Ahmedabad: Delivering the inaugural Y K Alagh Memorial Lecture in Ahmedabad on Friday, Nitin Desai, chairman of the governing council of The Energy and Resources Institute (TERI), stated that while India currently has a business-friendly government, the nation requires a market-friendly government to foster rapid manufacturing growth. Speaking on “Policy Priorities in a Changing World” at the Ahmedabad Management Association (AMA), the economist and prominent public policy voice elaborated on this distinction.
Market-Friendly Government Needed for Manufacturing
“We have a business-friendly government, but we do not have a market-friendly government. And we need to have a market-friendly government if we want manufacturing to grow fast,” Desai asserted. He noted that promoting manufacturing is often perceived as reflecting a close relationship between the government and the corporate sector. However, he pointed to China as an example where smaller, newer businesses drive manufacturing growth. “In China, the huge growth in manufacturing came entirely from newcomers. Their exports account for 20% of the GDP while ours are just 2%. I believe government assistance must be focused strongly on the new companies,” he said.
Declining Manufacturing Share
Desai highlighted that manufacturing’s share of GDP has declined from 17% a decade ago to 14%. “The problem is that we have ended up with a sector that is excessively dependent on the government,” he remarked, underscoring the need for structural reforms.
Agricultural Policy Challenges
Commenting on agriculture, Desai acknowledged that decades ago, the government implemented a sound policy of support pricing for paddy and wheat. However, he questioned its relevance today. “But that is not our problem today. We have a surplus of paddy and wheat. Rice and wheat make up 14% of the total agricultural production. We have an effective policy for 14% of agricultural production, but what about the remaining 86%?” he asked, urging a broader focus on diverse crops.
