Topic: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth
Q5. “Sustained economic growth requires businesses to move from value extraction to value creation.” Comment. (10 M)
Difficulty Level: Medium
Reference: IE
Why the question
India’s aspiration to become a developed economy requires a transition from consumption-driven growth towards innovation-led and productivity-driven growth. In this context, the role of businesses in creating long-term economic value has become increasingly important.
Key Demand of the question
The question requires commenting on why sustained economic growth depends on a shift from value extraction to value creation. It also requires examining the challenges hindering this transition and suggesting suitable measures to promote value creation.
Structure of the Answer:
Introduction
Briefly explain the distinction between value extraction and value creation and link it with innovation, competitiveness and long-term economic prosperity.
Body
- Need for value creation: Explain how innovation, technological capability, productivity enhancement and intellectual property generation enable sustainable economic growth and strengthen global competitiveness.
- Challenges in the transition: Discuss the structural, financial, institutional and behavioural barriers that discourage firms from undertaking long-term investments in innovation and capability building.
- Way forward: Suggest measures to strengthen research ecosystems, incentivise risk-taking, improve industry-academia linkages and promote long-term innovation-oriented business strategies.
Conclusion
Conclude by highlighting that India’s growth story will be more durable when businesses evolve from wealth extractors to creators of knowledge, technology and globally competitive products.
