93. Which of the following statements reflects the reasons for trickle-down theory’ has not worked in India?
1. The sector contributing the least to GDP has the maximum dependence (agriculture) and the sector contributing the most, has the least dependence (services).
2. In India’s growth process, there has a missing link of the relative earlier maturity of the services sector before achieving manufacturing sector maturity.
3. Lack of basic, effective and efficient Infrastructure in and around rural areas.
4. Despite increase in per capita income level per capita saving has remained nearly constant.
Which of the above statement(s) is/are not correct?

Only 1 and 2

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Only 1, 2 and 3

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None of the above

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All of the above

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Solution

The correct option is C None of the above
Since the economic reforms initiated in 1991 and since 2005, India has not only broken through the low-growth cycle but it has also become one of the fastest-growing economies after China.
The high growth rate achieved since 2005 questions the trickle-down theory in India, as it has not benefited the Indian masses in terms of lowering absolute poverty levels significantly, creating employment opportunities, and reducing inter/ intra- regional imbalances (rather it has only accentuated). There are reasons to understand why trickledown theory’ has not worked for India
1. Indian economy has a structural problem of excessive economic dependence on the agricultural sector. Over 65 per cent of the population is either directly/indirectly dependent on this sector. The contribution of the agricultural sector to the overall gross domestic product {GDP) is only 18 per cent. The largest contribution of over 55 per cent comes from the services sector and the remaining 27 per cent is contributed by the secondary sector of which only 14 per cent is by the manufacturing sector. The sector contributing the least to GDP has the maximum dependence (agriculture) and (he sector contributing the most, has the least dependence (services).
2. In India’s growth process, there has a missing link of the relative earlier maturity of the services sector before achieving manufacturing sector maturity. Ideally it should be first manufacturing sector before the services sector or at best together. This is an important feature as there is a linkage between manufacturing sector and agriculture sector either through raw material or as a market for industrial produce and employment opportunities.
3. Thus the benefit of increased growth in recent years has largely been confined to the service sector and little to the manufacturing sector and has not percolated to the agricultural sector where the majority of our population resides.
4. But it also has to do with the governmental efforts by providing basic, effective and efficient Infrastructure around villages including the road /rail links. The aim should be to have pan- India rail - road connectivity. This would provide for easy accessibility and faster mode of travel the making labor mobile .History has been testimony to the fact that roads are the gateways to development in countries like Germany, the United States and more recently China. India has only recently woken up to this reality.
5. The saving rate began to increase steadily in the 2000s with the Tenth Plan average (for 2002-07) registering 31.4 per cent while during 2007-13 it increase almost double which is the highest in all previous decades

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Similar questions

Q. Which one of the following sub-sector of the services sector in India has contributed the highest per cent in the annual growth rate of the GDP?

On attending a conference, which focused on the role of the services sector in the Indian economy I was amazed. The conference gave a very interesting perspective on the role of the service sector in the growth of the Indian economy in relation to growth rates in agriculture and industry. The current situation in India is that the growth rate of services has overtaken both agriculture and industry and is now contributing to more than 50% of GDP. The service sector has the highest growth rate and is the least volatile sector. Growth is particularly marked in public services, IT and financial services.

In some areas, the growth rate of the service sector is 40-50% due to increased use of mobile technologies. India, therefore, has a service-oriented economy. It hasn't followed traditional growth models as in China. However, in the process of doing so it has skipped the manufacturing stage and has jumped straight from the agriculture stage to service stage, which is also the main reason for the expansion of the service sector. In fact, the situation now is such that the growth in the service sector can and will support the agriculture and industrial sectors. However, the only setback for the Indian economy is the lack of growth in the manufacturing sector which causes dependence on other countries, which is not so desirable in terms of job creation and increased prosperity.

Population is also a major concern of the Indian economy. As the population of India grows so also does the number of dependents in the population in both the lower and higher age groups. In such a scenario of increasing population, especially in an economy which is still recovering from the crisis, growth becomes difficult. For such an economy to grow it has to invest. Currently, the public sector invests more than it saves. The household sector saves in surplus, but it is not increasing so it cannot continue to support private and public sectors. There is a massive need to spend on agriculture and infrastructure development in the country. Apart from that, health and education should also be the priority of the government particularly the education of women in order to reduce the birth rate.

Q. According to the passage, which of the following is/ are true about the impact of increasing population on the Indian economy?

Q. Read the following passage carefully and answer the given questions.

On attending a conference which focused on the role of the service sector in the Indian economy, I was amazed. The conference gave a very interesting perspective on the role of the service sector in the rate in agriculture and industry. The current situation in India is that the growth rate of services has overtaken both agriculture and industry and is now contributing to more than fifty percent of GDP. The services sector has the highest growth rate and is the least volatile sector. Growth is particularly marked in public services, IT and financial services. In some areas the growth rate of services sector is forty to fifty percent due to increased use of mobile technologies. India, therefore, has a services oriented economy. It hasn’t followed traditional growth models as in China. However, in the process of doing so it has skipped the manufacturing stage and has jumped straight from the agricultural stage to service stage, which is also the main reason for the expansion of the service sector. In fact, the situation now is such that the growth in the service sector can and will support the growth in the service sector can and will support the growth in the agricultural and industrial sectors. However, the only setback for Indian economy is the lack of growth in the manufacturing sector, which causes dependence on other countries, which is not so desirable in terms of job creation and increase in prosperity. Population is also a major concern of the Indian economy. As the population of India grows so also does the number of dependents in the population both in the lower and higher age groups. In such a scenario of increasing population, from crisis, growth becomes difficult. For such an economy to grow it has to invest. Currently, the public sector invests more than it saves. The household sector saves in surplus but it is not increasing, so it cannot continue to support private and public sectors. There is a massive need to spend on agriculture and infrastructure development of the country. A part from health, education should also be the priority of the government, particularly the education of women, in order to reduce the birth rate.
However, all said and done, we cannot deny the fact that growing population of the country can also benefit the economy if considered as a resource and used efficiently. In fact, it is said that in the next two decades a ‘growth window’ for India will open, which may not come again because the working population to total population ratio will rise up to mid 2030s only. It is important for India of maximize its economic growth in this period. For doing so, it will be important of Indian to absorb the growing labour force. This would mean that most people in the country would be employed (with a steady income), the number of dependents in the population would reduce and with effect the economy would prosper. Absorbing the labour force is also very important if the service sector is to play a key role in the growing Indian economy. Today to address the issue of poverty in India, there is a need to change the bad sectors into good sectors and in turn to move people from unemployment to employment. Only the service sector can help in doing so and thus can have major impact on poverty. Although service – intensive sectors such as hotels, restaurant and IT are booming with growth in human skills, there are geographical, labour unions and human skills restrictions on labour movement. The key question here, I suppose, is that – can service sector lead the economy? For example, can service such as IT be taken to rural areas? Experts in the conference have suggested that it seems that services could lead the economy. However, there are certain prerequisites for the same. In order words, there needs to he great equality between the different states and better gender balance. There is also the need for additional fiscal equality, tax reforms to fund education, reeducation in government debt, and the revenue account must be kept in balance. Progress is good but still the initial conditions for growth have not yet been achieved.

What does the author mean by the statement, “ ___ a ‘growth window’ for India will open”?

Q. Service sector contributes to nearly _______ of GDP in India.

Q. Consider the following statements:

1. The maximum unemployment in India is in rural areas.
2. There is disguised unemployment in agricultural sector.
3. Industrialisation has rendered people jobless in India.

Which of the statement(s) given above is/are correct?

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