Topic: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
Q5. “India’s development is constrained by a legacy it did not choose”. Analyse the historical roots of India’s capital-intensive model. Examine its incompatibility with India’s current demographic-economic structure. Suggest a new development framework for labour-intensive growth. (15 M)
Difficulty Level: Medium
Reference: NIE
Why the question:
Chief Economic Advisor delivered a stark warning to India’s industry leaders today, identifying a critical “trust deficit” and unsustainable economic imbalances as key threats to the nation’s ambition of becoming a developed economy by 2047.Key demand of the question:
The question demands an analysis of the historical origins of India’s capital-intensive development, its unsuitability for a labour-abundant economy, and a reform-oriented strategy for promoting labour-intensive, inclusive growth.Structure of the Answer:
Introduction:
Briefly mention India’s inherited industrial trajectory and its misalignment with current demographic needs.Body:
- Historical roots of capital-intensive model: Mention colonial deindustrialisation, Soviet-style planning, and the License Raj legacy.
- Incompatibility with demographic-economic structure: Talk about jobless growth, rural-urban labour exclusion, and low employment elasticity.
- New labour-intensive growth framework: Suggest reforms in MSMEs, skilling, export promotion, and informal sector integration.
Conclusion:
Emphasise the need to align policy with India’s labour surplus to ensure inclusive, sustainable development and avoid the middle-income trap.
