Title of the essay: Inclusive growth: An Indian experience. Name: Sweta Singh Category: Undergraduate INCLUSIVE GROWTH: AN INDIAN EXPERIENCE ABSTRACT: The present buzzword for India’s development strategy is inclusive growth. The role of state and market has been crucial in achieving rapid and inclusive growth. “Inclusive growth” means an emphasis towards more equitable distribution of income and building capabilities in terms of attainment of better health and education. The general notion about the success of inclusive growth is little apprehensive.
The argument is although the poor are getting richer, the rich are getting richer faster than the poor. This is problematic as it can lead to an uneven distribution of income leading to social unrest. However, such an outcome is not surprising. Globally, economists measure growth as the percentage by which a nation’s output (GDP) has changed over a period of time. Reforms entail unequal payoff to economic agents. People with more skill stand to gain more compared to those with less skill sets. In the present context, the contribution of services sector to national income (GDP) is around 55 per cent, followed by manufacturing (26. per cent of GDP) and agriculture sector (18 per cent of GDP). A more equitable income distribution would require a scenario with more people earning their livelihood from agricultural sector and less people earning their livelihood from the services sector. The present situation, however, is quite the opposite. Around, 58. 6 per cent of the Indian population earns its livelihood from agricultural and agricultural-related allied activities (such as cooperatives, fishing, dairies, etc. ) compared to less than 10 per cent dependent on organized services sector.
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What is more worrying is that this inequality is going to increase as the agricultural sector is now growing at an annual rate of 2. 6 per cent (from a lower base of 18 per cent growth) compared to services growing at 11 per cent (from a higher base of 55 per cent growth). There are too many people locked into the farm sector (with lower productivity and hence lower income) and there is an urgent need to absorb them either into manufacturing or into services sector (with higher productivity and hence higher income). India’s post 1990’s economic growth has made it one of the world’s fastest growing economies in the world.
Its GDP growth rates of up to about 9% in the last few years is historically unparalleled except by the neighboring China. With the rapid growth rates, however, come new challenges and new questions. One such challenging question concerns the spread of the benefits of growth across different segments of society. To ensure that growth has been well distributed, India’s Planning Commission has made Inclusive Growth their explicit goal in the eleventh five-year plan. The concept of Inclusive Growth has dominated discussions across India.
Its popularity has sparked intense discussions among politicians, economists, policymakers and the general public. KEYWORDS: ¦Function: A function is a rule that assigns exactly one output to each input. Functions are represented verbally by word descriptions, numerically in tables, visually with graphs, or algebraically with equations. If x is the input symbol and f is the rule, then f(x) symbolizes the output. Input/output diagrams display the input, how the input is measured (input units), the rule that relates the input and output; and the output, including how the output is measured (output units). Market: 1. The interaction between supply and demand to determine the market price and corresponding quantity bought and sold. 2. The determination of economic allocations by decentralized, voluntary interactions among those who wish to buy and sell, responding to freely determined market prices. ¦Inflation: An ongoing rise in the average level of absolute prices. Increase in the overall price level of an economy, usually as measured by the CPI or by the implicit price deflator. A rise in the average level of prices of goods and services.
Change in the general level of prices. ¦Scenario: A prospect comprising a sequence of events. ¦Allocation: An assignment of economic resources to uses. Thus, in general equilibrium, an assignment of factors to industries producing goods and services, together with the assignment of resulting final goods and services to consumers, within a country or throughout the world economy. The question is to whether or not an allocation is efficient. A change from an allocation that is not efficient to one that is may be termed an increase in efficiency. Agriculture: Production that relies essentially on the growth and nurturing of plants and animals, especially for food, usually with land as an important input; farming. Contrasts with manufacturing. ¦Economic growth: The increase over time in the capacity of an economy to produce goods and services and (ideally) to improve the well-being of its citizens. ¦Entrepreneur: A person who starts a business. ¦Gross domestic product: The total value of new goods and services produced in a given year within the borders of a country, regardless of by whom.
