Q.1.
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? (CIVIL SERVICE(MAIN), 2014,G.S-3, ECONOMIC
DEVELOPMENT: Vashistha Ray)
ANS: A
careful study of India’s pattern of sectoral growth shows that in the four
decade period, 1950-1990, agriculture share in GDP or agricultural growth
declined by 25%, while industry and services gained equally. The growth of
industry has stabilized since 1990, while the growth of services picked up in
1980s and accelerated in 1990s. at current level, India’s service sector seems to have bypassed
industrial sector. Following reasons could be attributed to huge growth of
services vis-à-vis industry in the country:
A. As income of people increases, demand
for services such as health, education etc. increases by more proportionate than
demand for industrial output. In India also, the rise of middle- class and
upper- middle classes caused demand for services to increase significantly.
This led to growth of services in India.
B. Industrial growth is more dependent
upon infrastructural development such as road and ports which acted as
bottlenecks to growth. The growth of service sector is less impacted by such
constraints. The phenomenal growth of
low skilled services activities has occurred due to reduced opportunities of
manufacturing sector and the sophisticated and high skilled services have grown
due to more intensive in skilled labour, with which India is well endowed.
C. The growing external demand for miscellaneous
services from India has also led to huge growth of service sector.
D. The advent of IT revolution made it possible
to deliver services over long distances at a reasonable cost. Trade in services,
thus, increased world wide and outpaced industrial growth.
E. Indias’s comparative advantage in
huge labour force, skill & expertise proved to be more catalyzing factors
for growth of service sector than that for industrial sector.
F. The introduction of new economic
reforms, 1991 in industrial, financial and fiscal areas also resulted in
significant growth of services in post- reforms period.
In the age of globalization, India can definitely become a developed
country without a strong industrial base. This would materialize if we
specialize in export based services and enhance our skill and competitiveness
in delivering services through appropriate policy measures.
