Integrated model for the development of Punjab: The Tribune India

BS Ghuman

Former Vice-Chancellor, Punjabi University

Punjab’s economy has thrived for three decades based on an agriculture-led growth model, which has reached saturation. To rejuvenate the state’s economy, the new government is expected to adopt an integrated triple-engine growth model. Punjab lost its economic supremacy during the market-oriented reforms of the early 1990s. The economic atrocities of market forces in Punjab became more pronounced due to the tax exemption policy for neighboring hill states. To offset the negative effects of this policy, it is recommended that the state government play the role of contractor.

The famous Punjab model needs fundamental changes. Historically, the march of Punjab’s economy started in the mid-1960s when it held the top spot in terms of growth rate and per capita income. The growth model was essentially a single-sector model centered on a national agricultural development program. Unfortunately, neither the central government nor the state government has come up with a policy to look at Punjab beyond agriculture. The lack of political foresight for the non-agricultural sectors and the timely development of their linkages to a thriving agricultural sector has resulted in the “growth reversal” syndrome. Punjab, at present, has a deadly sectoral combination comprising a stagnant and crisis-ridden agricultural sector; weakening of the industrial sector; and slow growing service sector. Decent jobs for Punjabi youths are not available. The state’s fiscal health has deteriorated over time. The results of the model therefore suggest adopting a whole new model of development intertwined through three drivers – the rural economy, industry and services. Strengthening cross-sector linkages would boost growth, create jobs and enhance the dynamism of government revenues.

Work on the model should start with an “approach paper” suggesting an overall growth rate of the economy based on traditional and new growth drivers, including knowledge and digital technology. The Punjab State Planning Council, chaired by the Chief Minister, is an appropriate institution for the “approach paper”. To build a tri-sectoral model based on research, the board should set up sector working groups.

The first engine of growth driven by agriculture can be improved by diversifying the rural economy. The development of the rural economy in the state is unbalanced. It was mainly confined to the agricultural sector. The diversification of the rural economy in the form of the promotion of related activities such as animal husbandry, forestry, mining and quarrying can be the new source of growth and employment. Moreover, if the agricultural sector would not be a major source of growth, however, crop diversification; promotion of niche agriculture; water management techniques; and, new crop marketing facilities can add significant value to the agricultural economy.

The fourth industrial revolution (industry 4.0) is rapidly taking place across the world. Industry 4.0 is driven by smart technologies, especially by applying advanced digital technologies like artificial intelligence; the Internet of Things; 3D printing; robotics; Cloud computing; mobile devices; smart sensors; quantum computing, etc., in manufacturing processes. Most of the successful industries under Industry 4.0 have location advantages in Punjab. These use very light raw materials and are therefore cost effective to transport. Another advantage of Punjab is that these industries do not require much land.

These industries are primarily digital technology and knowledge-based and would therefore provide decent jobs for educated youth. Punjab has huge potential for start-ups, provided favorable policies are put in place. Industry 4.0 can be developed jointly by higher education institutions and industry. In Punjab, however, the two work in silos. The new government should develop an institutional mechanism for these two partners to work together for a seamless transfer of technology from laboratory to industry and to undertake industry-relevant research. Depending on the location of universities and research institutes, the new government should set up technology parks. Experiences from Maharashtra, Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh would be useful.

Punjab has a very fertile social and economic environment for technology-driven rural industrialization. Farmers’ agitation against three farm bills demonstrated strong organizing skills; use of social media; cooperation and networking of agricultural unions from global to local level. A number of farmers are engaged in agriculture-related activities such as brokers (arhtiyas). This social capital, entrepreneurial and technological skills are the threshold for Punjab to develop agribusiness and create jobs. The government should harness this potential to transform the landscape of the economy. Policy lessons for rural industrialization can be drawn from the Chinese model of “township and village enterprises”.

The service sector is the backbone of Punjab’s economy. It contributes the maximum (47 percent) to state revenue and provides two-fifths of total employment. Service sectors, with the exception of a few sub-sectors, use traditional technologies. The sector is not fully aligned with other sectors. The service sector can become the third fastest driver of growth by developing emerging services such as information technology based services (ITES), including BPO, online education, social media and entertainment ; cyber security; environmental services; Fintech services (fintech companies); quaternary/knowledge services such as scientific research, biotechnology, education, consultancy, IPRs; quinary services provided by key decision makers regarding new ideas/policies, data interpretation and application, evaluation of new technologies. Developing links with agriculture and industry would add to the power of the third engine. The application of digital technologies is the key to making the third sector the source of quality services and decent jobs.

The economy of Punjab excelled between the mid-1960s and early 1990s. This was the phase of state-led development. The economy, however, has suffered tremendously due to the market-driven model. In the post-reform period, due to locational disadvantages, a reluctance to invest was observed. Market failure theory suggests that where the market fails, it is the government’s responsibility to intervene. To develop Punjab on a faster track, the new government should play an entrepreneurial role. The state has a number of public corporations related to industry, finance and agriculture. The government should restructure them on business lines by granting professional autonomy and imposing accountability. These companies should participate directly in industrialization by creating large-scale units. Around large industries, auxiliary units, preferably in the cooperative sector, should be encouraged.

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