It is “gross” in the sense that it does not deduct depreciation of previously produced capital, in contrast to NDP. A measure of the market value of goods and services produced by a nation. Unlike Gross National Product, GDP excludes profits made by domestic firms overseas, as well as the share of reinvested earning in domestic firms’ foreign-based operations. ¦Income distribution: A description of the fractions of a population that are at various levels of income. The larger are the differences in income, the “worse” the income distribution is usually said to be, the smaller the “better. International trade and factor movements can alter countries’ income distributions by changing prices of low- and high-paid factors. ¦Long run: Referring to a long time horizon. This is not always well defined, but in trade models it usually means long enough for industries to vary the amounts of all factors they employ, and therefore for the factors to be mobile across industries. Contrasts with short run. ¦Short run: Referring to a short time horizon, usually one in which some aspects of behavior that would vary over a longer time do not have time to do so.
In trade models, it usually means that the employment of some factors of production is fixed. It contrasts with long run. ¦Unemployment Rate: The ratio of the total number of unemployed persons to the total number of persons in the labor force. The ratio of unemployment to the labor force of a country. INTRODUCTION: The word “inclusive” has become not only fashionable but also quite relevant in our country. The Oxford Dictionary gives four meanings to the word, and the most inclusive meaning is “not excluding any section of society. In this sense, the title of the Approach Paper on the Eleventh Five Year Plan “Towards faster and more inclusive growth” reflects the need to make growth “more inclusive” in terms of benefits flowing through more employment and income to those sections of society which have been bypassed by higher rates of economic growth witnessed in recent years. Inclusive growth by its very definition implies an equitable allocation of resources with benefits accruing to every section of society, which is a utopian concept.
But the allocation of resources must be focused on the indented short and long terms benefits and economic linkages at large and not just equitable mathematically on some regional and population criteria. . Society by its very definition implies coming together of a variety of peoples and sharing of benefits in order to survive and grow. Inclusive growth is a must from a narrow economic point of view (it will broaden the base for domestic demand) as well as in terms of politics (more people will have a stake in stability and reform).
Inclusive growth refers both to the pace and pattern of growth , which is considered interlinked , and therefore in need to be addressed together. The idea that both the pace and pattern of growth are critical for achieving a high, sustainable growth record, as well as poverty reduction. The subject of inclusive growth has been in the spotlight recently, for very obvious reasons. The parliamentary election campaign of 2004, with its ‘India Shining’ vs. ‘Aam Aadmi’ confrontation, highlighted an apparently widespread perception that the benefits of economic growth were simply passing too many people by.
Of course, that campaign was fought after only one year of 8 per cent plus GDP growth, which came after a relatively sluggish period between 1998 and 2003. But, notwithstanding several other factors that may have influenced the outcome of the elections, the assessment that a widespread feeling of exclusion contributed to it has shaped the rhetoric and the broad policy orientation of the United Progressive Alliance government. This orientation is most visibly manifested in the theme of the Eleventh Five-Year Plan, which runs from 2007 to 2012.
The theme is ‘towards faster and more inclusive growth,’ which clearly reflects the need to find a sustainable balance between growth and inclusion. I:DEFINING INCLUSIVE GROWTH: The inclusive growth approach takes a longer term perspective as the focus is on productive employment rather than on direct income redistribution, as a means of increasing incomes for excluded groups. In the short run, governments could use income distribution schemes to attenuate negative impacts on the poor of policies intended to jump start growth, but transfer schemes cannot be an answer in the long run and can be problematic also in the short run.
The inclusive growth definition is in line with the absolute definition of pro-poor growth, but differs from it in the following ways: (i) Absolute pro-poor growth can be the result of direct income redistribution schemes , but for growth to be inclusive productivity must be improved and new opportunities for employment created. (ii) The pro-poor growth concept has traditionally focused on growth and poverty measures whereas the inclusive growth definition focuses on ex-ante analysis of the sources of, and constraints to sustained, high growth and poverty reduction.
Policies for inclusive growth are an important component of most government strategies for sustainable growth. Sustainability of inclusive growth, therefore, calls for better usage of public fund – in terms of building rural infrastructure and imparting accountability towards provision of health and education. Otherwise, the whole objective of growth can be self-defeating. Uncertainty and volatile income in agriculture sector will create incentive for migration – creating pressure on the already inadequate urban infrastructure, unemployment and, more importantly, social unrest.
