Inclusive growth has become a buzzword in the past few years. It is being widely discussed in various forums, seminars, workshops, corporate gatherings, etc. Inclusive growth was the cynosure of the recently held Economic Times Award for Corporate Excellence, where Pranab Mukherjee, the finance minister of India, held a close gathering of top guns of India Inc. to disseminate the message that government is working earnestly for the people at the bottom of the pyramid. Also, Inclusive Growth will be one of the core themes of the budget for the year 2010-11.
So, what exactly do we mean by Inclusive Growth? The 11th plan defines Inclusive Growth to be a “growth process which yields broad-based benefits and ensures equality of opportunity for all”. Inclusive Growth is about the overall growth and development of an economy by empowering the poor and marginalized sections of the society. It is about equitable allocation of resources with benefits accruing to every section of the society. The growth of a nation depends upon the development of all sections of people. The UPA Government has been taking umpteen measures to facilitate inclusive growth by investments in various programmes concerning health, nutrition, education, etc.
Pitfalls before Inclusive Growth strategies in India
The following problems are a major cause of concern for developing countries like India to attain inclusive growth.
Inequality and Poverty: After liberalisation and with the advent of globalisation, India began emphasizing on attaining high GDP growth rate and raising the per capita income. Notwithstanding the rise in GDP and per capita income in the last few decades, the poverty level in India has also increased substantially. This situation is an indicator of exclusive growth. This is because when growth is substantial and adequate, poverty should not prevail in the country. However, poverty is rampant in the fastest growing, free market India, necessitating inclusive growth.
An analysis of the growth of India based on empirical data has revealed a growing mismatch between growth and poverty. The GDP growth data of India was 5.9% during the 1980s.About 382 million people were below the poverty line in that period. From 2000-2005, the GDP growth rate was 6.6%. Also, the population of India below the poverty line during the same period was 387 million. Thus, it is beyond doubt that the fruits of economic growth did not reach the lowest strata of the society.
Neglect of agriculture and rural development: India is considered to be an agriculture-based country. As many as 600 million people continue to depend on agriculture as a source of livelihood, yet agriculture has been growing at only 3% annually. Some of the key problems in this sector are;
1. Decline in per capita land availability and shrinking of farm size
2. Low labour productivity
3. Decline in the yield output because of water and land problems
Workforce woes: India currently has around 500 million people in the workforce and this is expected to grow by about 20 million each year for the next ten years. But this workforce has a serious problem: unemployability due to the lack of necessary skills and competence that is essential for today’s environment. Multiple surveys by bodies such as CII and NASSCOM show a severe gap between employment and employability, which in turn severely limits the possibility of true inclusive growth that ultimately depends on the productivity of the overall workforce and talent resource levels.
Social Development issues: There is significant regional, social and gender disparities in India which stymies the success of inclusive growth. There is underinvestment on the part of the government in human development. India is ranked 134th among 170 countries on Human Development Index. It has poor quality delivery systems in place. Malnutrition is also one of the key concerns impeding the economic growth of India.
The above impediments can be resolved by taking certain measures in the ensuing strategy of inclusive growth in India. Firstly, growth should take place in the sectors in which most of the poor people are entailed viz, agricultural sector. Secondly, growth should occur in marginalized areas where poor people live. This can take place through massive investments in physical and social infrastructure. Growth should ensure that the prices of essential commodities such as wheat, rice and milk, etc. are under control. Lastly, growth must use the factors of production that the poor possess. This can be accomplished by bolstering, promoting and encouraging labour-intensive industries.
How can the government actually help deliver inclusive growth? Different programmes have been introduced by the UPA Government that sought to make the growth inclusive. The President has promised to enact the Food Security Act which would guarantee every BPL (Below Poverty Line) family the supply of 25 kilograms of rice or wheat at Rs.3 per kg. The food security scheme would be a pure income transfer programme; it is bound to have direct and dramatic impact of poverty. The focus on inclusive growth continues with increased allocations for flagship programmes, with the National Rural Employment Guarantee Scheme (NREGS) getting a stupendous 144 percent increase to a total of Rs.39100 crore. A total of 44.7 million households are expected to be covered as against 33.9 million last year. The Bharat Nirman programme and the National Health mission are also expected to get a substantially higher allocation.
Research that followed C.K. Prahalad’s seminal arguments has revealed that companies that focus on business with the poor, both from the demand side and the supply side, can be very profitable. There are well-known proofs of concept from India and across the globe- the inclusive Markets Research programme of the UNDP has highlighted a number of these cases. The challenge ahead is to engineer business models in environments of poverty i.e. business models that can be value-creating by selling products and services to the BPL families. A valuable lesson here is offered by the micro-finance industry. Microfinance firms pull together social networks, community and group norms and local knowledge of the poor to reduce costs of operation hugely.
Conclusion
There are various challenges ahead which need to be met for the success of inclusive growth. Since agriculture holds the key to rural income, food self sufficiency and relative stability in prices; these benefits are expected to contribute to improved farm productivity and thus contribute to the economy as well for inclusive growth. Gender equality and women empowerment are essential human rights that lie at the heart of economic development and achievement of Millennium Development Goals (MDG). Government initiatives and various development programmes must reach the bottom of the pyramid in due time to ensure inclusive growth at a less time span. Employment is the key to eradicate poverty. Hence, employment generation is paramount. Better infrastructure facilities and investments in public and private sectors are likely to strengthen the economic growth. The urban-rural divide ought to be abridged to ensure equitable growth. Inclusive growth is a call to action. Not only for government, but also for the private sector, the education sector and people to join hands, identify solutions and grow together.
