Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

[op-ed snap] The de-urbanization of India’s manufacturingop-ed snap


Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Industrial growth and associated issues


Relation between industrialization and urbanization

  1. Conventional wisdom suggests that industrialization and urbanization go hand in hand
  2. Policymakers often adopt an active “industrial policy” to accelerate growth
  3. They also embrace an active “urban policy”, since industrialization without urbanization gets stalled

Change in this phenomenon

  1. India’s industrialization and urbanization did grow together in the early 1990s
  2. Manufacturing growth was initially concentrated around the megacities
  3. It has dispersed in the last decade
  4. The share of the manufacturing sector has increased in rural areas

Current scenario

  1. Unlike in China and US, the growth drivers in India are still concentrated in megacities
  2. Secondary cities have yet to become engines of growth and job creation in India

Future of India’s economic growth

  1. India’s future economic growth may not be in its megacities
  2. It might be in its secondary cities, where there is substantial untapped potential
  3. Inter-urban competition between tier I and II cities could be India’s big driver of economic transformation and growth
  4. Next phase of urbanization could result in a four-fold increase in per capita income

What can be done to scale up secondary cities?

  1. Building a smart tier II and tier III city calls for scaling up investments in physical and human infrastructure
  2. This would make them more competitive, attract new enterprises, and create more jobs
  3. New technology can play a more dynamic role in urbanization
  4. It can reduce congestion costs, make cities green and sustainable, and increase the efficiency of local government programmes

Way forward

  1. New urbanization should build more bridges with rural areas
  2. India’s renewed emphasis on rural development, and the current trend of the manufacturing sector moving away from densely populated urban areas, opens new doors and provides immense potential for regional and spatial development

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