In India, Manufacturing has never been the leading sector in the economy since 1991 reforms and requires specialized industrial policy to propel the economic growth trajectory in an inclusive manner. Discuss (200 Words)
Refer - The Hindu
Enrich the answer from other sources, if the question demands.
K. V. A 6 years
Pls review
IAS Parliament 6 years
Try to include about formation of human capital, imparting skills etc. Keep writing
IAS Parliament 6 years
KEY POINTS
The contribution of manufacturing sector in India economy has been hovering around 14% of its GDP since 1991, while developed countries like Japan, USA are contributing around 27% of their GDP.
The percapita income also got declined and the fruits of industrial policies are not reaching the people effectively in an inclusive manner.
Specialized industrial policy
· There is the need to coordinate complementary investments when there are significant economies of scale and capital market imperfections (for example, as envisaged in a Visakhapatnam-Chennai Industrial Corridor).
· Industrial policies are needed to address learning externalities such as subsidies for industrial training (on which we have done poorly).
· In fact, industrial policy was reinforced by state investments in human capital, particularly general academic as well as vocational education/training aligned with the industrial policy, in most East Asian countries.
· However, a lack of human capital has been a major constraint upon India historically being able to attract foreign investment. This can be resolved by easing the labour laws and formalising the workforce via vocational training.
· The Contract Labour (Regulation and Abolition) Act 1970 needs to be amended to provide social security net for informal labours.
· The state can play the role of organiser of domestic firms into cartels in their negotiations with foreign firms or governments.
· The role of industrial policy is not only to prevent coordination failures (i.e. ensure complementary investments) but also avoid competing investments in a capital-scarce environment.
· Excess capacity leads to price wars, adversely affecting profits of firms — either leading to bankruptcy of firms or slowing down investment, both happening often in India (witness the aviation sector).
· Even worse, price wars in the telecom sector in India have slowed profits (even caused losses), which hampers investment in mobile/Internet coverage of rural India where access to mobile phones and broadband Internet, needs rapid expansion.
· Industrial policy can ensure that the industrial capacity installed is as close to the minimum efficient scale as possible.
· When structural change is needed, industrial policy can facilitate that process.
Madhaba Chandra gharai 6 years
Sir check it.
IAS Parliament 6 years
Cut short the introduction part. Try to elaborate more on reasons for specialized industrial policies and its outcomes. Keep Writing.
vivek attri 6 years
Words written are 196
IAS Parliament 6 years
Good answer. Try to include about labour regulations, formalisation of workforce etc. Keep Writing.
