Why Mining Industry is not developed in India despite potential

 UPSC CSE 2021 Main GS Paper 1

Question 5. Despite India being one of the countries of the Gondwanaland, its mining industry contributes much less to its Gross Domestic Product (GDP) in percentage. Discuss.

Answer 

India is one of the countries that was part of the ancient supercontinent of Gondwanaland, which broke up and drifted apart about 180 million years ago. As a result, India has inherited a rich and diverse geological heritage, with various types of rocks, minerals, and fossils. India produces nearly 95 minerals, including fuel, metallic, non-metallic, and minor minerals, which serve as raw materials to various industries.

However, despite its vast mineral resources, India's mining industry contributes much less to its Gross Domestic Product (GDP) in percentage. According to the latest data from the Ministry of Mines, the mining and quarrying sector contributed around 2.5% of India's GDP in 2020-21, which is lower than the global average of around 3%. The mining sector also accounts for only around 10% of the total industrial sector GDP.

Some of the reasons for the low contribution of the mining industry to India's GDP are:

Policy and regulatory hurdles: The mining industry in India faces various policy and regulatory challenges, such as delays in obtaining clearances and approvals, lack of transparency and consistency in rules and procedures, frequent changes in taxation and royalty regimes, environmental and social safeguards, etc. These factors affect the ease of doing business and discourage investment and exploration in the sector.

Infrastructure and technology gaps: The mining industry in India suffers from inadequate infrastructure and technology, such as poor connectivity and transportation facilities, lack of power and water supply, outdated equipment and machinery, low mechanization and automation, etc. These factors affect the productivity and efficiency of the sector and increase the cost of production and operation.

Environmental and social impacts: The mining industry in India has significant environmental and social impacts, such as land degradation, water pollution, air pollution, biodiversity loss, displacement of people, human rights violations, health hazards, etc. These impacts affect the sustainability and acceptability of the sector and create conflicts and litigation with various stakeholders.

Demand and supply mismatch: The mining industry in India faces a demand and supply mismatch, due to various factors such as low domestic consumption, high import dependence, export restrictions, excess or shortage of certain minerals, etc. These factors affect the profitability and competitiveness of the sector and create market distortions and inefficiencies.

  • Consequences of low contribution: The low contribution of the mining sector to India’s GDP has several implications, such as:
    • The loss of potential revenue and employment generation for the economy.
    • The dependence on imports of minerals and metals, which affect the trade balance and foreign exchange reserves.
    • The underutilisation of natural resources, which could be used for industrial development and value addition.
    • The vulnerability to external shocks and fluctuations in the global market prices of minerals and metals.
  • Measures to increase contribution: The government has taken some steps to increase the contribution of the mining sector to India’s GDP, such as:
    • The MMDR Amendment Bill, 2021, which aims to remove the restrictions on end-use and sale of minerals by captive mines, streamline the auction process, and enhance transparency and accountability in the mining sector.
    • The National Mineral Exploration Policy, 2016, which seeks to promote private investment in mineral exploration, create a baseline geoscientific data, and establish a National Mineral Exploration Trust.
    • The National Mineral Policy, 2019, which envisages to increase the share of mining in GDP to 2.5% by 2024, reduce delays in obtaining clearances, rationalise taxes and levies, encourage research and development, and ensure sustainable mining practices.

Thus, India’s mining sector has a huge potential to contribute more to its GDP if the challenges are addressed and the opportunities are tapped. This would also help India achieve its goals of self-reliance, industrialisation, and inclusive growth.

 

nandosir

I am a civil services teacher. I teach online / offline for UPSC CSE / WBCS

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