From UPSC perspective, the following things are important :
Prelims level : Not Much
Mains level : Prospects of ethical wealth creation and its redistribution
- The big idea from the Economic Survey 2019-20 is the need to push towards increasing the number of wealth creators in the Indian economy.
- The Survey states that to achieve the goal of becoming a $5-trillion economy, the invisible hand of markets will need the support of “the hand of trust”.
- Essentially, this means that regulation and rules in the economy should be such that they make it easy to do business but not turn into crony capitalism.
- The Survey states: “The invisible hand needs to be strengthened by promoting pro-business policies to:
- Provide equal opportunities for new entrants, enable fair competition and ease doing business,
- Eliminate policies that unnecessarily undermine markets through government intervention,
- Enable trade for job creation, and
- Efficiently scale up the banking sector to be proportionate to the size of the Indian economy.”
How can this be done?
- The Survey introduces the idea of “trust as a public good that gets enhanced with greater use”.
- In other words, it states that policies must empower transparency and effective enforcement using data and technology to enhance this public good.
- A key element here is the need to increase the opportunities for new entrants.
- “Equal opportunity for new entrants is important because… a 10 per cent increase in new firms in a district yields a 1.8 per cent increase in Gross Domestic District Product (GDDP)”.
- According to the Survey, the right policy mix can boost job creation.
Levers for furthering Wealth Creation
The Survey identifies several levers for furthering Wealth Creation, which are:
- entrepreneurship at the grassroots as reflected in new firm creation in India’s districts;
- promote ‘pro-business’ policies that unleash the power of competitive markets to generate wealth as against ‘pro-crony’ policies that may favour incumbent private interests;
- eliminate policies that undermine markets through government intervention, even where it is not necessary;
- integrate ‘Assemble in India’ into ‘Make in India’ to focus on labour intensive exports and thereby create jobs at a large scale;
- efficiently scale up the banking sector to be proportionate to the size of the Indian economy and track the health of the shadow banking sector;
- use privatization to foster efficiency. The Survey provides careful evidence that India’s GDP growth estimates can be trusted.
Is this push for wealth creators new?
- This is an extension of what PM said during his Independence Day speech in August last year, where he stressed on the need for the country to view “wealth creators” differently.
- Those who create wealth for the country, those who contribute in the country’s wealth creation — they all are serving the nation as well.
- We should not look at wealth creators with apprehension and doubt their intentions; we should not look down upon them.
- The PM had also said there was a need in the country to give such wealth creators due respect and credit.
- He had said that this change is required because “If no wealth is created, no wealth can be distributed”.
Focus on Ethical Wealth Creation
- The Survey emphasised on the importance of ‘Ethical Wealth Creation’, as the key to making India $5 trillion economy by 2025.
- Krishnamurthy V. Subramanian, the Chief Economic Adviser of Ministry of Finance has done a commendable job in producing a thought-provoking masterpiece on ‘ethical wealth creation’.