MDC -M1 Sectors of India (1).docx

**Module 1** **Understanding Indian Economy** **B.A. (HONS.) ECONOMICS** **EC1MDC01B24** **FIRST SEMESTER** **MDC-INDIAN ECONOMIC OUTLOOK** *Prepared by Dr.Soumya K M* Introduction to the Sectors of Indian Economy ============================================= India is one of the largest, if...

**Module 1** **Understanding Indian Economy** **B.A. (HONS.) ECONOMICS** **EC1MDC01B24** **FIRST SEMESTER** **MDC-INDIAN ECONOMIC OUTLOOK** *Prepared by Dr.Soumya K M* Introduction to the Sectors of Indian Economy ============================================= India is one of the largest, if not the largest economy in the world. It is predicted to be the second largest economy in the world by 2050. So, what contributes to the Indian economy? To answer this, we need to divide India's economy into three parts and study the sectors of Indian economy in detail. We will also discuss the problems faced by each sector and solutions to these sectors respectively. **Indian Economy** They are three sectors in the Indian economy, they are; primary economy, secondary economy, and tertiary economy. In terms of operations, the Indian economy is divided into organized and unorganized. While for ownership, it is divided into the public sector and the private sector. But today, we are only going to talk about the sectors of Indian economy and what consists of these sectors. Sectors of Indian Economy ------------------------- ### **Primary Sector** The primary sector in India is the sector which is largely dependant on the availability of natural resources in order to manufacture the goods and also to execute various processes. The services in this sector are entirely dependant on the availability of the natural resources in order to keep the day-to-day operations running. As we have the clear idea of this sector is, the best example to discuss in this sector is the agriculture sector. The other examples in this sector include fishing and forestry, but agriculture accounts for the largest in this sector. One of the major problem that this sector faces is the underemployment and the disguised employment. Underemployment accounts for the workers not working to the best of their capabilities while the latter accounts for the workers not working to their true potential. As a solution to the problems, the state, as well as the national government, can increase the funds for the irrigation facilities and provide loans for buying high-quality seeds and fertilizers. ### **Secondary Sector** The economy in the sector is dependent on the natural ingredients which are used to create the services and products offered and which at the end are used for consumption. In terms of value added to the products and services, this sector is the best sector. The major examples that fall under this category are transportation and manufacturing. Both these sectors end product is the consumption by the people. This sector is responsible for the employment of almost 14 percent of the entire workforce currently working in India. The secondary sector also contributes to almost 28 percent of the share of GDP. This sector is the backbone of Indian economy and there are more development and growth in the near future. ### **Tertiary Sector** This sector contributes the largest in terms of share in GDP in India. The sector is also the service sector and is important when you consider the development of the other two sectors. Like the previous sector, this sector also adds the value to the products. This sector is responsible for employing 23 percentage of the workforce out of the total workforce currently working in India. The example of this sector is all service sectors which IT services, consulting, etc. This sector contributes to almost 59 percent of the total share of GDP. The main problem that this sector is that the jobs which involve lower salaries do not attract much employment. And this remains the future dilemma as India is looking for double-digit growth in the near future. High-Performing Sectors of Indian Economy ----------------------------------------- The three Sectors of Indian Economy that we have mentioned above are the high-performing sectors in India. Below we have mentioned some important points related to these sectors. - Agriculture is one of the biggest sectors in India, and more than half the population of India depends on agriculture for sustenance. - The industry sector has grown significantly from iron to steel to the automobile industries. - The service sector has been one of the most reliable Sectors of the Indian Economy for job opportunities and employment. IT giants like WIPRO, Infosys, and TCS are gaining global recognition and adding a significant contribution to the overall GDP of the country. - The economy of India depends on all three sectors that contribute to its development. Organized and Unorganized Sectors of Indian Economy --------------------------------------------------- The primary, secondary, and tertiary are the three sectors of the Indian economy. These sectors are further divided into organized and unorganized sectors on the basis of employment conditions. In the organized sector, the job terms are consistent, and people are assured of employment. Dispersed and tiny units distinguish the unorganized sector, and it operates outside the official jurisdiction. While there are rules and regulations in place, they are not followed because they are not registered with the government. Contribution of Different Sectors in GDP of India 2022 ------------------------------------------------------ India's Gross Domestic Product (GDP) is a measure of the country's economic performance. It is the sum of the total value of goods and services produced in the country. The contribution of different sectors to the [**GDP**](https://byjusexamprep.com/upsc-exam/gdp-is-the-total-value-of-produced-during-a-particular-year) of India in 2022 was as follows: the Primary sector was estimated as 21.82 percent, the secondary was estimated as 24.29 percent, and the tertiary sector contributed 53.89 percent to the GDP of India in 2022. On the back of double-digit growth in Manufacturing sector (11.6%) sector, followed by a good growth rate of Construction sector (9.5%), Real GDP grew by 8.4% in Q3 of FY 2023-24. Second Revised Estimate (SRE) of 2021-22 and Third Revised Estimate (TRE) of 2020-21 are the Final Estimates for the respective years. The Indian economy witnessed a great year, closing 2023 with a GDP of US\$ 3.73 trillion, GDP per capita at US\$ 2,610 and a projected GDP growth rate of 6.3 percent against the global average of [2.9 percent](https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD). As India is geared to become a [US\$ 5 trillion economy by 2027](https://economictimes.indiatimes.com/news/economy/indicators/india-to-become-usd-5-trillion-economy-third-largest-by-2027-rbi-dg-patra/articleshow/103844727.cms), an inquiry into the driving factors of growth along with the other vital parameters is necessary. Some of these parameters are---inflation, unemployment, investment, sectoral performance and especially, performance in terms of sustainability. A review of these indicators is undertaken to identify the strengths of the economy and highlight the endeavours that need to be emulated in 2024. ### Sectoral stars The third quarter of the calendar year 2023 saw the manufacturing sector grow at [13.9 percent](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/india-economic-pulse/2023/12/ey-india-economic-pulse-december-2023.pdf), supported by double-digit growth in the steel, cement, and automobile manufacturing sectors. The infrastructure and real estate sectors have performed well while the construction sector recorded a robust quarterly growth rate of 13.3 percent. However, a slowdown has been experienced in the last quarter in the agricultural sector and services---financial and hospitality services. While the agricultural slowdown is attributable to unfavourable weather conditions and sub-par production of the kharif crop, the relative contraction in financial services can be interpreted as the growing base effect---where robust growth in the previous year has increased the base. ### Securing sustainability India ranks [112^th^ among 166](https://dashboards.sdgindex.org/profiles/india) countries in terms of its Sustainable Development Goals (SDG) score. It also has a very high spillover score, i.e., it has the potential to positively affect the sustainability of other nations. However, a focus on manufacturing-led growth will have serious implications for environmental quality, posing a trade-off between growth and well-being. This brings out the need for multidisciplinary research and policy coordination to ensure social-cost-less growth. India has taken several measures to promote the 2030 Agenda during its G20 Presidency and is incorporating frameworks in line with sustainability requirements, in its economic agreements. However, to ensure organic, responsible growth in 2024, the country will have to design and implement an unprecedented policy structure, which is unique to a large, developing nation in the current geopolitical setting. Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 295.36 lakh crores (US\$ 3.54 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US\$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.6% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Government's continued emphasis on capital expenditure are seen as among the key driver of the GDP in the second half of FY24. During the period April-June 2025, India's exports stood at US\$ 109.11 billion, with Engineering Goods (25.35%), Petroleum Products (18.33%) and electronic goods (7.73%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months. Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sector\'s success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. India\'s appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the \"Invest in India\" narrative. **Reasons and review of sect oral shift in India:** As we reflect upon the journey of the Indian economy from 1947 to 2023, it becomes evident that India has witnessed remarkable growth and transformation. From the challenges of independence to becoming one of the world\'s fastest-growing economies, India has come a long way. Let\'s take a closer look at the key milestones and factors that have shaped India\'s economic landscape over the years. **1. Post-Independence Challenges (1947-1990):** The period immediately following India\'s independence was marked by numerous challenges, including poverty, a large agrarian economy, limited industrialization, and inadequate infrastructure. The government adopted a planned economy approach, focusing on import substitution industrialization, and implemented policies aimed at self-reliance. **2. Economic Reforms and Liberalization (1991-2000):** In 1991, India faced a severe balance of payments crisis, leading to a turning point in its economic policies. The government initiated a series of economic reforms and liberalization measures, dismantling the license raj, opening up the economy to foreign investment, and