GS3 – Indian Economy
Context:
The Standing Committee on Finance recommended a plan for balanced industrial distribution across states to promote equitable economic development.
Key Recommendations
- PSE Policy: Accelerate privatisation or closure of loss-making PSUs in non-strategic sectors.
- State Incentives: Revise central funds for states undertaking PSU reforms.
- Investment Rate: Raise India’s investment to 35% of GDP to achieve 8% growth.
Current Industrial Landscape
- Output Skew: Five states contribute 53% of manufacturing GVA and national employment.
- Industrial Clustering: Tamil Nadu dominates in factories, Bihar lags significantly.
- Regional Divide: Gujarat, Uttarakhand, Himachal prosper, while northern and eastern states remain under-industrialised.
Reasons for Uneven Distribution
- Historical Legacy: Colonial industrial concentration in Bengal & Maharashtra created long-term disparities.
- Geographical Barriers: Himalayan terrain and North-Eastern isolation hinder growth.
- Infrastructure Deficits: Power shortages and transport gaps restrict eastern states’ industrialisation.
- Policy Disparities: Green Revolution favoured Punjab & Haryana, widening gaps.
- Skill Imbalance: Technical training and R&D hubs remain concentrated in southern states.
Way Forward
- Cooperative Reform: Centre-State coordination with reform incentives.
- Logistics Upgrades: Use PM GatiShakti to improve transport and logistics in weaker states.
- Cluster Expansion: Replicate EV and electronics clusters via plug-and-play industrial parks.
- Energy Reliability: Strengthen grids and pumped-storage capacity to attract manufacturing.
- Skill Hubs: Establish engineering and vocational institutes in under-industrialised regions.