The real sector of the Indian economy comprises industries involved in the production and manufacturing of physical goods such as agriculture, mining, manufacturing, and construction. India’s economic transformation in the real sector began with the adoption of the New Economic Policy in 1991, which emphasized market-oriented reforms and liberalization. The reforms aimed to make the economy more efficient and competitive, by reducing state intervention, promoting private enterprise and foreign investment, and encouraging technological advancements.
Some of the key policy initiatives that have contributed to the transformation of the real sector in India include:
- Industrial policy: The industrial policy of India was reformed to provide a favorable environment for domestic and foreign investment. The government liberalized the licensing system and abolished the requirement of obtaining an industrial license for most industries.
- Foreign direct investment: India opened up to foreign investment, allowing up to 100% foreign ownership in most sectors, including manufacturing. The liberalization of foreign direct investment (FDI) regulations resulted in an inflow of foreign capital, technology, and expertise.
- Infrastructure development: The government invested heavily in infrastructure development, including roads, railways, ports, airports, and power. This has helped in the growth of the manufacturing sector by reducing transportation costs and improving connectivity.
- Trade liberalization: India initiated trade liberalization by reducing tariffs and non-tariff barriers, promoting exports, and integrating into the global economy. This led to an increase in competition and productivity, and the growth of the export-oriented manufacturing sector.
- Technology upgradation: India has made significant progress in technology upgradation, particularly in the automobile, electronics, and pharmaceutical sectors. The government has encouraged research and development, provided tax incentives for technology upgradation, and promoted collaborations between industry and academia.
- Agricultural reforms: India has undertaken several agricultural reforms, including the liberalization of agricultural markets, investment in rural infrastructure, and the promotion of contract farming. These initiatives have led to an increase in agricultural productivity, diversification, and value addition.
The economic transformation in the real sector has led to several positive outcomes, including higher economic growth, increased employment opportunities, and a reduction in poverty. However, there are also concerns about environmental degradation, inequality, and job displacement due to automation and technological advancements. Therefore, the government needs to ensure that the transformation is inclusive, sustainable, and equitable, and addresses the needs of all sections of society.