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Home arrow Business News arrow Industrial Policy must encourage Strategic Collaboration: Prof. Dani Rodrik
Industrial Policy must encourage Strategic Collaboration: Prof. Dani Rodrik Print E-mail
Written by Ganesh   
Saturday, 13 August 2011
New Delhi: On designing Industrial policies, Prof. Dani Rodrik, Rafiq Hariri Professor of International Political Economy at the John F. Kennedy School of Government, Harvard University, said that strategic collaboration and coordination between the private sector and the government with the aim of uncovering where the most significant bottlenecks are, should be considered.

According to him, Industrial Policy is a process of discovery rather than a list of policy instruments. Industrial policy should encourage investments in non-traditional areas and weed out projects/investments that have failed.

He was speaking at a session on “Industrial Policies and Economic Development” organized by the Confederation of Indian Industry (CII), here today.

"Low post-crisis growth in the advanced countries need not impede developing countries’ economic performance”. Lagging countries’ growth potential is determined by their ability to close the gap with the technology frontier – not by how rapidly the frontier itself is advancing," he said.

Professor Rodrik also said that igniting and sustaining rapid growth would require policies that stimulate ongoing structural change and foster employment in new economic activities that entail higher productivity. In other  words, the challenge is one of structural change: moving labor from the traditional to the modern parts of the economy. Those countries that achieve this faster and on an ongoing basis are the ones that grow. Growth that relies on capital inflows or commodity booms tends to be short-lived. He stressed that sustained growth requires devising incentives to encourage private-sector investment in new industries.

Dr. Subir Gokarn, Deputy Governor RBI, on this occasion commented on the much talked about inflation-growth trade-off. He said that, there is high correlation between periods of low growth and high inflation though this may not imply causality. In the long term, sustaining high growth requires control on inflation. Hence to make growth sustainable, inflation has to be managed. He further highlighted that structural barriers or supply side bottlenecks prevent the economy from growing rapidly and creates inflationary pressure.

Mr Arun Maira, Member, Planning Commission, said that we are about to embark on a third phase of industrial policy. Widespread restrictions on industrial activity were removed during the 1990s which lead to much greater competition and growth over the last two decades. We need to now make the growth process sustainable and inclusive. He too emphasized the role of the manufacturing sector in providing more jobs. He said that the Planning Commission was engaged in widespread consultation with different stakeholders including industry.

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