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HindustanTimes Wed,16 Apr 2014

Indo-US study finds India’s growth model ‘flawed’

Yashwant Raj, Hindustan Times  Washington, January 15, 2014
First Published: 23:18 IST(15/1/2014) | Last Updated: 23:20 IST(15/1/2014)

A new report on India’s economy has argued that policymakers need to shift focus from the current “flawed” approach of increasing manufacturing to improving productivity.

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Instead of a National Manufacturing Plan, which has set a goal of creating 100 million jobs in this decade, the report made a case for a National Productivity Commission.

The report has been produced jointly by US think-tank Information Technology and Innovation Foundation and India’s ICRIER, which is headed by Isher Ahluwalia, wife of Planning Commission deputy chairman Montek Singh Ahluwalia.

The report was slated for release later this month. However, it was put off for a couple of weeks due to, among other reasons, the circumstances that followed the arrest of Indian diplomat Devyani Khobragade in the US.

The report, however, doesn’t contain much good news.

“Indian policymakers are pursuing a flawed economic growth model, one that is too one-dimensionally focussed on manufacturing-based growth and not sufficiently focused on productivity-based growth across all sectors of India’s economy, including services and agriculture,” authors Stephen J Ezell and Robert D Atkinson said in the executive summary.

That “flawed” model, they argued, is responsible for India’s insistence on local content sourcing (preferential market access), compulsory licensing of some medicine, restriction on FDI and market access to e-commerce and retail.

According to the authors, India was “pressured” to go in that direction because of the perceived success of these “trade-distorting practices” in Brazil and China.

These measures may deliver in the short-term, but only generate trouble in the longer run, and are “fundamentally unsustainable,” Ezell said in an interview.

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