For instance, a country that has grown rapidly over a decade, but has not seen substantial reduction in poverty rates may need to focus specifically on the inclusiveness of its growth strategy, i. e. on the equality of opportunity for individuals and firms. Rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to and benefit from economic growth. Rapid pace of growth is unquestionably necessary for substantial poverty reduction, but for the growth to be sustainable in the long run, it should be broad-based across sectors, and inclusive of the large part of the country’s labor force.
This definition of inclusive growth implies a direct link between the macro and micro determinants of growth. The micro dimension captures the importance of structural transformation for economic diversification and competition, including creative destruction of jobs and firms. II:ABOUT INCLUSIVE GROWTH: ? Inclusive Growth focuses on economic growth which is a necessary and crucial condition for poverty reduction. ? Inclusive Growth adopts a long term perspective and is concerned with sustained growth. ? For growth to be sustained in the long run, it must be broad-based across sectors.
Issues of structural transformation for economic diversification therefore take a front stage. ? It must also be inclusive of the large part of the country’s labor force, where inclusiveness refers to equality of opportunity in terms of access to markets, resources and unbiased regulatory environment for businesses and individuals. ? Inclusive Growth focuses on both the pace and pattern of growth. How growth is generated is critical for accelerating poverty reduction, and any Inclusive Growth strategies must be tailored to country-specific circumstances. Inclusive Growth focuses on productive employment rather than income redistribution. Hence the focus is not only on employment growth but also on productivity growth. ? Inclusive Growth has not only the firm, but also the individual as the subject of analysis. ? Inclusive Growth is in line with the absolute definition of pro-poor growth, not the relative one. ? Inclusive Growth is not defined in terms of specific targets such as employment generation or income distribution. These are potential outcomes, not specific goals. Inclusive Growth is typically fueled by market-driven sources of growth with the government playing a facilitating role. III:UNDERSTANDING INCLUSIVE GROWTH: The proponents of “Inclusive Growth” have some vogue notions of growth and fail to see a vast change underway. Off course they fail to see any linkages between pyramid of resources, skills , jobs ,and entrepreneurships. Through the tough election campaign, Congress leaders touted inclusive growth to mean last year’s farm loan waiver and the National Rural Employment Guarantee Scheme.
These doled out lots of cash—but without delivering clear economic benefits. They are very basic social security schemes at best and lodestones of corruption at worst. These schemes throw money at the poor and destitute without actually helping them climb the economic ladder. In the long run, they could perversely prevent people from moving out of their low-productivity traps in rural India. In a way, rural Indians now have incentives to keep digging a ditch and refilling it. Neither program creates wealth.
Growth in a competitive economy is and will always be inclusive, because it cannot be other wise. But it is immensely fashionable to criticize and play down innovations in economy and hence the job market. While some level of growth is obviously a necessary condition for sustained poverty reduction, and strong average growth has been accompanied by a sharp reduction in poverty, the evidence is clear that growth by itself is not a sufficient condition. Growth does not guarantee that all persons will benefit equally. Growth can bypass the poor or marginalized groups, resulting in increasing inequality.
High and rising levels of income inequality can lower the impact on poverty reduction of a given rate of growth, and can also reduce the growth rate itself. High inequality also has implications for political stability and social cohesion needed for sustainable growth . Hence reducing inequality has become a major concern of development policy, a concern that has generated interest in inclusive growth. The growth process creates new economic opportunities that are unevenly distributed. The poor are generally constrained by circumstances or market failures that constrain them from availing these opportunities.
As a result, the poor generally benefit less from growth than the nonpoor. Thus, growth will generally be not pro-poor if left completely to markets. The government, however, can formulate policies and programs that facilitate the full participation of those less well off in the new economic opportunities. We may thus define inclusive growth as growth that not only creates new economic opportunities, but also one that ensures equal access to the opportunities created for all segments of society, particularly for the poor.
