Inclusive Growth

Inclusive Growth

What is Inclusive growth?

It is a growth process which yields broad-based benefits and ensures equality of opportunity for all.

• The central idea of the inclusive growth i.e. sharing of fruits of socio-economic development with all sections of the society.
• World Bank defines the IG as follows – “Inclusive Growth refers both to the pace and pattern of growth, which are interlinked and must be addressed together.”
• Therefore, IG is not only an outcome or end but a process or a mean in itself.

COMPONENTS / VISION OF INCLUSIVE GROWTH

1. Rapid growth and poverty reduction – 
   • A decisive reduction in poverty and an expansion in economic opportunities for all sections of the population
   • Rapid growth is essential for this which results in increase in employment and incomes for large numbers of our people.
   • Growth should be balanced to rapidly create jobs in the industrial and services sectors
   • Also a significant portion of the labour force should shift out of agriculture which is currently in low productivity
   • efforts to improve the income-earning opportunities of those who remain in agriculture by raising land productivity
   • targeted livelihood support programmes aimed at increasing productivity and incomes of the poor in several low income occupations
   • Special programmes aimed at target groups such as small and micro enterprises, weavers, artisans, craftsmen, etc.

2. Employment opportunities– 
   • generate an adequate number of productive employment opportunities
   • India is currently at a stage of ‘demographic transition’ where population growth is slowing down but the population of young people entering the labour force continues to expand
   • If the workforce is gainfully employed, a lower dependency ratio means a higher rate of savings which, in turn, can raise the growth rate.
   • This young demographic profile places India favourably in terms of manpower availability and could be a major advantage in an environment where investment is expanding in India and the industrial world is ageing.
   • It is essential to generate employment to both new entrants to the labor force and also for workers leaving agriculture
   • Greater labor flexibility is needed which requires some changes in labor laws
   • The ability to sustain a labour-intensive growth process depends crucially upon the expansion of skill capabilities in the labour force. Specific programmes for development of skills at all levels is needed.
3. Access to essential services– 
   • In the short run, access to basic facilities such as health, education, clean drinking water, etc. impacts directly on welfare
   • In longer run, it determines economic opportunities for the future
   • Without access to these services one cannot be considered to have equality of opportunity
   • Access to these services for the majority of the population depends not only upon their income levels but upon the delivery of these services through publicly funded systems. Therefore IG also requires major expansion in the supply of these essential services.

4. Social justice and empowerment– 
   • Vision of inclusiveness should encompass equality of opportunity, as well as economic and social mobility for all sections of society, with affirmative action for SCs, STs, OBCs, minorities and women
   • There should be freedom and dignity, and without social or political obstacles
   • This must be accompanied by an improvement in the opportunities for economic and social advancement
   • It can be ensured only if there is a degree of empowerment that creates a true feeling of participation so necessary in a democratic polity. Empowerment of disadvantaged and hitherto marginalized groups is therefore an essential part of any vision of inclusive growth.
   • India’s democratic polity, with the establishment of the third layer of democracy at the Panchayati Raj Institution (PRI) level, provides opportunities for empowerment and participation of all groups with reservations for SCs, STs, and women. These institutions should be made more effective through greater delegation of power and responsibility to the local level.

5. Environment Sustainability– 
   • clear commitment to pursue a development process which is environmentally sustainable
   • based on a strategy that not only preserves and maintains natural resources, but also provides equitable access to those who do not have such access at present.
   • Unless environment protection is brought to the centre stage of policy formulation, what is perceived as development may actually lead to a deteriorating quality of life
   • an effective strategy requires international co-operation to evolve forms of burden sharing for mitigation as well as adaptation that are fair and equitable across nations.
6. Gender Equity–
   • IG should recognize women as agents of sustained socio-economic growth and change
   • IG recognises that women are not a homogenous category and ensure that all the differential and specific requirements are catered to.

