DUTCH DISEASE
RELEVANCE: GS-3 Science & Technology
CONTEXT: How countries see uneven growth due to the sudden discovery of natural resources.
About Dutch Disease:
It refers to a phenomenon wherein a country witnesses’ uneven growth across sectors.
It is due to the discovery of natural resources, especially large oil reserves.
This phenomenon occurs 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.
Thus, it discourages the exports from other sectors while encouraging the
import of cheaper alternatives.
For e.g., In 1960, Netherlands found 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.
o This led to unemployment which rose from 1.1% to 5.1% and capital investment in the country dropped and it also caused a downfall in the industrial sector.
