Q . The economic base of countries, in general, see the transition from agriculture to industry and then to services. However, India skipped the development of an industrial base and shifted to services directly from agriculture. Cite the reasons and how India can be a developed nation without strong industrial base?
The proper course of development that an economy
- The question is asking for the reasons for the direct shift. First para would brief about the shift.
- From 2nd para, we can cite the reasons.
- Then in the 3rd para, challenges in India’s road to be a developed nation.
- Concluding para would contain the way forward and future measures.)
follows a shift from agriculture to services via industry, but India has shifted from agriculture to services directly without entering into industrial phase.
The Reasons behind its direct-shift are as follows:
- Fear of foreign domination– India’s historical experiences prevented the development of private sector and India opted for the socialist mode of development, thus a weak private sector and an inefficient public sector emerged.
- The period during 1975 and 1990s saw the political instability which weakened the decision-making.
- Promotion of industrialization needed the support of capital goods industries which was absent in India.
- Red tape, bureaucracy and the Licence Raj had strangled the private enterprise.
- India also lacked infrastructure like power, logistics which is essential for the industries.
- Absence of market for industrialized goods as large chunk of population was poor.
- India focused on domestic market but lacked strategies to promote the exports.
- India followed the socialism and hence has stringent Labour laws.
- Lack of skilled labour– India poorly conceptualized over the vocational training to the labours.
The factors that supported the direct shift are as follows-
- Globalisation and Liberalisation– Both the term influenced India almost at the same time, which created a base to grow service sector. The globalization opened the shifting of service sector job while liberalization opened the country’s market by increased investment.
- Reforms in Finance, telecom, IT sectors made it possible to prosper these services in India.
- Availability of Skilled manpower– The huge availability of skilled manpower with lower labor cost provided a solid base for service sector growth. Focus on Higher education 1st FYP onwards
- Internal and external demand– The worldwide demand of services sector with increasing economy and purchase power has influenced greatly in growth of service sector.
- Proficiency in English
- Being on the other side of the globe with respect to USA.
Now the question arises whether India can become a developed nation without the strong industrial base. So the answer is no. India cannot be a developed country without a strong industrial base because of the following reasons:
- Solid industrial base is required for growth of both agriculture and service sector.
- The demand of services and goods cannot be met for such a huge population until a solid industrial base in country itself.
- Jobs– the huge working population of the country cannot be vested in service or industrial sector only. The service sector contributes to 60% of GDP but employs only 24% of the workforce.
- The manufacturing sector tends to be labour intensive, hence renewed emphasis on the manufacturing through programmes like ‘Make in India’ will serve to correct this anomaly and raise employment in proportion with growth in GDP.
- An industrial economy sees a spurt in exports. Since India skipped this step, its exports are still not high, even though it has potential. Boost to the manufacturing sector, large-scale production of goods at competitive prices, creation of new SEZs, easier clearances and a relaxed tax regime will eventually lead to rise in exports.
- Since India skipped the manufacturing stage, its heavy industries sector is relatively under-developed.
So the road ahead needs to be facilitated with the reforms for Ease of Doing Business so that the Industrial Revolution 4.0 can be led by India in order to multiply the economic growth rate. The programmes like Make in India seems to be good step in that direction if properly supported by the labour and banking reforms to provide both human resources and financial resources. But the major role could only be played with the development of infrastructure with continuous power supply, logistical support and also the skilled manpower.