies inhibit hiring and job-creation. Labour-intensive industries like garments suffer from excessive tax and regulations.

·         China invested massively in skill development and in her universities.

·         It created very many new cities, promoted urbanisation and benefited immensely.

·         But, India did not invest adequately in infrastructure, while China over-invested in its infrastructure.

·         India did not invest in her cities, discouraged urban planning depriving her cities of autonomy and good governance creating an urban crisis.

·         It championed the romantic notion of rural villages, failing to understand that rapid urbanisation was the future.

Growth lessons for India 

·         Incentivise and increase investment in labour-intensive industries to create more jobs.

·         Remove restrictive labour regulations to increase job-creation.

·         Allow firms to grow faster in all areas by de-reserving goods for MSME and making them grow bigger.

·         Reduce corporate taxes to 25% for all to increase internal generation of resources.

·         Reduce capital intensity by reducing depreciation rates.

·         Incentivise job creation by special tax-breaks.

·         Increase investment in infrastructure to at least 6.5% of GDP, release investment resources by divestment in state-owned mature infrastructure assets.

·         Improve productivity of ports, reduce power theft, improve speed on highways and in railways and reduce the cost of doing business by removing unnecessary regulations.

·         Keep a level playing field between Indian business and FDI.

·         Allow investment in education by the private sector to improve skills and human capital, grant full autonomy to the top 200 universities to increase innovation.

·         Above all invest in India’s cities, including in new cities.