On Monday, the Nobel Prize winner economist Paul Krugman said that India should not return to the ‘licence raj’ and that the country should have a deliberate strategy for promoting industries. Krugman also said that income inequality is a serious problem in India, speaking at a virtual event organised by Ashoka University.
“Don’t return to the Licence Raj system, a country like India will want to have a deliberate strategy for promoting industries,” he said.
With the liberalisation policy implemented in 1991, the licence raj, which involved a complex system of licences and regulations that were necessary to set up and operate businesses in the country, was abolished.
In response to a question about why India isn’t doing well in labor-intensive industries, Krugman claimed that India isn’t as well-suited to manufacture labor-intensive manufacturing goods as some other countries.
“Indian internal geography may be one of the reasons, India has a kind of non-industrial ecology,” the eminent economist stated.
He went on to say that India’s transportation system is inadequate, which will cause problems.
Krugman pointed out that while India has struggled in labor-intensive areas, it has done exceptionally well in the service sector and high-skill manufacturing.
He said, “The services sector generates a lot of GDP, but it does not generate a lot of employment.”
Even as the globalisation process slows, the Nobel prize winner expressed optimism about export-oriented development for developed countries.
“In India, the problem of income inequality is a serious one. If the United States is having a difficult time tackling severe inequality, I’m worried about India “he said.
