Changing the Growth Paradigm in India

Source: This post has been created based on the article “Changing the growth paradigm” published in “The Hindu” on 24^th February 2024.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Indian Economy and issues relating to growth and development.

News: The article discusses the dominant paradigm for growth in India and the issues with it. Growth Paradigm in India

Background:

The Governor of the Reserve Bank of India recently said in an open letter to the Union Finance Minister that India’s economy is not healthy. To improve the well-being of citizens, they need decent jobs, which the Indian economy has not provided despite impressive growth of GDP.

What is the dominant paradigm for growth in India?

All Indian governments, since the liberalisation of the economy in 1991, have focused on GDP. This paradigm focuses on increasing the size of the pie before its redistribution.

It has replaced “socialist” models which were concerned with conditions at the bottom. In this model of progress, villages are bad, cities are good; farms are bad, and factories are good.

What is the issue with the current growth model?

1) Inequality: India is becoming one of the most unequal countries in the world with this flawed model of economic progress. Structural conditions that cause inequitable growth have worsened.

2) Environmental Concerns: With the present model of progress, India must use more fossil fuels to propel economic growth. This has become a bone of contention in global climate negotiations, where all countries are expected to make equal sacrifices to save the global climate.

3) Dependence on Fossil Fuels: They are required for steel, concrete, plastics, and mobile machinery used for transportation and farming runs on fossil fuels.
a. Usage of Fossils in the Food Industry: Fertilizers are produced from fossil-fuel feedstock. Farm machinery is made of steel and runs on fossil fuels. Plastics are used for hygienic transportation of food in global supply chains.

Therefore, India must find a new paradigm of progress, for itself and for the world, for more inclusive and environmentally sustainable growth.

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What should be the way forward for a new paradigm of growth?

According to the author, the following needs to be done:

1. Retreat of agricultural mechanization.
2. Reduction in the use of synthetic agrochemicals and services.
3. Need for the labor force to leave cities to produce food in the old ways. Purely organic farming would require people to abandon cities and resettle villages.
4. Local systems solutions, cooperatively developed by communities in their own villages and towns, are the way to solve global systemic problems of climate change and inequitable economic growth.

Rather than trying to catch up with rich countries on their historical development paths, India should take advantage of its present realities. India’s policymakers must free themselves from western-dominated theories of economics.

Question for practice:

What is the issue with the current growth model in India? What should be the way forward for a new paradigm of growth?