True inclusive development would mean that even the poorest Indians get a chance to move into the modern, high-productivity sectors. For that, we will need greater liberalization. Three reforms will be especially important: 1. Greater ease of doing business so that starting and— equally important—shutting down a business should be less of a Himalayan task. 2. New labour laws that will give companies a reason to use less expensive capital and more permanent labour. 3. Public investment in education and also selective privatization so that the poor acquire the skills needed in modern jobs.
Inclusive growth and reduction in poverty are inter-related. A high pace of growth over extended periods of time is a necessary, and often the main contributing factor in reducing poverty. Sustained, high growth rates and poverty reduction, however, can be realized only when the sources of growth are expanding, and an increasing share of the labor force is included in the growth process in an efficient way. From a static point of view, growth associated with progressive distributional changes will have a greater impact in reducing poverty than growth which leaves distribution unchanged.
India has, in the last four years, witnessed a GDP growth rate of 8 per cent per annum but this has not translated into any substantial reduction in poverty. The rich-poor divide has increased and poverty reduction figures of India are now lower than those of Bangladesh. More than 300 million people in India still live in deep poverty at less than a dollar a day (PPP) while another 350 million live on less than two dollars a day. There are disparities among regions, states, sectors, and communities.
Among the states, the north-eastern and the central regions, which have large tribal populations, are lagging behind. Among sectors, agriculture has fallen behind industry and the service sector. Although some of the poorest states are rich in natural and forest resources, the predominantly tribal population is unable to take advantage of this. Religious minorities, large sections of Scheduled Castes (SC) and Scheduled Tribal (ST) groups, and women still do not have access to many job opportunities and human development.
The informal sector has emerged as the largest job creator, characterized by low wages and income insecurity while wage growth is concentrated only at the top end. When the Congress led UPA Government received a winning mandate in this year’s Parliamentary election, Dr Manmohan Singh was quick to remark that ‘the election result was a verdict for inclusive growth’. “It is a verdict for equitable development,” he had added. The term inclusive growth has suddenly acquired great importance for our country in the last 10 years or so.
In fact, the Government has been using it like some kind of magic mantra. Almost all of Dr Singh’s ministers have been emphasizing on it. , while delivering the World Habitat Day Address, the Housing & Urban Poverty Alleviation & Tourism Minister Kumari Selja has said ‘only an Inclusive city can be a sustainable city’. “We have to work towards an urban India where we would have addressed the developmental disparities in a comprehensive and holistic manner,” she added. The Commerce minister too acknowledged this while speaking at the National Seminar on Industrial Productivity for ‘Inclusive Growth’.
He said that the Government has followed an inclusive model of economic growth to ensure that the benefits of growth percolate down to the poorest of the poor. One appreciates that there is a clear shift of focus from mere growth figures to betterment in the lives of the masses. In the context of infrastructure development, this assumes a significant dimension because infrastructure by definition implies a social structure that includes all sections of the society. A road, for example, does not belong to any particular class of the society; all can use it. (Paying a tax or toll is the democratic price of keeping it in running condition. Inclusive Growth in terms of infrastructure development for Construction Week India (and me personally) means positive augmentation in employment opportunities and creation of a structure that is not just physical in its output but is also economically feasible, socially relevant and one that truly delivers benefits to each and every section of the society. While it may sound Utopian to most, it is important to shed our cynicism and strive for inclusive growth. IV:ISSUES RELATED TO INCLUSIVE GROWTH: The United Progressive Alliance government counts among its successes the high growth rate of 8. per cent registered during the last five years and its programs such as the National Rural Employment Guarantee Scheme (NREGS) that sought to make that growth inclusive. The budget presented by Finance Minister Mr. Pranab Mukherjee focuses sharply on one part of the success story, that is, inclusive growth, even as its efforts to restore the economy to the path of high growth have not been so robust. The big idea that emerges out of this budget is the Food Security Act to which there is now an express commitment of a time frame for implementation.
