Inclusive Growth and Issues arising from it:

  • It is a new paradigm that is related essentially to equality and opportunity to all. It may be defined as ‘growth that promotes equal opportunities and increases access to these opportunities i.e. growth that allows all members of society to participate and contribute equally to development efforts regardless of individual circumstances’. This concept appeared for the first time in Asian Development Bank (ADB) Report, 1999 names as ‘Strategy 2020’ which examined the extent of inequality of opportunities and in what ways it can be addressed.
  • The main idea in ADB approach is to focus on productive employment which can easily bring inclusive growth in a country. In broader sense, it has three dimensions:
    • Social inclusion i.e. equity among all sections of the society
    • Economic inclusion i.e. equity among all sectors of the economy.
    • Regional/Political inclusion i.e. equity among all regions of the country.
      • India adopted the above strategy on Inclusive Growth from the 11th Five Year Plan (FYP) onwards and became more aggressive from 12th FYP.
      • Similar inclusive growth programmes were adopted by many countries after the ADB Report. Such as:
    • Brazil – ‘Bolsa Familia’
    • Mexico – ‘Oportunidades’
    • Sri Lanka – ‘Samruddhi Kosh’
    • China – ‘Harmonious Development’: India often likes to compete with China. Poverty reduction would be a good arena to do so. China’s current catch-up rate of about 3 per cent means Gansu province—whose spectacular mountain and desertscapes host the highest poverty levels in the country—will reach midway to the level of the richest provinces, the coastal Guangdong and Shanghai, in 23 years.
    • ‘Bolsa Familia’: Bolsa Família provides financial aid to poor Brazilian families; if they have children, families must ensure that the children attend school and are vaccinated. If they exceed the total of permitted school absences, they are dropped from the program and their funds are suspended. The program attempts to both reduce short-term poverty by direct cash transfers and fight long-term poverty by increasing human capital among the poor through conditional cash transfers. It also works to give free education to children who cannot afford to go to school to show the importance of education.
    • Inclusive growth is different from poverty reduction schemes where the focus is on redistributing wealth and making transfers through public expenditure activities. In poverty reduction schemes, the poor are primarily passive recipients of donation whereas in inclusive growth, the objective is to enable the poor with the opportunities to empower them in a better way.
    • There is immense need of Inclusive Growth in India to maintain the bonds of Unity in Diversity as there is a rise in number of disadvantaged groups not benefitted from rapid economic growth in the country. Inclusive Growth includes betterment of historically disadvantaged groups such as SC, ST, OBC, minorities, tribal groups, differently abled persons, widows, etc.
    • Directive Principles of State Policy (DPSP) supports the idea of inclusive growth as Article-38 mentions a state to secure social order for the promotion of welfare of the people. Article-38 (2) mentions that a state shall strive to minimize inequalities in income, status, opportunities.
    • Hence, the GOI adopted the strategy of inclusive growth with two strategic pillars:
  • To create a greater economic opportunities
  • Diffusion of opportunities through investment in education, health and infrastructure.
    • Both of these can be ensured through ‘Good Governance’ where we find decision making process along with accountability.
    • According to C. Rangarajan Committee Report, 2008, the strategy of inclusive growth can be achieved through the implementation of the strategy of ‘Financial Inclusion’
    • Financial inclusion refers to the individuals having the availability and accessibility of banking, credit and insurance facilities at their door step. According to the World Bank’s report, 2008, India’s financial inclusion is below 50% which means the majority of Indians are financially excluded however France has provided a fundamental right to every citizen to have a bank account. Similarly, Denmark has 99% and USA has 91% financial inclusion. The GOI recently adopted the ‘JAM Trinity’ where J => Jan Dhan Yojana, A => Aadhar card, M => Mobile technology, to ensure financial inclusion is 100% as soon as possible.
    • The major hurdles to inclusive growth remains in the light of poor governance, corruption, nexus between politicians, bureaucrats, criminals and lastly concentration of developmental activities only in and around urban agglomerations.
    • In conclusion, a two pronged strategy is needed to address the problem of exclusion:
  • Social and economic empowerment of the excluded groups by ensuring their ownership over the capital, land, education, skills, business, etc.
  • By providing equal opportunities for them through legal safeguards, reservations and similar measures in both public and private sectors.
    • Thus achieving equity through such measures will not only restore self-esteem and confidence among the socio-economically disadvantaged groups but also improves their overall efficiency and their contribution in the process of nation building.
    • Issues arising out of Inclusive Growth:
      • The objective of Inclusive Growth is to ensure peace and stability not only in the society but also in other aspects of a country. There are three possible dimensions in which Inclusive Growth can be better understood in terms of its consequences
      • Equity in Society
        • If it is not achieved, it creates division between haves and have-nots which leads to increase in inequality and a great dissatisfaction towards the institutions of democracy. This disenchantment is better manifested in the form of the rise in the ideas of communalism, naxalism, casteism, linguism, etc. The demand of reservation in economic and other opportunities and the politics surrounding over it is also a natural outcome of lack of equity in society.
      • Equity in Economy
        • If equity in economic sectors is not achieved, it has some adverse consequences such as labour unrest, rise in unemployment, disguised unemployment in agricultural sectors, huge migration from rural to urban, exclusion of unorganized workers in the country.
      • Equity in Regional Balance
        • It was essential for keeping the spirit of Unity in Diversity intact. However, from II FYP onwards, the industrial activities started coming up more in coastal areas than in the hinterland which led to imbalance regional growth and finally creating some dire consequences in the country. Regionalism, separatism, secessionism are outcomes of lack of regional balance in the country.
      • Solutions to ensure equities in society, economy, regional balance in the country:
        • Initiation of rural development programmes throughout the country. Major schemes like Bharat Nirman Yojana, PURA, MGNREGA, etc.
        • Employment generating policies, programmes were also launched for ensuring equity in society and regional balance. Two types of employment generation schemes are prevalent:
          • Wage-employment – NREGA
          • Self-employment – NRLM, SJGSY, Nehru Rozgar Yojana, etc.
        • The strategy of financial inclusion will go long way in integrating the excluded sections of the society under the schemes and policies of GoI
        • To launch infrastructure projects throughout the country in two forms:
          • Physical infrastructure – roads, buildings, airports
          • Social infrastructure – education, health, sanitation, drinking water
        • The Deepak Parakh Committee gave instruction to increase the investment on infrastructure as high as of 9% GDP which is roughly USD 320 billion to maintain a GDP growth of India between 9-10%. Today, it is 5.6% GDP
        • K. Srinath Reddy Committee has recommended to increase public expenditure on health sectorsto 2.5% of India’s GDP per annum which today stands at 0.9% GDP
        • Similarly, Kothari Commission of 1964 long back recommended to increase public expenditure on education to 6% GDP which even today stands at 3.5% GDP.
        • Recently, Raghuram Rajan Committee has proposed ‘Composite Index of Backwardness’ for giving a specific treatment to the backward states of India while allocating central funds under the plan outlay.
        • According to famous economist Uma Kapila, the economic solutions of inclusive growth will not attain its objectives unless the excluded sections of the Indian society are brought into the political mainstream i.e. by increasing their political representation.

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