So, what exactly do we mean by Inclusive Growth? The 11th plan defines Inclusive Growth to be a “growth process which yields broad-based benefits and ensures equality of opportunity for all”. Inclusive Growth is about the overall growth and development of an economy by empowering the poor and marginalized sections of the society. It is about equitable allocation of resources with benefits accruing to every section of the society. The growth of a nation depends upon the development of all sections of people. The UPA Government has been taking umpteen measures to facilitate inclusive growth by investments in various programmes concerning health, nutrition, education, etc.
Pitfalls before Inclusive Growth strategies in India
The following problems are a major cause of concern for developing countries like India to attain inclusive growth.
Inequality and Poverty: After liberalisation and with the advent of globalisation, India began emphasizing on attaining high GDP growth rate and raising the per capita income. Notwithstanding the rise in GDP and per capita income in the last few decades, the poverty level in India has also increased substantially. This situation is an indicator of exclusive growth. This is because when growth is substantial and adequate, poverty should not prevail in the country. However, poverty is rampant in the fastest growing, free market India, necessitating inclusive growth.
An analysis of the growth of India based on empirical data has revealed a growing mismatch between growth and poverty. The GDP growth data of India was 5.9% during the 1980s.About 382 million people were below the poverty line in that period. From 2000-2005, the GDP growth rate was 6.6%. Also, the population of India below the poverty line during the same period was 387 million. Thus, it is beyond doubt that the fruits of economic growth did not reach the lowest strata of the society.
Neglect of agriculture and rural development: India is considered to be an agriculture-based country. As many as 600 million people continue to depend on agriculture as a source of livelihood, yet agriculture has been growing at only 3% annually. Some of the key problems in this sector are;
1. Decline in per capita land availability and shrinking of farm size
2. Low labour productivity
3. Decline in the yield output because of water and land problems
Workforce woes: India currently has around 500 million people in the workforce and this is expected to grow by about 20 million each year for the next ten years. But this workforce has a serious problem: unemployability due to the lack of necessary skills and competence that is essential for today’s environment. Multiple surveys by bodies such as CII and NASSCOM show a severe gap between employment and employability, which in turn severely limits the possibility of true inclusive growth that ultimately depends on the productivity of the overall workforce and talent resource levels.
Social Development issues: There is significant regional, social and gender disparities in India which stymies the success of inclusive growth. There is underinvestment on the part of the government in human development. India is ranked 134th among 170 countries on Human Development Index. It has poor quality delivery systems in place. Malnutrition is also one of the key concerns impeding the economic growth of India.
The above impediments can be resolved by taking certain measures in the ensuing strategy of inclusive growth in India. Firstly, growth should take place in the sectors in which most of the poor people are entailed viz, agricultural sector. Secondly, growth should occur in marginalized areas where poor people live. This can take place through massive investments in physical and social infrastructure. Growth should ensure that the prices of essential commodities such as wheat, rice and milk, etc. are under control. Lastly, growth must use the factors of production that the poor possess. This can be accomplished by bolstering, promoting and encouraging labour-intensive industries.
How can the government actually help deliver inclusive growth? Different programmes have been introduced by the UPA Government that sought to make the growth inclusive. The President has promised to enact the Food Security Act which would guarantee every BPL (Below Poverty Line) family the supply of 25 kilograms of rice or wheat at Rs.3 per kg. The food security scheme would be a pure income transfer programme; it is bound to have direct and dramatic impact of poverty. The focus on inclusive growth continues with increased allocations for flagship programmes, with the National Rural Employment Guarantee Scheme (NREGS) getting a stupendous 144 percent increase to a total of Rs.39100 crore. A total of 44.7 million households are expected to be covered as against 33.9 million last year. The Bharat Nirman programme and the National Health mission are also expected to get a substantially higher allocation.
Research that followed C.K. Prahalad’s seminal arguments has revealed that companies that focus on business with the poor, both from the demand side and the supply side, can be very profitable. There are well-known proofs of concept from India and across the globe- the inclusive Markets Research programme of the UNDP has highlighted a number of these cases. The challenge ahead is to engineer business models in environments of poverty i.e. business models that can be value-creating by selling products and services to the BPL families. A valuable lesson here is offered by the micro-finance industry. Microfinance firms pull together social networks, community and group norms and local knowledge of the poor to reduce costs of operation hugely.
Conclusion
There are various challenges ahead which need to be met for the success of inclusive growth. Since agriculture holds the key to rural income, food self sufficiency and relative stability in prices; these benefits are expected to contribute to improved farm productivity and thus contribute to the economy as well for inclusive growth. Gender equality and women empowerment are essential human rights that lie at the heart of economic development and achievement of Millennium Development Goals (MDG). Government initiatives and various development programmes must reach the bottom of the pyramid in due time to ensure inclusive growth at a less time span. Employment is the key to eradicate poverty. Hence, employment generation is paramount. Better infrastructure facilities and investments in public and private sectors are likely to strengthen the economic growth. The urban-rural divide ought to be abridged to ensure equitable growth. Inclusive growth is a call to action. Not only for government, but also for the private sector, the education sector and people to join hands, identify solutions and grow together.