[Answered] Economic survey 2020, highlights that India’s aspiration to become a $5 trillion economy depends critically on promoting ‘pro-business’ policy than a ‘pro-crony’ policy. Do you agree? Elaborate.

Demand of the question Introduction. Contextual introduction. Body. Discuss why Pro-business policy is important to achieve the $5 trillion goal. Conclusion. Way forward.

India aspires to become a $5 trillion economy by 2025. This will make India the 3rd largest economy in the world. According to the economic survey to fulfil this dream India must promote ‘pro-business’ policy. This will unleash the power of competitive markets and will generate wealth. Further India needs to prevent ‘pro-crony’ policies that favour specific private interests.

Importance of Pro-business policy:

  1. Encourage competition: Pro-business policies are those that enable fair competition in the country. It leads to equal opportunities for new entrants and thus instil a sense of competition among them leading to overall economic growth.
  2. Market freedom: Pro-business policies are pro-people policies. When the government fosters a climate that encourages economic freedom, then market forces work freely to earn profits. It speeds up economic growth and job creation.
  3. Small scale industries: Pro-business policies means enabling small scale industry to grow and boost. This not only leads to economic growth but also generates employment. This would help in economic growth.
  4. Generate revenue: Pro-business policies are favourable for the new entrants to markets. This in turn leads to market growth, generates wealth and provides tax revenue to the government.
  5. Boost exports: If India has to achieve the $5 trillion target it needs to boost exports. Pro-business policies help in boosting exports through a better tax system, removing inverted duties etc. Exports help to enrich the forex reserves as well prevent any BOP crisis. Initiatives like Make in India is a right step.
  6. Prevent monopolies: Pro-crony policies favour few and led to growth of only powerful and rich corporates. Pro-business policies work towards destroying monopolistic tendencies and enable equal market. $5 trillion goal can’t be achieved by favouring few.
  7. Benefit labour: Pro-business policies benefit labour too. Cutting the federal corporate tax rate is a good social policy, because it will lead to job growth and rise in wages. This will enable more efficient labour and would boost the economy.
  8. Foreign investment: Cutting the corporate tax will encourage more business activity from abroad, which will encourage firms to expand their operations and hire more workers.

Way forward:

  1. Labour reforms: Labour Laws should be reformed as due to the stringent labour laws corporates in India are preferring Capital intensive mode of Production in a country where labour is abundant.
  2. Promoting labour Intensive sectors: Labour intensive sectors like food processing industry, leather industry, apparel, electronics, gems and jewellery, financial services, and tourism etc. should be encouraged. Appropriate subsidies and tax incentives should be given to incentivise them. Make in India initiative a great step forward which will boost the manufacturing.
  3. Strengthening MSME: MSME sector should be promoted and supported. Easing regulations, subsidies will help. Also easy availability of credit should be the priority. MUDRA has the potential to create required jobs in India.
  4. Implementing Niti Aayog action agenda:  The Action Agenda has provided several good ideas for job creation, including labour law reforms at the state level. The report emphasizes the role of exports in job creation and recommends establishing coastal employment zones (CEZs), similar to China’s special economic zones (SEZs). This agenda must be implemented in letter and spirit.
  5. Entrepreneurship: The focus of economic policy must be on creating an enabling policy for youth to take up entrepreneurship and create more jobs in the market. India does not need five companies worth 5000 crores turnover but needs 5000 companies of 5 crore turnover.

Pro-business policies are important for economic growth. Initiatives like Make in India, Skill India and digital India are important. India has improved its ease of doing business and moved to 63rd spot recently. Government must ensure that its policies should not turn pro-crony benefiting only a few.

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