India needs to develop a unique economic strategy

Source: The post India needs to develop a unique economic strategy has been created, based on the article “A new agenda for great power status” published in “Business standard” on 28th June 2024

UPSC Syllabus Topic: GS Paper 3– Economy

Context: The article discusses the need for India to develop a unique economic strategy that is sustainable and not resource-heavy like China’s. It emphasizes joining global trade groups, reducing tariffs, and supporting the informal sector to boost manufacturing and overall economic growth.

For detailed information on Indian Development Model read Article 1, Article 2

What is India’s external economic footprint?

1. Currently, India accounts for 1.8 per cent of world exports and is ranked 18th.
2. It accounts for 2.8 per cent of global imports and ranks ninth worldwide.

Why should India not follow the China growth model?

1. Resource and Energy Demand: China’s growth relied heavily on extensive resource and energy consumption. This model is unsustainable for India, given global resource limits and the world’s inability to support another such heavy consumer.

2 Ecological Sustainability: The Chinese model is incompatible with the needs for ecological sustainability and addressing climate change. India requires a growth strategy that significantly reduces environmental impact.

3. Greenhouse Gas Emissions: China may have peaked in terms of its greenhouse gas emissions. In contrast, India’s emissions are set to increase, which will lead to international pressure to curb them.

How can India enhance its global economic influence?

1. Expand Foreign Trade: India aims to become the third-largest trading power by expanding its foreign trade, aligning with its current status as the fifth-largest economy.
2. Join Major Trade Groups: Engaging with major trade groups like the Regional Comprehensive Economic Partnership (RCEP) and applying to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will integrate India more deeply into global trade dynamics.
3. Reduce Tariffs: Lowering high custom tariffs, which have increased since 2014, will facilitate India’s participation in global and regional supply chains, essential for being a global trading power.
4. Support the Informal Sector: Simplify GST procedures and reconsider the Production-Linked Incentive scheme to bolster small and medium enterprises, which are vital for employment and economic resilience.

Question for practice:

Discuss India’s strategy to enhance its global economic influence and why it should diverge from China’s resource-heavy growth model.