A new economics for inclusive growth – India’s Growth Mismatch: Rethinking the Path to Development | 27 December 2023 | UPSC Daily Editorial Analysis

Please Share with maximum friends to support the Initiative.

What's the article about?

  • It talks about the core issues of the Indian economy based on “Breaking the Mold: Reimagining India’s Economic Future,” a book by Raghuram Rajan and Rohit Lamba.


  • GS3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment; Inclusive Growth and issues arising from it.


  • The book highlights the challenges faced by India's economy, including the mismatch between skills, jobs, and incomes, and the need for inclusive and sustainable growth.
  • This article challenges the conventional wisdom of India's economic development strategy, advocating for a shift towards inclusive, localized manufacturing and value creation over export-oriented high-end services. It argues that India's current approach, despite heavy investment in education and skills, has failed to generate sufficient jobs and incomes for its vast population.


  • Mismatch Between Skills, Jobs, and Incomes: The book highlights the glaring disconnect between economic growth and social well-being. Millions of Indians, across diverse demographics, remain classified as “economically weaker sections,” struggling to make ends meet. This stark reality exposes the fundamental flaw in India's development model – the mismatch between skills, jobs, and incomes.
  • Learning and Skill Development: Economic theories based solely on data analysis often miss the crucial aspect of “learning” in development. The article emphasizes the importance of creating adjacent job opportunities in rural areas that allow workers to gradually upgrade their skills while staying close to their homes and existing skillsets. This fosters both economic activity and skill development.
  • The authors challenge the notion that India, like China, can bypass the traditional development ladder. They argue that China's success stemmed from lifting its masses through a robust manufacturing sector, creating jobs and propelling them up the economic ladder. India, however, invested heavily in high-end skills and institutions like the IITs, but failed to translate this into sufficient decent jobs for the majority.
  • Rethinking Manufacturing: The article criticizes the overemphasis on large-scale, capital-intensive manufacturing. It argues for promoting small, labor-intensive enterprises in rural areas that add value to agricultural produce and cater to local markets. This approach utilizes India's abundant human resources without requiring excessive land or capital.
  • Inclusive and Sustainable Growth: The article emphasizes the need for inclusive and sustainable economic growth. It warns against relying on foreign direct investment or tax cuts for job creation, arguing that these benefits rarely trickle down to the masses. Instead, it advocates for policies that directly boost domestic production and consumption.
  • Breaking the Mould: Policy Imperatives for Inclusive Growth: The authors advocate for abandoning the obsession with GDP targets and prioritizing inclusive, sustainable growth. They urge policymakers to focus on:
    • Nurturing the informal and small-scale manufacturing sector: India cannot afford to neglect its existing industrial base, which employs millions.
    • Investing in local value addition: Processing and selling agricultural produce locally creates jobs and reduces transportation costs.
    • Rethinking the role of foreign investment: FDI should prioritize job creation and not just market access.
    • Prioritizing domestic production: Making more for India in India, catering to its vast unmet needs, can drive both job growth and economic expansion.

Way Forward:

  • India's economic future hinges on breaking free from outdated economic models and reimagining its growth path. Focusing on inclusive, local development, prioritizing skill development adjacent to existing capabilities, and fostering a vibrant “Make in India” ecosystem are crucial steps towards creating a prosperous future for all Indians.

Please Share with maximum friends to support the Initiative.

Download the Samajho App

Join 5 lakh+ students in downloading PDF Notes for 2000+ Topics relevant for UPSC Civil Services Exam. &nbsp Samajho Android App: https://bit.ly/3H9hva1 Samajho iOS App: https://apple.co/3H8ZJE2 &nbsp Samajho IAS Youtube Channel (300K+ Subscribers): https://www.youtube.com/@SamajhoIAS