resuscitate the bedridden global economy- manufacturing to supersede services

it is not in good shape, let alone any hopes for expansion and inclusive growth. have we reached saturation, a point from where we can merely sustain past successes and not tread into newer horizons? it’s time we stop blaming geopolitical tensions for the economic stagnation, rather find rationales.

it’s simple, the economy runs on three sectors, primary, secondary and tertiary.

now when we were growing our capabilities and outputs in primary – agriculture and allied activities – and secondary – industrial production of tangible goods – we made sustainable progress. we not only pulled out many from poverty but created a space of material wants, which when achieved gave meaning to life.

the next stage, that saw revolutionary research and development in the tertiary sector – services like communication and information technology – was when viabilities eroded and sustainable and inclusive growth became elusive.

according to the definition, development is a shift from agrarian activities to manufacturing and a subsequent move toward services.

the former was sustainable since ample food production could sustain non-agricultural ventures; however, the latter is proving untenable for services cannot supersede manufacturing and ample manufacturing isn’t a driver for shift toward services.

global growth today is a representative of supremacy of services over primary and secondary sectors; a developed nation is one that produces more of services and less of the latter two. this is where the problem lies, and if not corrected, golden days of progression and poverty eradication will never revisit the global economy.

the idea advocates supremacy of secondary sector and its participants over those functioning in tertiary.

the rationale is that you may think of outsourcing information technology, cloud computing, robotics, but to whom will you outsource when the global system would crash owing to disincentives to manufacturing sector?

it is time we correct the basics and incentivize manufacturing and related research. the so-called information technology revolution is just rhetoric, it won’t repeat historic success of industrial revolution.

differential taxation of corporations; segregate primary, secondary and tertiary

no two industries will be functioning alike, impacting the economy in same manner; hence both cannot be subjected to identical degree of taxation on income. rational segregation of enterprises is the foundation of this notion.

any enterprise would be involved in either an ‘essential’ or ‘complimentary’ production. steel, consumer goods as essential, and telecom, information technology as complimentary.

we know that contribution from primary, secondary and tertiary sectors makes up country’s gdp. primary sector includes agriculture, mining and like, secondary includes manufacturing, electricity and like, and tertiary includes all services.

alike taxation of companies functioning in different sectors is irrational in long run.

let’s understand why. an enterprise undertaking mining activities has dissimilar factors of production as compared to another that produces computer programs. the risks in agriculture or manufacturing sector outnumber those in tertiary sector, while margins of latter outdo that of former.

for instance, retail works on the difference in price charged from buyer to what was paid to the seller. manufacturing a garment, however, is poles apart, from spinning machines to dyeing machines procured, intensive labour applied, servicing of interest on loans for plant and machinery.

it is simple. similar to how the rich are taxed more than those earning less (progressive taxation), companies working on more risks and less margins are to be incentivized on similar lines.

else, as is in the present state, we can see telecom and it ventures faring exceptionally better than their counterparts in steel, infrastructure and other core sector activities.

once put into place, this mechanism will not only help recover the health of manufacturing and primary sector, it will make our banking system healthier, will push real and sustainable job growth, will bring down inflation and promote equity.

give your verdict: