EDEN IAS

INCLUSIVE GROWTH AND ISSUES ARAISING FROM IT| GS ARTICLES

Syllabus Section: Economic and Social Development/ GS Paper III

 

What is Inclusive Growth?

 The OECD defines inclusive growth as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society”.

The United Nations Development Programme’s (UNDP) perspective is based both an outcome and process. Inclusive growth implies participation and benefit-sharing ensuring that while everyone can participate in the growth process (both in decision-making and in participating in growth) and benefits of growth are shared equally.

Therefore, Inclusive growth is both a process and an outcome. As a process the focus is on wider participation in the process of growth and as an outcome it concerns with benefit sharing removal of poverty and reducing income inequalities. Inclusive growth has become central focal point of all policies, fiscal policy, monetary policy, trade policy, labour market policy, price policy, etc., across the globe.

The key features of Inclusive growth

• Economic growth is a precondition for inclusive growth, though the nature and composition of growth has to be conducive to inclusion.

• Inclusive growth is to include the poor and lagging socio-economic groups such as ethnic / tribal groups, weaker sections as well as lagging regions as partners and beneficiaries of economic growth.

• The Inclusive growth addresses the constraints of the excluded and the marginalized. It has to open up opportunities for them to be partners in growth.

• Inclusive growth should be non-discriminatory and favorable for the excluded. This implies that inclusive growth has to be broad-based in terms of coverage of regions, and labour-intensive in terms of creating large-scale productive employment opportunities in the economy.

• Inclusive growth is expected to reduce poverty faster in the sense that it has to have a higher elasticity of poverty reduction.

• Inclusive growth has to ensure access of people to basic infrastructure and basic services/capabilities such as basic health and education. This access should include not only the quantity, but also quality of these basic services.

• Inclusive growth should reduce vertical as well as horizontal inequalities in incomes and assets.

Elements of Inclusive Growth

Major components of the inclusive growth strategy included a sharp upsurge in investment in rural areas, rural infrastructure and agriculture spurt in credit for farmers, increase in rural employment through a unique social safety net and a sharp increase in public spending on education and health care. 

There are several interrelated elements of inclusive growth:

• Poverty Reduction

• Employment generation

• Agriculture Development

• Industrial Development

• Social Sector Development

• Reduction in regional disparities

• Protecting the environment.

• Equal distribution of income

• Agriculture Development

• Industrial Development

• Environment protection

• Reduction in Regional Disparities

• Equal distribution of income

• Social Sector Development

KEY PILLARS AND INDICATORS OF INCLUSIVE GROWTH

 

Key drivers and dimensions of Inclusive growth

Problems before Inclusive Growth Strategies in India

For a developing country like India, the need of inclusive growth is vital to achieve the overall progress of the country. Though it is positive for macro-economic stability, 2008-09 has resulted a relative growth slowdown, mostly from the spillover effects of the weakening of the global economic momentum and volatile financial markets. The following problems are the major concerns for developing countries like India to achieve the inclusive growth. They are:

1. Poverty

2. Employment

3. Agriculture

4. Problems in Social Development

5. Regional Disparities         

Challenges before Inclusive Growth Strategies in India

The key components of the inclusive growth strategy included a sharp increase in investment in rural areas, rural infrastructure and agriculture spurt in credit for farmers; increase in rural employment through a unique social safety net and sharp increase in public spending on education and health care. The government also should go for a variety of legislative interventions to empower the disadvantaged.

Some of the challenges and opportunities before inclusive growth strategies in India are:

• Poverty alleviation is one of the big challenges for India. Eradication of poverty in India is generally only considered to be a long-term goal. Poverty alleviation is expected to make better progress in the next 50 years than in the past, as a trickledown effect of the growing middle class. Increasing stress on education, reservation of seats in government jobs and the increasing empowerment of women and the economically weaker sections of society, are also expected to contribute to the alleviation of poverty.

• For agricultural growth, the private players can participate in to bridge the gap including providing micro finance. Contract farming, setting up storage facilities for agro-produce, and producing them from farmers. The private sector could also develop heritage sites and tourist spots and encourage the promotion of traditional arts and carafats in joint ventures with rural enterprises. The government of India should also increase its present moratorium on interest payments, lowering of farm credit rates for increase in agricultural growth.

• Skill development and unemployment: Government schemes should target eradication of both poverty and unemployment (which in recent decades has sent millions of poor and unskilled people into urban areas in search of livelihoods) attempt to solve the problem, by providing financial assistance for setting up businesses, skill honing, setting up public sector enterprises, reservations in governments, etc. The decreased role of the public sector after liberalization has further underlined the need for focusing on better education and has also put political pressure on further reforms.

• Child labour: Child labor is a complex problem that is basically rooted in poverty. The Indian government is implementing the world's largest child labor elimination program,, with primary education targeted for around 250 million. Numerous nongovernmental and voluntary organizations are also involved. Failure to implement the law and poor rehabilitation policies need urgent attention which is a big challenge for India to achieve inclusive growth.

• Women Empowerment & Regional disparities: Social development is possible through achieving Women Empowerment and eradicating the regional disparities. Though the Government is giving the women empowerment by giving special reservations, the women's advancement in India is still not matched the expectations for inclusive growth. To bring in inclusive growth, it is necessary to enhance the capabilities of women by providing education, so that they get the opportunity of getting employed and be self sustainable.

Way forward and suggestions

• Equity is important for economic development so it should be preferred.

• Agricultural Development is necessary for economic development.

• Economic reforms are important. But macro-poor policies (fiscal, trade, financial, monetary etc.) should have pro-poor focus.

• Structural change should have followed agriculture-industry-services sequence.

• Development of manufacturing sector is important for creation of productive employment.

• Equality of opportunities (education) should be given.

• South East Asian and East Asian experience can be used.

• Shift focus of reforms to delivery systems.

• Importance of women's economic and social empowerment

• Decentralization and Economic reforms in relation to socio-political environment

Conclusion   

Inclusive growth is necessary for sustainable development and equitable distribution of wealth and prosperity. Achieving inclusive growth is the biggest challenge in a country like India. In a democratic country like India, bringing 600 million people living in rural India into the mainstream is the biggest concern. The challenge is to take the levels of growth to all section of the society and to all parts of the country. The best way to achieve inclusive growth is through developing people's skills.

 

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