Integrated model for Punjab’s development

Punjab’s economy thrived for three decades on the basis of an agriculture-led growth model, which has reached saturation. For rejuvenating the state’s economy, the new government should adopt an integrated triple engine-led growth model. Punjab lost its economic supremacy during the market-driven reforms of the early 1990s. Economic atrocities of the market forces on Punjab became more pronounced due to the tax holiday policy for the neighbouring hill states. To offset the negative effects of this policy, it is recommended that the state government should play the role of an entrepreneur.

The much-celebrated Punjab model needs fundamental changes. Historically, the march of Punjab’s economy started in the mid-1960s as it held the top position in terms of growth rate and per capita income. The growth model was essentially a single-sector model with a thrust on a national programme of agricultural development. Unfortunately, neither the Central nor the state government came up with a policy to envision Punjab beyond agriculture. The lack of policy foresightedness for non-agricultural sectors and timely developing their linkages with thriving agricultural sector resulted in the ‘growth reversal’ syndrome. Punjab, at present, has a deadly sectoral combination comprising a stagnating and crisis-ridden agricultural sector; weakening industrial sector; and slow-growing service sector. Decent jobs for Punjabi youth are not available. The fiscal health of the state has deteriorated over time. The outcomes of the model, thus, suggest to adopt altogether a new model of development interwoven across three drivers — the rural economy, industry and services. The strengthening of intersectoral linkages would stimulate growth, create jobs and enhance the revenue buoyancy of the state.

The work on the model should start with an ‘approach paper’ suggesting an overall rate of growth of the economy based on traditional and new drivers of growth, including knowledge and digital technology. The Punjab State Planning Board, chaired by the Chief Minister, is a suitable institution for the ‘approach paper’. For building a research-based tri-sector model, the board should set up sector-wise working groups.

The first engine of growth led by agriculture can be improved upon by diversifying the rural economy. Development of rural economy in the state is lopsided. It has mainly confined to agricultural sector. Diversification of rural economy in the form of promotion of allied activities like animal husbandry, forestry, mining and quarrying can be the new source of growth and employment. Further, though the agriculture sector would not be a major source of growth, however, the diversification of crops; promotion of niche farming; water management techniques; and, marketing facilities for new crops can make handsome value addition to farm economy.

The Fourth Industrial Revolution (Industry 4.0) is unfolding rapidly across the globe. Industry 4.0 is led by the smart technologies, particularly 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 the manufacturing processes. Most of the industries thriving as part of Industry 4.0 have locational advantages in Punjab. These use very light raw material and hence are cost-effective to transport. Another advantage to Punjab is that these industries are not land-intensive.

These industries are basically digital technology and knowledge-driven and hence would offer decent jobs to the educated youth. Punjab has huge potential for start-ups, provided conducive policies are put in place. Industry 4.0 can fruitfully be developed jointly by higher education institutions and industry. In Punjab, however, both are working in silos. The new government should evolve an institutional mechanism for these two partners to work together for seamless transfer of technology from lab to industry, and undertaking industry relevant research. Based on location of the universities and research institutions, the new government should set up technology parks. The experiences of Maharashtra, Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh would be useful.

Punjab has very fertile social and economic environment for technology-driven rural industrialisation. The farmers’ agitation against three farm laws has demonstrated strong organisational skills; use of social media; cooperation and networking of farm unions from global to local. A number of farmers are in business related to agriculture like commission agents (arhtiyas). This social capital, entrepreneurial and technological skills constitute the threshold for Punjab to develop agri-business and create jobs. The government should harness this potential to transform the landscape of economy. Policy lessons for rural industrialisation can be drawn from the Chinese model of ‘Township and village enterprises’.

The service sector is the backbone of Punjab’s economy. It is contributing the maximum (47 per cent) to the state income and offering two-fifth of the total employment. Service sectors, barring few sub-sectors, are using traditional technologies. The sector is not fully aligned with other sectors. The service sector can become the third fast engine of growth by developing sunrise services like information technology-enabled services (ITES), including BPO, online education, social media and entertainment; cyber security; environmental services; Fintech (Financial technology business) services; quaternary/knowledge services like scientific research, bio-technology, education, consultancy, IPRs; quinary services delivered by top decision-makers relating to new ideas/policies, data interpretation, and application, evaluation of new technologies. Developing linkages with agriculture and industry would add to the power of the third engine. Application of digital technologies holds the key for making the tertiary sector the fountainhead of quality services and decent jobs.

Punjab’s economy excelled between the mid-1960s and early 1990s. This was the phase of state-led development. The economy, however, suffered hugely due to the market-led model. In the post-reform period, due to locational disadvantages, investment reluctance was observed. The theory of market failure suggests that where the market fails, it is the responsibility of the government to step in. For developing Punjab on a faster track, the new government should play an entrepreneurial role. The state has a number of public corporations relating to industry, finance and agriculture. The government should restructure them on business lines by granting professional autonomy and enforcing accountability. These corporations should directly participate in industrialisation by setting up large-scale units. Around large industries, the ancillary units, preferably in the cooperative sector, should be incentivised.