Growth In Indian Economy: Which Way To Go?

India has played a pivotal role in sculpting global history since the ancient epoch. Being endowed with valuable resources, it is a source of aspirations for the world. However, the growth of the economy requires addressing the question: Which way to go?

After the Structural & Stabilization reforms of 1991, the growth rate of physical output accelerated and soon transmogrified India to one of the influential global economic superpowers, but the recent slump in economic indicators offers a dismal picture about future projections. Soaring poverty, skyrocketing prices & burgeoning income disparities have all made it necessary to bring reforms on war footings to regain former growth rates and ensure the development of our motherland.

According to Sen & Dreze, ‘One way of enumerating development is in the expression of real freedom that citizens enjoy.’ So, development means enlarging several choices that individuals can avail themselves of. In other words, there must be both social & economic growth. Now the primary focus of this article shall be two distinct approaches of escalating development & how we can utilize both simultaneously to maximize social advantages & minimize their flaws?


Kerala has been an exemplary example for other states of the Indian subcontinent due to its remarkable performance in enhancing the standard of living by focusing on social sectors like health & education.

Similarly, ‘The Gujarat Model’ of Narendra Modi got renowned owing to an unprecedented rise in the GDP of the state. Both the above-mentioned case studies are distinct as the model followed differs significantly. However, the ultimate result of both the models was adding prosperity to human lives.

Kerala Model, also called, ‘Bottom-up Approach’ emphasizes bringing changes at the grass-roots level of society that is providing the best possible healthcare, education & other social security benefits to individuals.

Thus, focusing more on HDI indicators to drive higher GDP. The Gujarat Model, on the other hand, also known as ‘The Top-Bottom Approach’ accentuated Economic indicators which means that it envisages that by bringing higher GNP with governmental support, a better standard of living can be easily attained.

Both the Kerela and Gujrat models were been supported by great economists. The former model that is the Kerela model fetched support from Nobel laureate Amartya Sen, who received Bharat Ratna while the latter model was been backed by Prof. Jagdish Bhagwati.

Now let me elaborate on both these models through a cyclic explanation. Amartya Sen suggested that India must heavily invest in the social sector(health & education) as it shall result in increased welfare, enhanced productivity, ability & willingness to work and ultimately lead to increased production.

Thus, increased income & enhanced expenditure and shall result in a virtuous cycle. Dr. Bhagwati on the other hand advised that more focus shall be placed on Economic infrastructure like rail, road, power generation, etc to lure more investment leading to higher output, income & expenditure. Thus with increased income, people shall be able to raise their material standard of living, more money shall be spent on the health & education sector.

Even though the former dilutes income disparities, it is still not very effective because of its time-consuming feature that results shall be attained after a long period and the other model raises income disparities but provide faster results.

The tussle between economists continues as both the ideas possess respective pros & cons and these are not comparable. The question of national importance that arises here is which Model will suit the need of India in the 21st century? What should be done to overcome this slump in the economy? there is an ancient “the path to desirable outcomes lies midway through two extremes” let’s endeavor to identify this midway that shall maximize the socio-economic welfare of Indians.

Due to the federal characteristic of our constitution, planning is done at three levels- center, state & local. There is a clear demarcation of work areas in the Indian constitution regarding these two groups, whereas local self-government holds little jurisdiction. In today’s situation, the best possible way to fulfill desired dreams is to examine distinct models at different levels for effective governance. Another question arises here that which model should be persuaded at which level? Geoff Crowther remarked, “India is not a country, but a continent” after visiting India being mesmerized by the prevalence of such diversity.

As described above, our nation is the land of diversity and thus each state & Union Territories have its own needs & priorities and so, the center may never be able to accommodate such diverse needs in their single policy package but the state is in a better place as it is familiar with the situation at the grass-root level.

The above argument shows that states can better adhere to the ‘Kerala Model’ while the Centre must continue with the ‘Gujarat model’. This suggestion will help our country to reap the fruits of both.

Empirical shreds of evidence can be cited to advocate the above suggestion. Kerala had recently stood first in NITI AAYOG analysis and it has always been ahead of other states while as trade regime liberalized and the motivation was given to businesses by both center and state government resulting in an unexpected rise of GDP. As described above, the Constitution of India has demarcated the responsibilities by enlisting distinct spheres in 3 different lists namely Union, State & concurrent lists.

It is fascinating that the State list consists of subjects like Agriculture, Animal husbandry, Health, Public order, Water & Sanitation, and many more while Union List comprises Banking, Highways, Foreign & inter-state trade, insurance, Currency, etc. it is thus clear that subjects of state list are more related to Social sector while the Union list is the subjects which directly affects the economic infrastructure. So, being at the topmost position, they must take up projects benefits of which shall Trickle Down to the bottom segment of society.

Coming to lower-level states, their governance measures must target the lowest segment of society. But the real question is, how to implement the aforementioned model?

Bringing major changes has always been a difficult task requiring firm determination on part of both union & provincial government as constitutional amendments are needed to alter existing relations to enforce a new model to attain the zenith of success in all spheres.

Because every year, The Finance Commission formulates policies regarding the allocation of resources between the Union and States, even though the allocations are never satisfactory from the state’s standpoint, what is baffling is that many major schemes of the union are not funded.

So, States must be feel empowered as they are assigned a much big role in the implementation of policy regime and, thus decentralization is requisite altogether along with assigned states new resources to finance their expenditures.

It is thus, concluded that for combating big problems, path-breaking changes are needed that might be cumbersome but shall be beneficial and because the situation is getting terrific with each passing day, there is a need to reform practices that are been followed for the betterment of the nation.


Edited by Anupama Roy

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