That measure would guarantee as a right to every family below the poverty line the supply of 25 kilograms of rice or wheat at Rs. 3 a kg. Who exactly will be eligible, when it will be rolled out, and whether it will be started on a smaller scale before it is extended to the whole country much in the manner of the NREGS remain unclear. Unlike the NREGS, which has a works component built into it, the food security scheme would be a pure income transfer program; it is bound to have an even more direct and dramatic impact on poverty. The experience of States that have launched subsidised foodgrains program – at Rs. a kg shows that it would be politically rewarding as well. Prime Minister Manmohan Singh has indicated that finding the resources for such a program going by the conservative estimates of the below-the-poverty-line population adopted by the Planning Commission would be within the realm of practical politics, although a larger program based on higher poverty estimates may pose problems of funding. The focus on inclusiveness continues through the increased allocations for the flagship programmes, with the NREGS getting a 144 per cent increase to a total of Rs. 39,100 crore. A total of 44. million households are expected to be covered this year as against 33. 9 million last year and the scheme is to be brought into convergence with other rural schemes such as water and forestry projects to ensure that tangible assets are created through work under the NREGS and the rural infrastructure strengthened. The Bharat Nirman programme and the National Health Mission are also to get substantially higher allocations. Also commendable are the plans to increase credit availability in the rural areas, assistance for women’s self-help groups, and the commitment to provide social security to sections in the unorganised sector.
The extension of the Integrated Child Development Services to cover all children under six is a measure that was overdue. An attempt has been made to take advantage of the changing demographic profile with the continuing increase in the working age population through the emphasis on skills development programmes. Where the budget falls short is in the area of stimulating growth. The increased expenditure of Rs. 61,000 crore over the interim budget should overall serve as a substantial stimulus. Not much need be made of the reaction of the stock markets that had gambled on some parts of their wish list coming through and were disappointed.
Yet there is nothing in the budget that is particularly significant or dramatic enough to change the mood of uncertainty and pessimism that has gripped business and industry. The Finance Minister was not inclined to reduce the corporate income tax rate on top of the plethora of exemptions that result in lost revenue but the corporate sector did get some relief through the abolition of the fringe benefit tax. This tax was meant to discourage the loading of personal benefits on to companies as business expenses but was regarded as too burdensome in terms of record-keeping and compliance.
Also, the sharp cuts in excise duties effected at the beginning of the slowdown have not been reversed. In customs duties, the goal that has been set by the government is to take the peak import duty rate close to the levels prevailing in the ASEAN countries. Yet at a time when industry has been hit by the downturn, a measure of protection was considered necessary and the Finance Minister did not move towards that goal. The increase in the personal income tax exemption limit by Rs. 10,000 is no more than a token gesture to the middle class, although Mr.
Mukherjee did not really have headroom to give away much more. Even more significant than the rates is the Finance Minister’s promise to simplify the tax code and make tax collection procedures less burdensome. While the budget may be short on measures that have an impact on business sentiment, the increased outlays on infrastructure, particularly agricultural and rural infrastructure, will strengthen the foundations for long-term growth. The Finance Minister has made a huge gamble in moving so far from the Fiscal Responsibility and Budget Management Act targets and leaving a fiscal deficit of 6. per cent of the gross domestic product. Add to this the off-budget items and the deficits of the States, the combined total fiscal deficit may well exceed 12 per cent of GDP. Excess capacity in many industries does provide a cushion against an immediate spurt in inflation but after a period when the slack is taken up, the build up of liquidity is bound to have its impact on prices. Further, as the excess of expenditure over income is to be funded almost wholly through government borrowing, there will be a hardening of interest rates at a time when a lowering is called for. Mr.
Mukherjee has promised a return to the process of fiscal consolidation at the earliest, but he will have to reckon with several imponderables, among them the recommendations of the Finance Commission that will have a deep impact on central finances. The widening deficit certainly poses a major risk but it is a risk taken in pursuit of the broader objective of inclusive growth and may well be politically justifiable. The general notion about the success of inclusive growth is little apprehensive. The argument is although the poor are getting richer, the rich are getting richer faster than the poor .
Some of the key issues are as follows: • Unequal payoff: People with more skill stand to gain more compared to those with less skill sets. In the present context, the contribution of services sector to national income (GDP) is around 55 per cent, followed by manufacturing (26. 4 per cent of GDP) and agriculture sector (18 per cent of GDP). A more equitable income distribution would require a scenario with more people earning their livelihood from agricultural sector and less people earning their livelihood from the services sector.
