India needs a ground-up growth model for an inclusive economy (Mint)

Mains Paper 3:Economy
Prelims level: Dominant school of economics
Mains level: Ground up growth model for an inclusive economy

Context:

• The country needs new ideas to uplift people in villages even if blinkered economists have little time for our rural multitudes
• It is clear they agree that the Indian economy is not doing well. And that they do not agree upon what the remedy is.

Differences in opinion:

• One group of economists is fixated on interest rates and fiscal deficits as the levers to improve the health of the economy.
• This will impact on economic growth of decimal point differences in interest rates and ratios of fiscal deficit to gross domestic product.
• Another group of “trade economists" sees opportunities for India in greater integration with global trade. These economists are alarmed by the weakening of the spirit of the 1991 reforms and the return of protection of domestic industries.
• A large group of economists is concerned that governments are interfering with the “magic" of the market.
• They accept that the market is poisoned by a concentration of market power.
• In economies where the “business of business must be only business" and where private participants are expected to pursue their self-interest, self-regulation is an oxymoron.
• They reluctantly accept that governments must shape the rules of the game for the market to work its magic.

Thought from the dominant school of economics:

• They has concentrated on framing regulations (and their reduction) to make economies attractive for investors.
• It measures an economy’s health by the size and growth of GDP. Countries, including India, have seen their GDP grow by adopting this ideology and the rules that flow from it.
• At the same time, the wealth of investors at the very top has grown much faster than the incomes and wealth of citizens in the lower half of the pyramid.
• This has fuelled the rise of anti-establishment, “anti-expert" populist movements around the world. 
• Citizens are asking whose interests these economists, or the policymakers who accept their advice, serve.

Criticism:

• Some economists question the dominant paradigm. They view economies “bottom-up" and “inside out" from the perspective of people at the bottom.
• Unlike the dominant school which takes a “top-down" and “outside in" view from investors’ perspectives.
• The ruling school derides them as “socialists" and “anti-growth". First grow the pie, they say, before you redistribute it.
• Whereas the bottom-up, people-first school’s view is that to grow the pie, there must be human development alongside, with significant public investment in education and health.

Conclusion:

• Economists of all hues now agree that structural reforms are necessary to revive the Indian economy.
• Fundamental reforms cannot be delivered by a finance minister in one budget. Nor by any government within a five-year term. Because deep reforms will require changes in economic structures that have been built up over decades.

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Prelims Questions:

Q.1) With reference to the MoUs/Agreements signed during the visit of President of Portugal to India, consider the following statements:
1. MOU for Cooperation for Setting Up a National Maritime Museum Heritage Complex in Lothal (Gujarat) between Portuguese Ministry of Defence and Indian Ministry of Shipping.
2. MoU between We-Hub Telangana and PARKURBIS Covilha for Exchange of Women Start-up Entrepreneurs.

1. Which of the statements given above are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Ans: C
Mains Questions:
Q.1) What do you mean by the dominant school of economics? What are the criticisms of it?