Why in the News?
The Lewis Model which expected a shift of surplus labor away from agriculture into manufacturing hasn’t happened as expected in India.
What is the Lewis Model in Economic Development?
The Lewis Model in Economic Development was developed in the late British economics expert Arthur Lewis.
Goal: To create an understanding of how countries that are relatively poor are able to grow economically.
Key Elements of Lewis Model:
Specifications Details
The Unlimited Supply of Workforce In countries that are less developed generally, there is plenty of workers in the agriculture sector.
The majority of this workforce is thought to be as surplus or underemployed due to the low productivity of agriculture.
Progress towards Industrialization When industrialization gets underway, the agricultural surplus labour is transferred to the industrial sector which leads to increased production and growth.
This transfer of work and capital accumulation is a key factor in economic growth.
The Dynamics of Wage Rates Initially In the industrial sector might be low due to the excess labor force. But, as the labor absorbs, wages will increase, and the economy’s production capacity grows.
The Economy is changing over time As the industrial sector develops and workers leave agriculture, the economic system transforms from agrarian-based to modern and industrialized.
What made this Lewis Model work in China and it did not work in India?
China’s success using The Lewis Model: China succeeded through its Lewis Model by absorbing a substantial amount of rural labor into its industry sector, and becoming an international manufacturing hub.
The successful implementation transformed China to”the “world’s factory” due to its capacity to utilize surplus labor to boost industrial expansion.
India was faced with challenges in the implementation of Lewis Model: In India the workforce of farmers slowed down from two-thirds down to nearly half between 1993-94 and the year 2011-12.
However, the anticipated increase in employment in the manufacturing sector didn’t happen at all during the same time.
Manufacturing’s share has increased slightly, and the last years have seen a decrease.
Therefore, the noble structural change i.e from factory-to-farm that Lewis proposed Lewis isn’t happening in India.
The movement of workers has mostly in those “subsistence” sectors (low-paid services and construction).
Which is Niti Aayog’s strategy to this issue?
NITI Aayog is developing a new economic model that focuses on the creation of jobs in and the agricultural sector.
They seek to create employment opportunities through expanding the activities that are that are related to agriculture, such as the aggregation of grading, processing packaging, warehousing, retailing, transportation and more.
There’s also an emphasis on biofuels made from residue and crop stubble that could create additional jobs.