But the present situation is completely different. Around, 58. 6 per cent of the Indian population earns its livelihood from agricultural and agricultural-related allied activities (such as cooperatives, fishing, dairies, etc. ) compared to less than 10 per cent dependent on organised services sector. What is more worrying is that this inequality is going to increase as the agricultural sector is now growing at an annual rate of 2. 6 per cent (from a lower base of 18 per cent growth) compared to services growing at 11 per cent (from a higher base of 55 per cent growth).
There are too many people locked into the farm sector (with lower productivity and hence lower income) and there is an urgent need to absorb them either into manufacturing or into services sector (with higher productivity and hence higher income). For an “Aam Aadmi”, that is, the common man, it is easier to get a job in the manufacturing sector relative to the services sector – specifically, IT-enabled or business type services such as finance and insurance. However, India’s growth story is predominantly revolving around the growth of the services sector. Low agricultural productivity: In India, 70 per cent of the landholding belongs to tenant farmers. Some of the big landholders are busy making money in the US and rest of the world. They have all but abandoned their traditional agricultural occupations back at home, so higher farm productivity is not a priority anymore. For States such as West Bengal where the ruling Left Front governments were successful in initiating land reform program, land owners and share tenants have little resources to invest in high-yielding variety crops.
As crop output is more dependent on rainfall, landowners are risk averse – investing in low-yielding varieties such as rice, pulses, bajra rather than investing in high-yielding varieties such as ground nut, castor. Lack of rainfall-linked insurance schemes, cold storage facilities, irrigation system, dams and tanks, connectivity of the rural to the urban market and ban on futures trading in agricultural commodities have contributed more towards this volatility and lower productivity of agricultural output. Skill formation: This is an important issue. Workers in India need to be more skilled and productive. To increase productivity, there is also reason to invest in health. Indeed, government with all good intention have increased allocation of funds from Rs 34,927 crore in 2005-06 to Rs 50,015 in 2006-07 , for its eight flagship projects on health, education, water supply and national rural employment guarantee (NREG) schemes. However, the results in form of outcomes are not satisfying. Improving efficiency: From the demand-side perspective, the Government is also spending money on schemes such as the National Rural Employment Guarantee (NREG) scheme in the backward districts in India with the objective of providing guaranteed wage employment to each rural household (typically, unskilled labour) opting for it. However, such demand management policies some time can be self-defeating. For instance, if these people are hired to build a road and the project never gets completed then the money allocated for the purpose will add to inflation.
A recent study by Subhashish Gangopadhyay (2007) has found evidence of causal linkage between NREG schemes and inflation – showing these funds are not efficiently utilised. V:MEASURING INCLUSIVE GROWTH: Inclusive growth may be measured using the idea of a social opportunity function, which is similar to a social welfare function. Hence, it can be said that inclusive growth leads to the maximization of the social opportunity function. To be consistent with our definition of inclusive growth, we propose a methodology to measure growth inclusiveness in terms of increasing the social opportunity function, which depends on two factors: ) Average opportunities available to the population. (ii) How opportunities are shared or distributed among the population. This social opportunity function gives greater weight to the opportunities enjoyed by the poor: the poorer a person is, the greater the weight will be. Such a weighting scheme will ensure that opportunities created for the poor are more important than those created for the nonpoor, i. e. , if the opportunity enjoyed by a person is transferred to a poorer person in society , then social opportunity must increase, thus making growth more inclusive. VI:STRATEGIES FOR INCLUSIVE GROWTH:
India has strong safeguard measures to promote inclusive growth. The Economic Survey 2006-07 has identified five mantras for achieving high and inclusive economic growth with a view to creating more jobs and eliminating poverty at a faster pace. ? As a first step, the government should initiate measures to channelise savings accruing on account of high growth rate coupled with the demographic dividend (a growing proportion of the population in the working age group) for investment. ? Secondly, efficiency improvements in the economy since 1999-2000 will reinforce the country’s confidence in the high-growth phase.
