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Mahesh

24/06/22 07:35 AM IST

Dutch Disease

In News
  • Dutch Disease in economics refers to a phenomenon wherein a country witnesses uneven growth across sectors due to the discovery of natural resources, especially large oil reserves. 
About Dutch Disease 
  • When a country discovers natural resources and starts exporting them to the rest of the world, it causes the exchange rate of the currency to appreciate significantly and this, in turn, discourages the exports from other sectors while encouraging the import of cheaper alternatives.
  • E.g., the Netherlands (1960s) discovered gas reserves in the North Sea. The subsequent export of oil and the appreciation of the Dutch currency made Dutch exports of all non-oil products less competitive on the world market. Unemployment rose from 1.1% to 5.1% and capital investment in the country dropped. Following this, over the years, the country witnessed a downfall in the industrial sector.
  • The idea was first proposed by economists Peter Neary and Max Corden in 1982.
Source- The Hindu 

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