The crux of Rajan’s argument is that given the doomed global demand altest for the next 5 years, an export led growth strategy will not produce results. Besides, global economy is not capable to accommodate another China. On the other hand, the bad past records of import led strategy in developing countries still make it an outcasted policy tool. Third (and most imp.), picking a winner industry “by the GOVERNMENT “won’t work; because time & space is different. Following these three ‘NO s’, what he recommends is to create ‘environment’ (infrastructure & eliminate co-ordination failures) where all industries will equally benefit. Let then the entrepreneurs (market) choose where to invest, grow & produce jobs. (Dani, Dani!). Interestingly, his second ‘Yes’ is to produce for Domestic Market! One of the last few books interested him should be from a Cambridge post Keynesian ;-) But I seriously doubt what’s wrong with ‘Government’ first picking some winning sectors, and entrepreneurs following it suitably. Given FM’s concern over fiscal deficits, our past records on infrastructure creation (including all 3 or 4 Ps), and poor governance I don’t think it is timely possible to create ‘environment’ where all industries will equally benefit. That’s why ‘picking the winners’ strategy is advisable. But that PICK should be genuine & justifiable. Otherwise we will be repeating the same mistakes of old industrial policies.
Posted on: Sat, 13 Dec 2014 08:02:36 +0000
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