7. Governance– 
   • IG aim at bringing about major improvements in governance which would make government-funded programmes in critical areas more effective and efficient.
   • The best possible way of achieving this objective may be by involving communities in both the design and implementation of such programmes.
   • Experience shows that Civil Society Organizations (CSOs) can work with PRIs to improve the effectiveness of these programmes.
   • It is especially important to improve evaluation of the effectiveness of how government programmes work and to inject a commitment to change their designs in the light of the experience gained.
   • Along with greater transparency and feedback from community participation, this is particularly important in the case of programmes delivering services directly to the poor.
   • Accountability and transparency are critical elements of good governance. The Right to Information Act (RTI) enacted in 2005 empowers people to get information and constitutes a big step towards transparency and accountability.

DIMENSIONS / FEATURES OF INCLUSIVE GROWTH

1. Equality
   • Equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment
   • To realize the IG in its ultimate form, equality is the most fundamental criteria.
   • IG and equality are mutually reinforcing. Without equality, IG can’t be achieved and lack of IG may lead to in-equality in real or perceived forms
   • In contemporary economic environment, gender equality has become a basic element of IG.
   • An OECD report has identified that inequality in India has been continuously rising which has posed policy challenges in promotion of inclusiveness.
2. Good Governance
   • Governance means the regulatory or the monitoring process which facilitates the delivery of the government services.
   • Good governance results in effectiveness and efficiency, it upholds justice in the rule of law, and accountability and it encourages popular participation, consensus, and equality
   • Good governance is an integrated effort of state, civil society and citizens
   • Good governance is the core of essential public services
   • Good governance provides a common platform for all actors and adapts to sustain the socio-economic transformation which is a pre-requisite of IG.
   • Private governance highlights the role of private sector in meeting the demand of capital, resource and skills required for IG.

3. Decentralization
   • Empowering local self-governing institutions is one of the delivery mechanisms of the IG
   • 73rd and 74th amendments of the constitutions are innovation in the field of Indian Polity
   • The eleventh plan has devised a Devolution Index to be called PRI-Empowerment Index to empower the PRIs
   • Therefore, govt. has to devolve, delegate and decentralize the administration.
   • Decentralization is a bottom-up approach
   • The following are the deficiencies in decentralization that limit the IG potential:
     • Lack of finance, proper institutions and delegation of roles and responsibilities.
     • Divergence in central and state approaches in programs and welfare schemes.
     • Incoherence in organization at national and state level.
     • Poor accountability, transparency and monitoring mechanism.

4. Accountability and Transparency
   • Accountability is answerability towards performance of service delivery
   • Accountability is specified both in vertically and horizontally.
     • The former refers to the departmental hierarchy in a govt. institutions and the latter refers to the autonomous agencies for check and balances on govt. activities e.g. CAG, PMO etc.
   • Transparency is necessary for efficient delivery of essential public services; it acts as an enabler for citizens in accessing information on demand which helps them in reinstating their claims on government endowments and entitlements meant for them
   • Citizen Charter, Right To Information, Central Vigilance Commission are revolutionary efforts in achieving accountability and transparency.

5. Sustainability
   • Sustainability and IG can’t be achieved in isolation and they supplement each other.
   • Sustainability is required at the following levels when charting out the policy framework for IG:
     • Financial Sustainability: The IG programs and projects of the govt. should be financially viable. It may be noticed that excess of subsidy and lack of outcome orientation is causing a problem of increasing fiscal deficit.
     • Social Sustainability: Social sustainability means the need to maintain and sustain specific structure and culture. This type of problem is typically prevalent in tribal areas where the development programs for economic growth come in conflict with the cultural sentiments of the tribal population.
     • Environment Sustainability: In long-term, the environment standards must not be jeopardized while in pursuit of IG. By excess use of fertilize, it has lead to unique problem of depletion of soil productivity and technology fatigue.

