16th May 2017, Editorial – The Hindu

GS III: Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.

When being clever is not enough.

Allocation of resources does not determine economic fate.

  • Experts say many countries lagging behind in prosperity and technological advancement are mostly lacking entrepreneurial spirit.
  • However economist William J. Baumol in his paper ‘Entrepreneurship: Productive,Unproductive and Destructive’ argued that just because a country maybe advanced does not mean it will lead to prosperity.

  • He goes on to say that economic prosperity depends on the way the country allocates the talent of the people. It can either be a productive allocation or an unproductive one.
  • Honest businesses are productive while activities such as gambling, criminal activities, rent seeking activities are unproductive and destroys wealth.
  • U.S. maybe a typical example of a country where the rent-seeking rich are getting more and more money and as a result income disparity widens.Rent seeking countries.png
  • The inequality in the country worsens when the rent income is re-invested thus generating greater returns and widening the income gap between the rich and the poor.
  • To break this cycle, the quality of institutions need to be assessed. If the country’s institutions reward entrepreneurship in productive activities, they have wealth and if not, then they will be about to face economic stagnation.
  • China and India’s structural economic reforms such as increasing foreign trade, reducing trade barriers, welcoming Foreign Direct Investments clearly make them economies that reward productive activities.

Source: The Hindu

GS II: India and its neighbourhood relations.

GS II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Off the Road

Dont Shut the Door on diplomacy over China’s Belt & Road Initiative

  1. India’s worries well founded:

The BRI’s flagship project is China Pakistan Economic Corridor which threatens India’s sovereignty and territorial integrity.


2. It could lead to an unsustainable debt burden for countries with an adverse impact on the environment.

3. There is lack of transparency in China’s agenda. It is unclear if this is a form of neo-colonialism which China is guilty of w.r.t to Arunachal Pradesh or does it really wish to boost economic ties.


  1. India is a co-founder of the Asian Infrastructure Investment Bank and a member of the Shanghai Cooperation Organisation. She will be most certainly a part of China’s BRI whether directly or indirectly.
  2. The U.N. supports the project as a shared vision for global development. It would be difficult for India to not participate in a venture where the rest of the countries are actively engagement for gwoth and development of all.

What India Should Do?

Get its concerns addressed to both China and all the other member countries and get viable assurances that it must see no cause to back out or else diplomacy between the two countries will be effectively threatened.

Image Source: Hindustan Times

Source: The Hindu


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