Daily News Analysis:-

GS3: Indian economy

World over, in post pandemic period, emphasis on industrialisation has again come to the forefront.

• Retreat from globalization
• Atmanirbhartha
• European green deal
• Inflation control act of USA

Meaning of industrialisation

Transforming the economy of the nation, where its reliance on industrial production, manufacturing sector or secondary sector increases.

Purpose of industrialisation

1. Generating Employment
2. Sectoral growth during pandemic and post pandemic growth is attributed to service sector growth. Service sector employs only 25-30% of the highly skilled population, the growth has been experienced by only a few. Employment elasticity of service sector is low. This widen inequality gap.
3. This anomaly of the service sector can be addressed by manufacturing sector which potentially employs a large number of people. Reduces disguised unemployment in the rural sector.
4. Helps to reduce trade deficit:
5. Still $60billion trade deficit is experienced by India.
6. Manufacturing sector helps to alleviate this problem by producing most of  the consumer goods we import.
7. Inequality in service sector is worse than the manufacturing sector.
8. Migrants in urban areas are employed in low wage construction activities.
9. Gini coefficient in service sector is 44, compared to 32% in manufacturing sector.
10. Infrastructure development
11. High end machineries are necessary to quicken infrastructure building.
12. Infrastructure is necessary to bring down the logistical cost which is around 12% of GDP right now. This increases the economic competitiveness of India.
13. Defense sector
14. Reduces import dependency which is leading to tightrope foreign policy. Manufacturing sector is also strategically important.
15. Plugs trade deficits which is happening due to excessive military imports. India is the world’s largest defense importer.
16. Attracts investments through FDIs and FIIs
17. Due to high export potential of manufacturing sector, foreign investments are enthusiastic.
18. Increases forex reserves.

Why is the industrial sector stagnant in India?

1. Lack of policy focus on manufacturing sector
2. Post 1991 reforms, the service sector was more focused.
3. Stricter labor and company laws for large companies. 
4. High compliance costs.
5. Continued police raj in terms of labor laws, in terms of opening and shutting of companies.
6. Failure of creating quality education for masses.
7. Early on higher education was more emphasized. Eg: IITs, IIMsm. Access for masses was less.
8. Industry requires massive quality labor.
9. Neglecting vocational training
10. Low ITI establishments 
11. Local artisanal industries were neglected and ignored. Innovation is the frontrunner of the manufacturing sector.

Thus, creating mass education, investments, competitiveness is essential for deeping industrialisation, which shakes the foundation entire society.