Trend and Pattern of Structural Changes in Punjab and Indian Economy:

Policy Implications

    Punjab’s economic growth rate has been conventionally lower than of India over the past three decades. There has been improved growth in agriculture and industry especially manufacturing, but it is slumping in the tertiary sector. It need not unquestionably follow the growth pattern as of India which is service-led, but it is important that the state’s comparative advantages are diagnosed and better utilized. For that to happen, the State and the Union government of India needs joint efforts to abolish the constraints in realizing the potential. They need to deal with the complications posed by the functioning of the macroeconomic policies, i.e. monetary and fiscal policies. People want a corruption free state, increased transparency, equality, impartiality and rule of law and an accountable administration. The government’s role should be curbed to that of an effective facilitator and coordinator of the process of growth (good governance). Punjab economy has experienced deceleration of economic growth in the post-reform period as opposed to acceleration of economic growth of the national economy as well as majority of the major states of the country. The major constraints that have encroached upon the development process of the Punjab economy are structural rigidities, macroeconomic policies, low investment-GSDP ratio, human capital development, demand and supply factors and non economic factors such as social, political and an active international border.

    The government should aim towards the diversification of agriculture, as this is of considerable importance to Punjab due to its agrarian nature. Steps should be taken to rejuvenate the primary sector due to the crisis in the farm sector. Punjab is also deficient in primary resources. For example, there are no coal, mineral or fossil fuel deposits that can be tapped. The major industries are textiles and readymade garments, motor parts, cycle and cycle parts and manufacturing of various food products. The real growth potential in future is anticipated to be in agro-processing. Hence, the government should accentuate on the secondary sector of Punjab to lead the growth process further. A relevant institutional mechanism and financial institutions should be diversified to help the sick industrial units. The major deceleration in agricultural growth had a dampening effect on the industrial sector in Punjab in the 1990s. The primary challenge in the development of industry is due to Punjab’s land being highly fertile and expensive as compared to other parts of India, thus making this sector relatively uncompetitive. A number of existing industries in Punjab are dominated by the small scale sector. The industrial scenario in Punjab has suffered from the lack of modernization of the small scale units, which contribute about half of the total industrial production in the state. The Government of India should also set up special economic zones (SEZ), for association with the global market with focus on the export of industrial products. It is crucial to set up industries in the large and medium sector in the state for their balanced growth. Apt facilities and incentives should be provided to multinational companies (MNCs) to set up manufacturing facilities in the state, especially in agro-food processing, light engineering and electronic hardware industries. NRIs should also be encouraged to invest in the state.

    Regional disparities within the districts of Punjab should also be removed. There is growth potential in the services sector so opportunities should be tapped to stimulate income and employment.

    In conclusion, it may be stated that Punjab has to evolve a model of its own, based on its limited natural resources, ample human resources, wide base of agriculture and small-scale industries and with many opportunities available in the field of Information Technology. All the potential that exists can be realized with the help of clear policy directions, which are required to be given to tap these resources. Once this is mobilized, the sky is the limit.