Q1. Normally countries shift from agriculture to industry and then later to services, but India shifted directly from agriculture to services. What are the reasons for the huge growth of services vis-a-vis industry in the country? Can India become a developed country without a strong industrial base? 

Model Answer:

Introduction

India's economic growth has taken an unconventional path, shifting from an agriculture-based economy directly to a service-led growth model, bypassing a significant industrial phase. This unique transition raises questions about the sustainability of India's growth model and the role of the industrial sector in driving comprehensive development.

Body

Reasons for the Huge Growth of Services vis-à-vis Industry in India:

1. Liberalisation and IT Boom: Post-1991 economic liberalisation opened India’s economy to global markets, facilitating investment in technology and outsourcing. This led to a rapid expansion in IT and business process outsourcing (BPO) services, where India emerged as a global hub.
2. Cost Advantage and Skilled Workforce: India offers a large pool of English-speaking, technically skilled professionals at competitive wages, attracting foreign companies to outsource services, particularly in software, finance, and customer support.
3. Policy Emphasis on Services: The government’s focus on promoting sectors like information technology, telecommunications, and financial services, coupled with incentives, propelled the growth of the service sector, while industrial policies remained relatively less prioritized.
4. Infrastructure and Capital Limitations in Manufacturing: A weak infrastructure base, complex regulatory frameworks, and capital-intensive requirements limited industrial growth compared to services, which require relatively lower capital investments.
5. Urbanization and Demand for Service Sectors: Rapid urbanization increased demand for healthcare, education, retail, and financial services, fueling domestic service sector growth even as manufacturing lagged.

Can India Become a Developed Country without a Strong Industrial Base?‍

While services contribute significantly to GDP, a strong industrial base is crucial for balanced, inclusive growth and job creation. Relying solely on services can limit economic stability, as the sector cannot fully address India’s vast labour force needs, especially for unskilled and semi-skilled workers. Manufacturing offers long-term economic benefits, such as technological advancements, employment generation, and increased export potential. To transition into a developed economy, India needs a robust industrial sector to create jobs, reduce trade deficits, and meet domestic demand for goods.

Conclusion‍

India’s service sector-led growth model has been a unique asset but lacks the inclusive potential of a balanced industrial sector. Strengthening manufacturing, along with services, will be essential to achieving sustainable development and comprehensive economic growth.

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