INCLUSIVE GROWTH AND ISSUES
Inclusive Growth
The Asian Development Bank claims that inclusive development lacks a universally accepted definition. However, it is generally accepted that the idea refers to “growth coupled with equal opportunities.” Its main goal is to create opportunities and make them available to everyone, not just the privileged.
When all members of a society, regardless of their unique circumstances, equally participate in and contribute to the growth process, this is known as inclusive growth.
The Eleventh Plan document outlined the agenda for inclusive growth, which aimed to achieve both faster and a growth process that guarantees a broad improvement in the quality of life of the people, particularly women, minorities, the poor, SCs/STs, and other backward castes (OBCs), while also pursuing equality of opportunity for all.
Need for Inclusive growth
In order to reduce poverty quickly and sustainably, inclusive growth is essential because it enables people to participate in and gain from economic expansion. This growth ought to be widespread across industries and involve a sizable portion of the labour force.
Extensive growth, which requires expanding input quantities, is necessary for rapid pace and employment. However, for sustainable long-term growth and productive employment, periods of intensive growth, driven by productivity improvements, technological breakthroughs, and innovations, should occur instead of just capacity expansion. This approach emphasizes the importance of both extensive and intensive growth.
Features of Inclusive growth
It emphasises economic growth, which is a vital and essential prerequisite for the decrease of poverty.
It takes a long-term view and considers both the rate and direction of growth.
It focuses on productive employment rather than income redistribution. As a result, both productivity growth and employment growth are being prioritised.
Inclusive Growth isn’t defined in terms of particular goals like creating jobs or distributing income. These are potential outcomes, not specific goals.
Usually, market-driven growth sources drive it, with government intervention serving as a catalyst.
Important Pillars
Processes of inclusion
Inclusion occurs through three distinct processes: (i) social inclusion, (ii) economic inclusion, and (iii) political inclusion.
Social Inclusion
Social inclusion is an overarching framework for addressing various social policy issues, including income inequality, skill levels, education, health inequalities, housing affordability, and work-life balance.
Social inclusion promotes more active participation of people living in communities.
Economic Inclusion
Scholars have recently come to understand the relationship between a productive economy and a society that enjoys high levels of participation, connection, and cohesion, as well as the combined impact these factors have on people’s wellbeing.
Policies that guarantee a wide range of opportunities for people to engage in society and the economy are directed by an inclusive economy, which in turn enhances people’s well- being.
Political Inclusion
A democratic and participatory political organization empowers people to raise their voices against injustices and
deprivation. This is done through reservations for various communities like the Scheduled Castes (SCs) and the Scheduled Tribes (STs).
Challenges in Achieving Inclusive Growth in India
Poverty: As per the Global Multidimensional Poverty Index (MPI) 2022, the incidence of poverty fell from 55.1% in 2005-06 to 16.4% in 2019-21 in India but still India has by far the largest number of poor people worldwide at
22.8 crore.
Unemployment: In India, unemployment is still a major issue, with variations seen in various areas and industries. Unemployment rate in India rose to 8.percent in March 2024, according to CMIE's consumer Pyramids Household Survey. India’s employment quality and quantity are low due to illiteracy and over-dependence on agriculture. More than 80% of people without social security work in the unorganised sector. Low job growth is attributed to low investment, low industry capital utilization, and low agriculture growth.
Prevalent Inequality: Oxfam India’s report on India’s inequality reveals that only 5% of Indians own over 60% of the country’s wealth, while the bottom 50% own only 3%. The report, titled “Survival of the Richest: The India story,” also shows that 40% of wealth created between 2012 and 2021 went to just 1% of the population, and only 3% went to the bottom 50%. In India, there were 166 billionaires by 2022 compared to 102 in 2020.
Agriculture Backwardness: Indian agriculture faces backwardness due to age old cultivation methods, over- dependence on monsoons, soil erosion, fragmented land holding, poor seed quality, unreliable irrigation facilities, lack of proper use of manure and fertilizer, reluctance to adopt modern scientific methods, excessive pressure on land, poor credit system, poor marketing, low prices of produce, poor electricity, storage, water, credit, marketing, less mechanization, and inadequate agricultural research.
Gender Divide: In terms of gender parity, India is still ranked 127th out of 146 countries, despite an eight-place increase in the annual Gender Gap Report, 2023.
Regional Disparities: For India, regional disparities are an enormous issue. Regional disparities lead to a system where certain particular groups have greater privileges than others due to factors like the caste system, the wealth and poverty disparity, etc. e.g. At 93.1%, Kerala is the state with the highest level of education, whereas Bihar’s is only 63.82%. Goa’s per capita income in 2018 was Rs 4,67,998, whereas Bihar’s per capita income was only Rs 43,822, or one-tenth of that.