MODELS OF INCLUSIVE GROWTH

• There are some of the models of IG which are currently adopted by the govt, private agencies and non-govt organizations

1. Financial Inclusion
   • Financial inclusion means to include the un-banked populace into formal banking system by providing financial services at very low cost.
   • Rangarajan committee has defined the financial inclusion in following manner: “The process of ensuring access to financial services and timely and adequate creditto vulnerable groups such as weaker sections and low income groups at an affordable cost.”
   • Expansion of banking infrastructure, opening new branches, zero-frills bank accounts, banking correspondents(BCs), setting up of ultra small branches etc. are a few of the modalities under financial inclusion strategies of the govt.
   • Swabhiman scheme is the running scheme under financial inclusion agenda through which banks have provided banking facilities to over 75,000 habitations having population in excess of 2000 using various models and technologies
   • The Business Correspondent models (“Branch-Free Banking”) have the potential to realize the financial inclusion in India in true sense of the term.

2. Inclusive Marketing
   • Market is instrumental in creating means and ends for inclusive growth.
   • Inclusive marketing is required at all levels e. G2G, G2C, G2B, B2B or B2C etc.
   • IEC (Information, education and communication) can be adopted by the government for inclusive marketing
   • Inclusive marketing is dedicated to add values to the livelihood of the poor, not merely treating them as a consumer of product and services.
3. Corporate Social Responsibility (CSR)
   • The private sector has been playing a vital role in promoting IG and contributing with various initiatives.
   • has provided the financial incentives to the industries which are contributing at least 2% of their profit towards CSR.
   • Hindustan Uniliver’s Project Shakti wherein woman groups are employed as distribution channels, Nanhi Kali, a CSR project by Mahindra and Mahindra to sponsor the education of an underprivileged girl child are some of the examples.

STRATEGIES FOR IMPLEMENTATION

1. Resource Allocation
   • Without proper resource utilization, the issues of poverty, equity and development can not be addressed.
   • Equitable sharing of the resources is one of the most important means to implement the inclusive growth based policy framework.
   • The allocation of resources should be made in a way to benefit the general mass in short and long term
   • Public distribution system (PDS) is a classic example of reinforcing IG through proper resource allocation, though it needs to be re-structured.

2. Employment Generation
   • Employment is the most vital of all strategies of inclusive growth.
   • India is witnessing a demographic transition and advantage of demographic dividend
   • Unemployment growth in recent years has been accompanied by growth in casualization and informalization.
   • A transition of increasing employment from unorganized to organized sector is an indication of socio-economic development.
   • Indian economy is marked by the disguised employment as a large chunk of the man force is employed in agriculture sector where the very low marginal productivity
   • For a sustaining inclusive growth, government is required to develop policy framework for employment generation as a top priority. MNREGS is a successful attempt in this regard.
   • Poverty alleviation schemes through resource distribution may be remedy for short term but in long term employment generation is the only way out. This is because resource distribution through subsidization enlarges fiscal deficit and burden on exchequer while employment is productive in its tendency.

3. Skill Building and Capacity Development
   • Skill deficit is a major impediment in IG. Government has created a framework for entrepreneurship
   • Employment generation may not fulfill the rising employment demand due to large share of the population lying in the informal sector.
   • Skill and capacity development are therefore cornerstone
   • Key agencies involved are National Skill Development Council, National Council of Vocational Training and Directorate General of Employment and Training, other govt. and non-govt. agencies, business chambers etc
   • The govt. has also launched a skill development initiative scheme – Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

4. Agriculture
   • Agriculture is the central pillar of inclusive growth
   • It provides employment to unskilled workforce and sustenance to the population
   • Although average annual growth rate of agriculture has increased from 11th FYP, but at the same time rural distress, farmers’ suicides and debt have also increased
   • Inflation, vulnerability to world commodity prices, regional disparities have been newly emerging challenges
   • Five factors which the govt. needs to work out and that may unblock the agriculture growth potential are: public investment, private investment, technology, diversification and fertilizer
   • Agriculture growth rate above 4% and investment in agriculture must be around 15%-20% of the GDP
   • Environment friendly practices can provide the sustainability