encouraging private sector participation. These reforms paved the way for higher economic growth and integration with the global economy. **3. Information Technology and Services Boom (2000-2010):** The 2000s witnessed the rapid growth of India\'s information technology (IT) and services sector. India emerged as a global hub for IT outsourcing, software development, and business process outsourcing. This sector played a crucial role in driving economic growth, job creation, and foreign exchange earnings. **4. Infrastructure Development (2010-2020):** The last decade saw a significant focus on infrastructure development. The government launched initiatives such as the National Highways Development Project, Smart Cities Mission, and Digital India. Investments in transportation, energy, and digital infrastructure aimed to enhance connectivity, support economic activities, and improve the quality of life. **5. Shift towards Innovation and Startups (2010-2023):** In recent years, India has witnessed a surge in entrepreneurial activity and a thriving startup ecosystem. The government\'s initiatives such as Startup India and Make in India have fostered innovation, technological advancements, and job creation. Sectors such as e-commerce, fintech, and healthcare technology have seen rapid growth, attracting domestic and foreign investments. **6. Social and Human Development:** Alongside economic growth, India has made significant strides in social and human development. Initiatives like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Pradhan Mantri Jan Dhan Yojana, and Swachh Bharat Abhiyan have focused on poverty alleviation, financial inclusion, and sanitation, improving the overall well-being of its citizens. **7. Challenges and Opportunities Ahead:** Despite the progress, India faces several challenges that require attention. These include income inequality, agricultural reforms, job creation, sustainable development, and skill enhancement. Leveraging emerging technologies, investing in education and healthcare, and promoting sustainable practices will be crucial for India\'s future growth. **8. The Road Ahead (2023 and Beyond):** Looking ahead, India has the potential to become a global economic powerhouse. With a large consumer market, a young workforce, and a vibrant entrepreneurial spirit, India can drive innovation, attract investments, and contribute significantly to the global economy. Embracing digital transformation, sustainable practices, and inclusive growth will be key to realizing this vision. As we reflect on the journey of the Indian economy from 1947 to 2023, it is evident that India has come a long way. From the challenges of independence to the opportunities of a rapidly changing world, India has shown resilience and adaptability. With a rich history and a bright future, India\'s economic growth story continues to unfold, driven by the indomitable spirit of its people and the determination to achieve sustainable and inclusive development. The Initial Strategy The government in the 1950s adopted a very particular strategy of economic development: rapid industrialization by implementing centrally prepared five-year plans that involved raising a massive amount of resources and investing them in the creation of large industrial state-owned enterprises (SOEs).^2^ The industries chosen were those producing basic and heavy industrial goods such as steel, chemicals, machines and tools, locomotives, and power. Industrialization was pursued because leaders believed, based in part on the beliefs of some economists, that the industrial sector offers the greatest scope of growth in production. It was not that the Indian agricultural sector offered no scope for growth. Crop yields in India were quite low compared to other countries, and the recent famine in 1943 had underscored the need to increase food production. Still, Indian leaders did not want to make agriculture the mainstay of their strategy. The preeminence of agriculture they believed was characteristic of a backward economy, and growth in agriculture eventually runs up against the problem of insufficient demand. There is only so much, after all, that people are willing to eat. Investments in the creation of *public* enterprises were chosen because one goal of the government was to establish a "socialistic pattern of society," i.e., using democratic methods to bring large swathes of the country's productive resources under public ownership. Industries producing basic and heavy goods were chosen for investment over consumer goods because the government wanted to reduce the country's reliance on imports of basic and heavy industrial goods in line with their belief in the goodness of national self-reliance. "To import from abroad is to be slaves of\ foreign countries," the first Prime Minister, Jawaharlal Nehru, once declared.