INCLUSIVE GROWTH- POLICY IMPLICATIONS
Agricultural Development
Agriculture development should be given priority. The
recent trend shows that the contribution of the agricultural sector to total GDP has reduced from 44.6 percent to around 18 percent from the year 1958-59 to 2022-23.
On the other hand, the absorption of labour in the agricultural sector has not reduced much during the same period. This emphasises shows that the pace of reduction of contribution to GDP by the agricultural sector is extremely high as compared to the pace of reduction of workforce in the agricultural sector. Hence there is a need to develop the agricultural sector by way of irrigation and water management, credit, research and extension, marketing etc.
Land and water management (including watershed development) are crucial for agriculture development. Development of agro-based industries in rural areas has not only expanded the scope of employment but also reduced the heavy dependence on the agricultural sector.
Rural Non-farm Employment opportunities
All non-agricultural activities, such as mining and quarrying, household and non-household manufacturing, processing, etc., are included in the Rural Non-Farm Sector (RNFS).
The non-farm rural economy is regarded as a successful decentralisation approach for economic activities in rural India, with the goal of preventing uncontrolled migration, bridging the gap between rural and urban areas, creating jobs, lessening inequality, and so forth.
Many issues have been plaguing the industry, including insufficient rural infrastructure (roads, electricity, and communication systems, in particular), a shortage of skilled labour, insufficient access to credit, information and training facilities, etc. Therefore, significant investments along with an appropriate governance structure are required for rural development that is inclusive, sustainable and diversified.
Financial Inclusion
The provision of timely and sufficient credit, along with financial services at a reasonable cost, to underprivileged and low-income populations is known as financial inclusion.
Financial inclusion can help in achieving development goals such as poverty eradication and income equality, food security and sustainable agriculture, supporting infrastructure and industries, better healthcare, encouraging increased consumption and savings, reduction in unemployment and sustainable economic growth.
Financial inclusion has been ensured by the government and the central bank by way of implementation of Jan Dhan Yojana, easier credit facilities, simpler KYC norms, use of information and technology, expansion of electronic benefit transfer system, business correspondence model, bank branch and ATM expansion, financial literacy and credit counselling, etc.
However, a sizable portion of Indians still don't have access
to formal banking. Rapid urbanisation is increasing the rate of urban poor who are devoid of the most basic banking facilities. Also, people working in the informal sector still remain outside the rings of the formal financial system. Thus, much needs to be done in the financial inclusion space in order to ensure inclusive growth.
Public Investment
Public funding for rural development has drastically decreased. As a result, India’s agricultural growth slowed. Prioritising public investment in physical (irrigation, roads, communications, transportation, electricity, etc.) and human infrastructure (health, education, etc.) is regarded as one of the most important factors contributing to inclusive growth.
Public Finance and Tax Policies
Taxes provide the funding for basic welfare and social security programmes, shielding the impoverished from unforeseen dangers and keeping them from reverting to poverty in hard times. Because of this, progressive tax policies are essential to promoting an equitable distribution of wealth and income.
Development of Institutions
Development of new institutions and strengthening the present institutions of service delivery are important. Institutions seem to be responsive when women are empowered. Decentralisation in terms of strengthening Panchayati Raj Institutions (PRIs) has to be improved in order to have better delivery systems.
Social Protection
Through redistribution, the social protection system can significantly reduce poverty and inequality. This also helps to give the platform to the excluded section of the society.
Most important programmes are the Public Distribution System (direct food subsidy), Indira Awas Yojana (Housing for poor) and direct cash transfer through programmes like the old age pension scheme, widow pension scheme, disability pension scheme, national family benefit schemes, etc.
Policy making and policy-shaping for Inclusive Growth
Inclusive growth is crucial for achieving equity objectives and sustaining growth momentum. Rural areas often focus on agriculture, but the unorganised nonfarm sector is increasingly absorbing the labor force. Investment in infrastructure, linking to markets, and easier access to assets and skills can lead to growth in this sector. Incorporating appropriate technology, skills, and credit, especially start-up capital, can expand this segment for self-sustaining employment and wealth generation, while fostering a culture of creativity and competitive industry. Entrepreneurial development should be encouraged through a
competitive environment and easy access to finance for new projects. Recognizing the poor as resilient entrepreneurs and value-conscious consumers can open up a whole world of opportunity.