ISSUES RELATED TO INCLUSIVE GROWTH

1. Growth vs. Development
   • Over a period since economic reforms, India’s economic growth has witnessed a mixed effect on the real development.
   • GDP is considered the key parameter of economic growth.
   • In reality, the increasing GDP growth rate has not trickled down to the bottom of pyramid.
   • A research study carried by Indira Gandhi Institute of Development Research, an autonomous think-tank under Reserve Bank of India find out that economic growth has “trickled down” in both rural and urban areas; it has not been in favour of the poor.
     • In urban areas, growth has been “anti-poor.”
     • BPL and poor of the poor still remains
   • Such issues are quite fundamental in nature as they depict the lack of clarity in the vision and strategy of the policy.
   • It is time, to put the IG as the central agenda of the economic growth.
2. Defining Poor
   • Without a proper criterion of poverty, proper policy framework for inclusive growth can not be developed.
   • The lacuna of poverty definition also impacts the other associated areas such as employment schemes and subsidies for the poor. All this have repercussions on inclusive growth
   • is enthusiastic on the observation the reducing rate of poverty which has come down to the level of 22% but the inequality has increased at the same time.
3. Fiscal Deficit
   • Development schemes run by the govt. have created a dilemma of expanding fiscal deficit
   • India has significantly high debt to GDP ratio, balance of trade (negative) and current account deficit (CAD).
4. Ill-effects of LPG
   • Liberalization, privatization and globalization of Indian economy has ushered the poor to vulnerability and irony.
   • Liberalization and privatization have particularly suited to the Indian private corporate, elites and rich.
   • Globalization has created a question of existence in-front of small and medium enterprises (SMEs)
   • The malfunctioning of LPG in Indian scenario has surmounted new issues viz. gender inequality and threat to women empowerment.
5. Social-injustice
   • Even though govt has reduces the poverty rates from 51% in 1990 to around 22% (according to census 2011), there are other chronicle issues which have magnified over a period e.g. child malnutrition
     • the problem of malnutrition a matter of national shame
   • Rich have become richer and poor have become poorer, marginalized are even more ignored, also, poverty has concentrated more in backward classes, minority, SCs and STs.
6. Infrastructure
   • Infrastructure is fundamental to the economic and inclusive growth.
   • In budgetary allocations, Infrastructure is assigned the highest expenditure. Major proportion of this allocation goes to large projects such as power generation, freight corridors, and airports etc while rural infrastructure is immensely neglected.
   • Agriculture, for an instance, has always lacked the focus. Infrastructure to support and facilitate backward linkages in agriculture e.g. cold storage houses, processing facilities, rural transport is need of the hour. Apart from that, the rural-urban divide in infrastructure development has become prominent.
   • Eleventh plan recognizes that: It is an irony that the phenomenal growth in the telecom sector has also created a digital divide in terms of mobile and land line connections and Internet and broadband connections between urban and rural India.
     • The plan also highlights the dearth of rural electrification and observes that rural electrification an important instrument to bring about inclusive growth by making electricity available to farmers and in rural areas.

7. Low Technology and Innovation
   • Indian economy is suffering from a technology-lag vis-a-vis developed economies and other industrialized economies.
   • Poor rate of technology and innovation creates a burden on capital and resource base.
   • India’s agricultural productivity is far below to that of developed countries.
     • Agriculture is mainstay of the economic growth and a source to unskilled work-force employment.
     • The rapid technological development in primary activities such as agriculture creates a question of economic duality in front of the policy makers of the country. This means, if a high rate of technology is adopted in primary sector industry, then it may lead to high rate of unemployment, but at the same time, without technological progress, the productivity would be less to sustain the pressure on the economy.
     • Considering this, there is an immediate requirement of technologies such as green technology, environmentally friendly technologies and renewable energy technology so that the pressure on natural resources may be overcome
   • Inclusive innovation means the creation and absorption of product and services relevant to the poor, is the need of the hour.

