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Asian Development Model is more relevant for India: PM suggests
Highlights
Recently the Prime Minister of India has convened a meeting with the big industrialists, the RBI Governor and leading bankers, economists and representatives of business chambers to give a call to the industrialists to go for job-oriented, labour intensive industrial investment in India.
Recently the Prime Minister of India has convened a meeting with the big industrialists, the RBI Governor and leading bankers, economists and representatives of business chambers to give a call to the industrialists to go for job-oriented, labour intensive industrial investment in India.
The industrialists brought to the notice of the P.M., a galore of problems that the government can solve their problems and minimize their intensities. It is reported that PM advised investors to take advantage of the slowing Chinese economy. Unlike western type of capitalist countries Asian model of development is more relevant for India.
It is reported that the idea of an Asian model for development grew with the rise of the “tiger” economies of Hong Kong, Singapore, South Korea, and Taiwan, dubbed “the East Asian Miracle” by the World Bank. This model came under stress in the regional crisis of 1997, but the idea of Asia’s rise has resumed given the region’s rapid recovery and the persistence of Asian growth rates despite the 2008 global crisis. Yet the idea that Asia might serve as a blueprint for development is still contested, and there are questions about future sustainability. With many Asian economies still export-based, Asians must find ways to increase their own domestic consumption and intra-Asian demand. The region must also confront growing inequality and environmental damage from rapid industrialization.
As Japan, Taiwan, South Korea and later China have been bright examples for India regarding how to develop industrial base with satisfactory income equality. Is the last meeting of Modi with the industrialist a step towards this type of economic development plan?.
India economy is not in good shape
It is true that the Indian economy is going through several problems, some of which are internal and others are outside problems affecting India. The PM and Finance Minister have repeatedly been quoting that “Indian economy is standing on sound basis and the external factors are responsible for not reaping the desired rate of growth of GDP”.
As a mark of the higher growth rate of the Indian economy FM surprisingly cited the increased indirect tax collection in the current financial year. But it is doubtful if the desired growth (7.5-8%) can be achieved as India is passing through weak macroeconomic indicators like Index of Industrial Production, exports, bank credit to industry, weak capacity utilization Purchasing Managers’ Indices. The agriculture sector has been functioning badly and FM has shown his great concern over the fact in the recent past. The most aggressive service sector is also not moving as fast as it had been a few years back.
Agriculture- sector with biggest source of employment
It is reported that some proposals have were discussed at the meeting on developing agricultural growth. Agriculture is the most labour intensive sector in India today. But a large number of persons are shifting to other sector as agriculture is not a lucrative sector to them.
Growth rate of agriculture in the ongoing 5th Five-Year plan (2012-17) has been 4%. But in the first three years it has been only 1.7% on an average. There is not hope for this sector to perform better as the monsoon is not favourable throughout India. The long neglect of agriculture may turn out to be grave if required action is not taken immediately.
The main three areas that economists suggest are irrigation, technique of production which includes quality seeds, pesticides, and fertilizers and third is marketing of products. Finance, insurance, land reforms are also important. A big push, for a period of 10 years or so, is needed to have food security, supply of inputs for agro-based industry and other intermediary products for the coming few decades. In this case a huge employment guarantee is possible.
MSME- an area that India can focus on
This could be the biggest sector for generating industrial employment. It contributes 45% of exports and 40% of total manufacturing in India. In the annual report 2013-14, ministry of MSME shows that there were 467.56 lakh entrepreneurs and 1061.52 lakh employed persons. But the actual employment was expected to be more.
The development experience of Asian countries like Japan, South Korea, Taiwan and China in their later phase shows that the MSME sector with government’s supervision and direct involvement was mainly the key to success.
In the later phase South Asia’s newly industrialized nations like Thailand, Malaysia and Indonesia had been able to attain commendable development performance. But before doing that each country had to attain high literacy, land reform, good health for the people. Is it possible for the Indian government to be deeply involved in the industrialization process as had been the cases in countries like Japan, South Korea and Taiwan? It is reported that in the meeting PM, made overturn to private investors. He expressed his trust and dependence on the private investors in boosting investment. But the government should also be directly be involved in the process of industrialization.
Sectors with high employment opportunity and exports
He stressed more on sectors like infrastructure, real estate, textiles, food processing, gems and jewellery are labour intensive. But about all the sectors are now performing unsatisfactorily. Textiles and gems and jewellery, to a large extent, are export dependent. Now the share of export is falling.
The share of export has been decreasing over the years in almost all the sectors except petroleum. Manufactured products constitute the largest share of our export basket, 67% in 2014-15. It had been as high as 81% in 1999-2000. This is a major concern for India, particularly at a time when India is thinking of becoming a manufacturing hub.
Skill development is the key to success
Improvement of skills is one of most vital for India; otherwise employability of the young generation will not be assured. In this respect the Chinese experience may be an example for India. In China, students are compulsorily trained from class seven. But selection of students for higher technical sections starts from class 10.
The syllabus is made at the national level but it is taught at the local level. Good monitoring system, financial subsidy to students, good job opportunity and change of study materials according to the need of the industry are some of the factors in achieving successful skill development in China. But in India, fruits of the demographic dividend cannot be reached without making the generation employable.
Conclusion
It should really be a concern for the leaders of a nation as to how to provide jobs to its people, particularly, where population pressure is the highest. But the government has to have a time bound target with full political will to achieve the goal. The history of economic development of a number of successful Asian countries throws lights on that. The European way of development is very different both politically and historically.
What India actually needs is a government led economic development with emphasis on income equality. The private sector will have a big role in the job. But welfare of the masses is the real goal.
G.Rajendera Kumar
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