^3^ The production of consumer goods such as clothing, furniture, personal care products, and similar goods was left to small privately run cottage industry firms that had the added advantage of being labor-intensive and therefore a potential generator of mass employment. The particular nature of the chosen strategy of development can be understood by comparing it to the alternative strategies that could have been adopted. One such strategy would have been to prioritize public investments in not industry but agriculture, which was the source of livelihood for more than three-fourths of its people. Investments in agriculture take the form of irrigation projects, education of farmers in scientific methods of farming, construction of rural roads and storage facilities, and agricultural research and development. Once the agricultural sector was relatively healthy and the poverty of its participants somewhat reduced, rising incomes could have been used to finance industrial development. The planners rejected such a strategy because putting off industrialization meant that the country would have to continue to rely on imports for needed industrial goods, while the leaders were impatient for the industrialization they identified with progress. People who argued for the priority of agriculture over industry were dismissed as being reactionaries and possibly stooges of the Central Intelligence Agency (CIA). ### The Initial Results Industrialization was a moderate success. The newly created public enterprises, albeit after major cost overruns and several delays, turned out steel, chemicals, and other products that were generally associated with developed countries. A British colonial official in the early twentieth century once scoffed that he would be willing to eat all the steel than the Indians would produce.^4^ If alive in 1960, he would have eaten 6,300 tons of steel.^5^ Still, by the late 1950s several problems resulting from the planners' chosen strategy of economic development were coming to the fore, and such problems intensified in the 1960s and the 1970s. Many SOEs were run on political rather than economic considerations, so they produced losses that drained government resources rather than---as the planners had hoped---augmenting them. The SOEs could also not be counted on to generate mass employment due to their capital and skill rather than labor-intensive character. Several enterprises were overstaffed and faced insufficient demand for what they produced, forcing them to render idle some of their capacity. The case of the Haldia fertilizer plant is an extreme but illustrative example. The plant was set up in the 1970s and employed 1,500 people. The workers and managers showed up regularly, kept the machine facilities clean and in working condition, and often received annual bonuses and overtime. They lived in a nearby spanking-new township built specially for them, one that had excellent roads, schools, and homes. There was only one thing missing. Because of numerous problems, the plant never produced even an ounce of fertilizer. Yet the government kept Haldia's lights on for twenty-one years.^6^ One government method for financing expenditures was the creation of new money, which resulted in significant inflation. ------------------------------------------------------------------------------------------------------------------------ The expenditures necessitated by the massive investments in SOEs generated new problems. One government method for financing expenditures was the creation of new money, which resulted in significant inflation. The government feared the political backlash that the rising prices could generate. Consequently, it resorted to price controls of essential commodities, which caused black markets to flourish, and the government found itself resorting to increasingly intrusive regulations and engaging in cat-and-mouse games with traders. At one point, the government even attempted to nationalize wholesale trade in grains without much success. The efforts at price controls generally failed while consuming much public and private attention. The drawback of prioritizing industry over agriculture for public investments became glaringly apparent when the country experienced a food crisis in the mid-1960s, necessitating urgent large-scale imports of subsidized grain from the United States. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Under the fixed exchange rate regime that existed in the country, high inflation in the 1960s reduced the country's exports while increasing its imports, resulting in a shortage of foreign exchange. The shortage was exacerbated by the food imports made necessary by a drought and a war with Pakistan. Foreign exchange became one of the items the government had to resort to rationing. The reverberations were felt throughout the economy. Several new factories lay idle for want of foreign exchange to import some necessary inputs, while others hoarded foreign exchange to starve their competitors or earn a premium in the black market. Holding foreign exchange without a license became an offense punishable by jail time. Ultimately, the rupee had to be devalued, which generated further disruptions in the economic lives of most people. Meanwhile, the industrial licensing system, designed to ensure that the private sector operated according to the five-year plans, became a source of much inefficiency and corruption. The micromanagement of the private sector called for much more knowledge and technical ability than government bureaucrats possessed. The system descended into a mechanism for rewarding political supporters of the rulers, which undermined the confidence of the people in the integrity of their governmental institutions. Perhaps the most unfortunate legacy of prioritizing industry at the expense of other alternatives for investment was that scarce public resources were diverted away from health and education. The meager resources expended on these in India stand in marked contrast to the plentiful attention paid to them in China and other Asian countries. Seventy years after independence, India has still to catch up on these fronts; one-half of its children are malnourished, one-half of women are illiterate, and twothirds of its people lack basic sanitation. As a result, a large fraction