( AST/TMA/2022-23 )
Answer:
De-industrialization is a significant economic phenomenon characterized by a decline in the relative importance and contribution of the industrial sector within an economy. It entails a shift away from manufacturing and industry-driven activities towards a greater emphasis on the services and primary sectors. This transformation is often accompanied by a decrease in the share of industrial employment, output, and investment as a proportion of the overall economy.
In the context of the Indian economy, de-industrialization can be understood as the dwindling prominence of the manufacturing sector in comparison to the services sector. Several factors have contributed to this phenomenon:
Economic Liberalization: In the early 1990s, India initiated economic liberalization policies that opened up the economy to foreign investment and reduced trade barriers. While this led to rapid growth in the services sector, it also exposed the inefficiencies and challenges faced by the manufacturing sector.
Lack of Infrastructure: The manufacturing sector in India has often been hindered by inadequate infrastructure, such as unreliable power supply, transportation bottlenecks, and bureaucratic red tape. These issues have impeded the sector’s growth and competitiveness.
Shift to Services: India has seen a significant shift in employment from manufacturing to services, particularly in IT and software services, business process outsourcing, and other knowledge-based industries. This shift has been driven by the demand for skilled labor and the globalization of services.
Agriculture Dominance: India continues to have a large agricultural sector, employing a substantial portion of the population. De-industrialization has, to some extent, resulted in a concentration of labor in low-productivity agriculture.
The impact of de-industrialization on the Indian economy can be both positive and negative, depending on various factors:
Positive Impacts:
Services Growth: The growth of the services sector has generated employment opportunities, increased foreign exchange earnings, and contributed to economic diversification.
Innovation and Technology: De-industrialization has allowed India to focus on high-tech industries, such as information technology, where it has gained global prominence.
Urbanization: As people move from rural areas to urban centers for service-sector jobs, it has spurred urbanization and improvements in living standards.
Negative Impacts:
Unemployment: De-industrialization has led to the displacement of workers in the manufacturing sector, resulting in
structural unemployment and underemployment.
Income Inequality: The benefits of de-industrialization have not been evenly distributed, contributing to income inequality, with a growing disparity between urban and rural areas.
Vulnerability to External Factors: A lopsided economy heavily reliant on the services sector can be vulnerable to external economic shocks.
In conclusion, de-industrialization in India reflects a complex interplay of factors that have reshaped the country’s economic landscape. While the growth of the services sector has brought significant benefits, it has also posed challenges related to unemployment and income inequality. Achieving a balanced economic development strategy that fosters both manufacturing and services sectors is essential for India’s sustainable economic growth and development.