POLICY APPROACHES TO INCLUSIVE GROWTH

• As far as the policy framework is concerned, the govt. lacks a suitable policy vis-a-vis IG.
• Nonetheless, the govt. has experimented with various models of IG.
• According to World Bank’s review of India’s Development Policy, IG policy implementation is facing a dilemma of improving the delivery of core public services, and maintaining rapid growthwhile spreading the benefits of this growth more widely.
• The strategy for the inclusive growth per se needs to be an integrating strategy comprising state, market, civil societies and common man.
• Since independence, the govt. has practiced various types of policy measures –

1. Growth oriented policy
   • India’s economic planning started with growth oriented policy. First plan (1951-56) was started with an objective of rapid and balanced growth. The second plan (1956-61) also put a thrust on rapid growth of industrialization. More recent, twelfth five year plan (2007-12) has blended economic growth with inclusion with an objective of Faster, Sustainable and More Inclusive Growth
   • The rate of economic growth has increased with time, which is a result of radical reforms during 1990s. However, it has failed to emphasize inclusive growth by creating more jobs for low and semi-skilled workers. Growth is not equally shared and in many parts of the country, people still remain poor and disadvantaged in significant proportion.

2. Direct intervention
   • legislation, regulation, credit facilitation and providing livelihood security are the forms of direct intervention by the govt.
   • Now, the orientation of administrative machinery is transformed from regulator to facilitator.
   • At present, direct intervention is in the form of making available the requisite social investment, establishing independent regulatory institutional mechanism, drafting incentive based policy and encouraging entrepreneurial innovation.

3. Capacity Building
   • Capacity development is not only limited to skill building or entrepreneurial innovation. Capacity development through training of rural development functionaries is also a mean of capacity building.
   • Increasing efficiency, effectiveness, accountability and transparency are also considered the areas under capacity building initiatives of the govt.
   • For example, if the objective of of Rural Development is enhancing the livelihood security of households in rural areas though MNREGA then capacity building for enhancing effectiveness of Gram Sabha is one of the modalities to achieve the objective.
4. Welfare schemes
   • Food subsidies, public distribution of essential commodities, nutrition programs, financial support though micro finance are examples of the ways in which welfare schemes are implemented.
   • For different types of beneficiaries (women, Children, BPL etc.) central and state govt. have come with the customized welfare schemes.
   • The approach in welfare schemes is to benefit the beneficiaries through optimal allocation of resources and access to essential services.
5. Public Participation
   • Without public participation at different level of governance, IG remains a distant dream.
   • is encouraging the public participation in multifarious ways towards which the common man must show an affirmative and pro-active response.
   • SHGs promotion is a typical example of public participation for IG. can provide the supporting platform for citizen centric services, the responsibility to deliver still is of the common man.
   • Kerala supported Kudumbasreeprogramme have been successful in women empowerment and reducing poverty. Similar initiative of Andhra Pradesh namely ‘Indira Kranti Pathakam’ is showing a good progress in social mobilization, gender empowerment and rural poverty reduction

Lastly, policy intervention takes place both at micro and macro level. Improving fiscal discipline, trade liberalization, promoting Foreign Direct Investment, privatization, deregulation, tax reforms, labour laws, social safety nets, public expenditure etc. are important for macro policy measures while at the micro level, reducing inequality in income, improving public/social infrastructure, healthcare, education, access to essential services, accountability and transparency, women empowerment, role of civil society organizations, etc are instrument of micro policy which needs to be re-worked.

CONCLUSION –

The approach paper for 11th Five Year Plan acknowledges that the economic growth has failed to be inclusive enough. The failure is a question of willingness, not of capacity. There is no dearth of capacity to achieve the goals of IG but willingness and shortsightedness. With a lot of enthusiasm, policies are framed; proper mechanism of implementation, monitoring and accountability is the central issue of all policies directed towards IG. The onus of IG must be shared by all channel partners state, civil society organization (CSOs) and citizen.

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