of Indians today are unable to directly take advantage of the opportunities opened up by the country's recent tilt toward a market economy and globalization. ### The Change in Strategies In response to the food crisis of the mid-1960s, the government changed its agricultural strategy. Rather than holding out for the reform of agrarian institutions, it began to guarantee higher crop prices to farmers and utilize subsidies to promote use of modern inputs such as chemical fertilizers and high-yielding varieties of grain developed in other parts of the world. The resulting surge of production---the so-called "green revolution" of the late 1960s---made the country self-sufficient in food grains. The strategy was controversial because it increased economic disparities among the farmers. For the greatest chance of success, the government had to focus its strategy on the irrigated sections---the very parts of the country that were already doing relatively well. The uptake of subsidized inputs was also the highest among large landowners, owing to their greater education, creditworthiness, and the ability to bear the risk posed by adopting new methods. The strategy did not do much to alleviate the economic condition of the agrarian poor, other than providing the indirect benefit of living in a country with better overall food security that has not since experienced famine. Micronutrient deficiencies (not caloric) such as anemia are today a bigger problem among the poor, and the country's health indicators lag behind those of other countries with comparable levels of income. The strategy toward industry, however, turned more interventionist after 1965. Elaboration of all the reasons for this need not detain us here; there is a strong case that the interventionist turn was a cynical ploy by new Prime Minister Indira Gandhi for consolidating her power in response to certain political developments. The new policy stance displayed a suspicion of large firms and a preference for the small. The licensing system imposed additional restrictions on the activities of large firms, curtailing their growth. Under a policy that was one of a kind, consumer goods such as apparel, footwear, furniture, sporting goods, office supplies, leather goods, and kitchen appliances were reserved by law for production by small firms. Foreign firms were asked to dilute their ownership stake in their Indian subsidiaries and in response, multinationals such as IBM and Coca-Cola closed their operations and left the country. To the extent that the success of the large firms was due to their superior technical or organizational capacity, the curtailment of their growth meant that such capacity remained underutilized. Delays and arbitrariness in the issuing of industrial licenses resulted in supply bottlenecks and shortages of many consumer goods. For example, in the 1970s, there was an eight-year waiting list for people wanting to buy a scooter, the preferred vehicle for middle-class Indians. Thirty-five years after independence, India's leadership had yet to achieve, to any significant degree, its pledge of lifting living standards. ----------------------------------------------------------------------------------------------------------------------------------------------- The reservation of consumer goods for small enterprises meant that the benefits of economies of scale were forgone, resulting in the production of poor-quality and high-priced goods that foreigners shunned and domestic consumers had no choice but to accept. Meanwhile, countries such as South Korea and Taiwan were growing rich by exporting this very category of goods. It was during this time that Indians developed a craze for foreign products, the imports of which were restricted, and the term "imported" became synonymous with "high-quality." The\ result of such policies was economic stagnation. The country's per capita income grew by an average of less than 1 percent a year between 1966 and 1980, a rate that was too low to make a dent in the country's massive poverty. Thirty-five years after independence, India's leadership had yet to achieve, to any significant degree, its pledge of lifting living standards. Also, years of rhetoric about creating rapid development had heightened people's expectations for their quality of living. Economic stagnation, combined with high inflation caused by the government's printing of massive amounts of money, bred political unrest and popular agitation, to which Indira Gandhi responded by declaring a national emergency in 1975. Taking advantage of the suspension of democratic procedures and requirements of due process brought on by the emergency, the Prime Minister attempted strict interventions that included rapid land redistribution and forced sterilization as a part of population control. The programs were poorly administered, contributed to incidents of human rights violations, failed to improve the economic situation, and caused a number of unintended consequences. For example, the government's attempts to liquidate debts of poor farmers led to the virtual drying up of informal sources of credit and the banks were not up to the task of picking up the slack. The chaos generated by the haphazard and poorly administered interventions generated a popular backlash and tainted in many minds the whole interventionist approach to economic development. By the 1980s, a substantial number of influential people had come around to the conclusion that the government did not have the political and administrative capacity to successfully run a controlled economy that