Nobel laureate Paul Krugman said that India should not go back to the "licence raj" regime, adding that the country should have a deliberate policy to foster industries. "Don't go back to Licence Raj regime... countries Like India might want to have a deliberate policy for fostering industries," he said. The economist was addressing a virtual event organised by Ashoka University when he said that the income inequality issue is a severe one in India.
The licence raj was dismantled when the liberalisation policy was introduced in 1991. The licence raj involved an elaborate system of licences and regulations that were required to set up and run businesses in India.
Krugman said that India is not well suited, as some players are, to produce labour-intensive manufacturing products. "Internal geography (of India) may be one of the reason...Indian does have a kind of non-industrial ecology," he said. While India does not do well in labour-intensive aspects, the country is successful in the services sector and high skill manufacturing. "Services sector generates a lot of GDP, but they do not generate a lot of jobs," he said.
The economist also pointed out that India's transport infrastructure is going to pose some problems. He said even as the process of globalisation is slowing down, he believes in the export-oriented growth for developing countries.
"Income inequality issue is a severe one in India. If the United States has an extremely hard time to tackle extreme inequality, then I got to worry about India," he said.
Paul Krugman was conferred the Nobel Prize in Economics in 2008 for his work on international trade theory. He has authored multiple books including The Great Unraveling (2003), The Return of Depression Economics (2008), and Arguing With Zombies (2020).
(With PTI inputs)