India needs a ground-up growth model
for an inclusive economy (Mint)
Mains Paper 3:Economy
Prelims level: Dominant school of economics
Mains level: Ground up growth model for an inclusive economy
- The country needs new ideas to uplift people in villages even if
blinkered economists have little time for our rural multitudes
- It is clear they agree that the Indian economy is not doing well. And
that they do not agree upon what the remedy is.
Differences in opinion:
- One group of economists is fixated on interest rates and fiscal deficits
as the levers to improve the health of the economy.
- This will impact on economic growth of decimal point differences in
interest rates and ratios of fiscal deficit to gross domestic product.
- Another group of “trade economists" sees opportunities for India in
greater integration with global trade. These economists are alarmed by the
weakening of the spirit of the 1991 reforms and the return of protection of
- A large group of economists is concerned that governments are
interfering with the “magic" of the market.
- They accept that the market is poisoned by a concentration of market
- In economies where the “business of business must be only business" and
where private participants are expected to pursue their self-interest,
self-regulation is an oxymoron.
- They reluctantly accept that governments must shape the rules of the
game for the market to work its magic.
Thought from the dominant school of economics:
- They has concentrated on framing regulations (and their reduction) to
make economies attractive for investors.
- It measures an economy’s health by the size and growth of GDP.
Countries, including India, have seen their GDP grow by adopting this
ideology and the rules that flow from it.
- At the same time, the wealth of investors at the very top has grown much
faster than the incomes and wealth of citizens in the lower half of the
- This has fuelled the rise of anti-establishment, “anti-expert" populist
movements around the world.
- Citizens are asking whose interests these economists, or the
policymakers who accept their advice, serve.
- Some economists question the dominant paradigm. They view economies
“bottom-up" and “inside out" from the perspective of people at the bottom.
- Unlike the dominant school which takes a “top-down" and “outside in"
view from investors’ perspectives.
- The ruling school derides them as “socialists" and “anti-growth". First
grow the pie, they say, before you redistribute it.
- Whereas the bottom-up, people-first school’s view is that to grow the
pie, there must be human development alongside, with significant public
investment in education and health.
- Economists of all hues now agree that structural reforms are necessary
to revive the Indian economy.
- Fundamental reforms cannot be delivered by a finance minister in one
budget. Nor by any government within a five-year term. Because deep reforms
will require changes in economic structures that have been built up over
Q.1) With reference to the MoUs/Agreements signed during the visit of
President of Portugal to India, consider the following statements:
1. MOU for Cooperation for Setting Up a National Maritime Museum Heritage
Complex in Lothal (Gujarat) between Portuguese Ministry of Defence and Indian
Ministry of Shipping.
2. MoU between We-Hub Telangana and PARKURBIS Covilha for Exchange of Women
1. Which of the statements given above are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above
Q.1) What do you mean by the dominant school of economics? What are the
criticisms of it?