(a) Do you subscribe to the view that private sector is a key driver to economic development of India? Give reasons in support of…

(a) Private Sector: A Necessary but Incomplete Driver I partially subscribe to the view that the private sector is a key driver of India’s economic development. After 1991, liberalisation, privatisation and globalisation allowed private capital to expand in IT, telecom, manufacturing and services, and National Accounts data show the private corporate and household sectors together accounting for roughly three-fourths of gross fixed capital formation in post-reform years. This has accelerated growth, created jobs, improved productivity, and brought innovation, competition and efficiency that the state alone could not deliver. Private firms also respond faster to demand, mobilise savings, and generate exports and tax revenue. It has also strengthened linkages with global value chains and improved consumer choice.

However, the private sector is not sufficient. Its investment is often capital-intensive and regionally concentrated, favouring urban India, skilled labour and profitable sectors. Profit motive may crowd out public goods such as health, education, sanitation and rural infrastructure. Post-reform growth has coexisted with persistent informal employment, jobless growth in some sectors, and concerns about crony capitalism and regulatory capture. Thus the state remains essential for infrastructure, human capital, social protection and market regulation. A balanced verdict is that the private sector is a key engine, but development requires a strong developmental state.

(b) Growth and Income Distribution in the Liberalisation Period The claim that growth caused deterioration in income distribution during liberalisation needs nuance. World Inequality Lab estimates of income shares show rising income Gini coefficient and Palma ratio, with higher top-decile shares, while Oxfam reports highlight wealth concentration. World Inequality Lab work (2024) puts the top 10% income share at about 57-58% in 2022-23, near its highest level in a century. NSSO and PLFS data, however, measure consumption expenditure, employment and wages rather than directly providing income Gini or Palma ratios; they show that consumption inequality was more muted and that poverty fell substantially, depending on the poverty line used. This distinction matters because consumption can be smoothed by credit, remittances and public transfers. The Tendulkar Committee line implied a larger fall in poverty than the Rangarajan Committee line, but both show a substantial decline. The World Bank (2025) estimated India’s consumption Gini at about 25.5 for 2022-23, among the lower values globally, which shows how the answer depends on whether income or consumption is measured.

The deterioration was not simply caused by growth. Skill-biased technological change, globalisation and the rise of high-productivity services increased returns to education and urban assets, while informalisation and weak social protection left low-skilled workers vulnerable. Regional disparities also widened. Therefore, growth was accompanied by rising inequality, but it also reduced absolute poverty; the distributional outcome depended on policy, not growth alone.

(c) Rationale for Power and Irrigation Subsidies in Agriculture Continuance of power and irrigation subsidies in agriculture has a clear rationale. Power subsidy—providing electricity below cost for tubewell pumping—reduces input costs for small and marginal farmers, supports food production and rural employment, prevents a sharp rise in food prices, and reflects political economy compulsions from the Green Revolution’s expansion of irrigated agriculture. Irrigation subsidy is distinct: under-pricing of canal water, often charged below cost or free, reflects equity considerations, its public-good character, the need to ensure affordable water for smallholders, and the state’s responsibility for food security and rural livelihoods. Both subsidies protect vulnerable farmers from market shocks and maintain agricultural output.

Yet their continuance is problematic. Power-intensive groundwater pumping has accelerated aquifer depletion in Punjab, Haryana and parts of Rajasthan, while fiscal burdens and inefficient water use persist. Canal subsidies can encourage over-cultivation of water-intensive crops. Reform is needed: direct benefit transfers to farmers, metering and time-bound power supply, crop diversification, and solar pumps under PM-KUSUM. Irrigation policy should shift from cheap water to efficient water, with user charges, watershed management and equitable allocation.