The ratio of net capital stock to gross value added in the national economy, which went down from 2. 78 to 2. 60 between 1999-2000 and 2004-05, has increased to 2. 66 in 2004-05, suggesting efficient utilisation of resources. ? Thirdly, availability of labour at reasonable wages and efficiency improvements will open new avenues in services, beyond the already well-known IT and ITeS that bolster confidence in the new high-growth phase. The Survey also suggested that the government should encourage tourism, which globally contributes 10 per cent to the world’s gross domestic product. As fourth step, the Survey underlined the need for rapid capacity addition through investments to prevent overheating of the economy as is being feared by some economists. ? Fifthly, the poor infrastructure that constrained growth in the past has started improving and is likely to strengthen further, giving a boost to economic growth. The strategies must also be based on sound macroeconomic policies which establish the macroeconomic preconditions for rapid growth and support key drivers of this growth.
It must also include sector-specific policies which will ensure that the structure of growth that is generated, and the institutional environment in which it occurs, achieves the objective of inclusiveness in all its many dimensions. The UPA government has recently produced a “Report to the people”. The Prime Minister’s foreword to this document states, “The key components of our strategy of ‘inclusive growth’ have been to: ? Step up investment in rural areas, in rural infrastructure and agriculture. ? Increase credit availability to farmers and offer them remunerative prices for the crops. Increase rural employment, providing a unique social safety net in the shape of National Rural Employment Guarantee Programme. ? Increase public spending on education and health care, including strengthening the mid day meal program and offering scholarships to the needy. ? Invest in urban renewal, improving the quality of life for the urban poor. ? Socially, economically, and educationally empower schedule castes, schedule tribes, other backward classes, minorities, women, children. ? Ensure that, through public investment, the growth process spreads to backward regions and district.
This strategy of “Inclusive growth” combines empowerment with entitlement and investment. Education empowers, improve health care empowers, employment guarantee entitles, fulfilling quota obligations entitles. Through a combination of offering entitlement, ensuring empowerment and stepping up public investment, our government has sought to make the growth process inclusive. ” This is fine as a statement of intent. But for all practical purposes, the UPA government’s initiatives err on the side of entitlement, rather than empowerment.
There is an attempt to cast everything into an employer-employee mould, be it through national rural employment guarantee, reservations or social security legislation. CONCLUSION: To ensure that growth has been well distributed, India’s Planning Commission has made Inclusive Growth their explicit goal in the eleventh five-year plan. The concept of Inclusive Growth has dominated discussions across India. Its popularity has sparked intense discussions among politicians, economists, policymakers and the general public.
In addition, Inclusive Growth has been the focus of studies by bilateral and multilateral aid agencies such as the UN, World Bank, Asian Development Bank, Foundations such as the ICICI Foundation, NGOs, and Civil Society Organizations alike. Despite all the attention that Inclusive Growth has received in the last few years, there lacks a precise and agreed upon definition of the term. Overall, the literature is divided between two concepts a) whether the benefits reach the poor and b) whether the benefits reach the poor proportionately more than it reaches the non-poor.
By the first definition, India may have performed quite remarkably in the last two decades, although the magnitude is hotly debated. By the second definition, India’s performance against inclusive growth seems more lackluster. Gini coefficient, a measure of income inequality, indicates that income inequality in India has increased both at an overall level as well in almost all of the states both for urban and rural areas. To address these challenges going forward, evidence suggests that there are a number of macro and micro level interventions that are poverty reducing and thus conducive to Inclusive Growth.
At macro level, there is little doubt about the usefulness of the augmented Washington Consensus . At micro level, evidence suggests that improving the following factors will help accelerate poverty reduction: reduction of inequality, not limited to income inequality, access to public infrastructure and services especially health and education, access to markets, accountability and voice, good governance, and the role of civil society organizations, women empowerment.
REFERNCES: Ali, I. , and J. Zhuang. Inclusive Growth toward a Prosperous Asia: Policy Implications. ERD Working Paper No. 97, Economics and Research Department, Asian Development Bank, Manila. Barro, R. 2000. “Inequality and Growth in a Panel of Countries. ” Journal of Economic Growth, Vol. 5. Commission on Growth and Development (2008) Growth Report: Strategies for Sustained Growth and Inclusive Development, the World Bank.