The Role of Indian Capital in Driving Domestic Demand-Led Growth
UPSC Relevance
Prelims: Indian Economy (Drivers of Growth, Investment - Private Capex, Public Capex, Foreign Direct Investment (FDI); Research and Development (R&D); Labour issues).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Investment models; Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth. This is a core GS3 topic on the role of the private sector in the Indian economy.
Key Highlights from the News
Due to global trade uncertainties, India's economic growth now needs to rely on domestic demand instead of foreign demand.
For this, the article argues that Indian private capital should not just focus on maximizing profits, but work in alignment with the country's public interests.
Three key areas the Indian private sector should focus on:
Enhance internal private investments: Despite various government incentives, Indian companies are reluctant to invest in the country.
Ensure moderate wage growth: While company profits are at record highs, workers' wages remain stagnant, negatively impacting domestic demand.
Invest more in Research and Development (R&D): Unlike other major economies, private sector investment in R&D in India is very low (only 36% of total R&D).
The article concludes that government efforts alone are not enough, and it is time for the Indian private sector to play a more active role in the country's growth.
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