delivered on economic growth. Gandhi, chastened by the political defeats that followed her earlier attempts to impose strict controls, acquiesced to relaxing some of them. Her Cambridge-educated son, Rajiv Gandhi, who succeeded her as Prime Minister, enacted further liberalization. Certain industries and business activities were exempted from licensing requirements. Such measures helped to cause robust industrial growth in the late 1980s. ### The About Turn When a foreign exchange shortage threatened a crisis again in 1991, the government made a clear break with past policies. By then, the intellectual consensus in favor of state-led, import-substituting development strategies had greatly weakened. The breakup of the Soviet Union had substantially discredited central planning, and the export-led success of East Asian countries had thrown into light the drawbacks of an inward-looking model of development. Also, cultural changes in India, consisting of a deemphasis of asceticism and a greater acceptance of the pursuit of material gain, had made extensive economic controls untenable.^7^ At the behest of the International Monetary Fund (IMF), which provided rescue during the foreign exchange crisis, but also of its own accord, the government announced major economic reforms. It dismantled the license Raj almost overnight, slashed tax rates and import duties, removed controls on prices and entry of new firms, put up several SOEs for sale, and rolled out the welcome mat for foreign investors. Rather than socialism, the guiding principles of policy now were liberalization, privatization, and globalization. The country's share in world trade increased from 0.4 percent on the eve of the reforms to 1.5 percent in 2006, and foreign exchange shortages, once a chronic headache for policymakers, have now been replaced by reserves upward of US \$350 billion... ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- The economy responded with a surge in growth, which averaged 6.3 percent annually in the 1990s and the early 2000s, a rate double that of earlier time frames. Shortages disappeared. On the eve of the reforms, the public telecom monopoly had installed five million landlines in the entire country and there was a seven-year waiting list to get a new line. In 2004, private cellular companies were signing up new customers at the rate of five million per month. The number of people who lived below the poverty line decreased between 1993 and 2009 from 50 percent of total population to 34 percent. The exact estimates vary depending on the poverty line used, but even alternative estimates indicate a post-1991 decline of poverty that is more rapid than at any other time since independence. The country's share in world trade increased from 0.4 percent on the eve of the reforms to 1.5 percent in 2006, and foreign exchange shortages, once a chronic headache for policymakers, have now been replaced by reserves upward of US \$350 billion---prompting debates about what to do with the "excess reserves."^8^ Several significant economic challenges remain for India. The economy has polarized into a highly productive, modern, and globally integrated formal sector, employing about 10 percent of the labor force, and a low-productivity sector consisting of agriculture and urban informal activities, engaging 90 percent of the labor force. The sectors that have experienced the most growth are services and capital-intensive manufacturing. It is illustrative that IT and pharmaceuticals are the two sectors of the economy with international renown. Such industries tend to be urban and employ mainly skilled workers. Yet to come India's way are millions of lowskill manufacturing jobs that have allowed the poor in East Asian countries to climb into the middle class. Companies are loath to set up labor-intensive manufacturing because Indian labor laws are some of the most restrictive in the world. For example, a manufacturing unit hiring more than 100 workers cannot lay off any of them without seeking government permission, which is rarely granted.^9^ Liberalization of labor laws tends to run into fierce political opposition. The second reason for the dearth of manufacturing jobs is that the country's infrastructure is relatively deficient, and so companies increasingly practicing just-in-time inventory management do not find it cost-effective to include India in their global supply chains.^10^ The provision of public services in India is appallingly poor. Government schools and clinics are underfunded and inadequately supervised, and their workers display low morale and high absenteeism. Yet such public institutions are rarely held accountable for their performance.^11^ The middle class has largely opted out of the system in favor of private health care, schools, and transportation so there is little political pressure from them to improve the system. Most middle-class Indians now even own a power generator to cope with everyday power cuts. The poor take the brunt of the derelict public services. Two million children die in India every year from easily preventable diseases, according to the United Nations Children's Fund (UNICEF), and immunization rates in India are amongst the lowest in the world. Air pollution levels in urban areas pose a severe public health crisis. According to a survey by the World Health Organization (WHO), thirteen out of the twenty most polluted cities in the world are Indian.^12^ The country still relies heavily on inexpensive coal to generate power and has shown very little willingness to move toward alternative energy sources.