Inclusive Growth and India  

                                                        - Anjan Kumar Chakraborty

In recent years a rising concern that the benefits of current growth process in India have not been reaching all segments of people equally has led to a section of policy advisers and columnists to prescribe 'inclusive growth'. But, the term inclusive growth, a comparatively new concept in macroeconomics, does not have a unique explanation or meaning. It is being interpreted in different ways leading to confusion for policy prescriptions. The term has been used to mean "shared growth", "pro-poor growth" and even redistribution of income through government subsidies in favor of targeted groups of people. As if subsidies in food, fertilizers or petroleum products are engines of inclusive growth. It is obvious that subsidies provide temporary relief to some people, but cannot ensure sustained growth. Thus, targeting inclusive growth primarily needs a distinct and unique clarification of the term to decide correct course of policy prescriptions.

In this context, recently Dr. K.C. Chakraborty, one Deputy Governor of Reserve Bank of India, has clarified that inclusive growth refers to both pace and pattern of economic growth. Considering the literal meaning of the two words of the term and back ground ideas, the clarification appears most acceptable among others. In his opinion there is a fine distinction between direct income redistribution or shared growth and inclusive growth. He explained that the inclusive growth approach focus on productive employment rather than on direct income redistribution. It is, therefore, inherently sustainable as distinct from income redistribution schemes which can in the short run reduce the disparities between the poorest and the rest. In other words, income redistribution schemes allow people to benefit from economic growth in the short run, inclusive growth enables poor people to contribute to and benefit from economic growth. So, participation of poor people in productive employment is integral part of inclusive growth and it ensures equal access opportunity for all in the growth process. Apart from addressing the issue of inequality, inclusive growth strategy makes the poverty reduction efforts more effective by creating opportunities for the vulnerable sections of society. According to one relevant document of the Planning Commission of India (Planning Commission, 2007), the concept "Inclusion" should be seen as a process of including the excluded as agents whose participation is essential in the development process, and not welfare targets of development programs.

In the light of the above interpretation of the term, sustained inclusive growth in India perhaps, requires changes in existing growth strategy and a definite line of action to include the excluded agents. After pursuing the current growth strategy for a long time, economic inequality in India is still very severe. It becomes apparent from the World Bank observation in 2010 that 68.7% of Indian lives on less than USD 2 per day and 37.2% of Indian people fall below international poverty line of USD 1.25 per day. A 2013 UN report also stated that a third of the world's poorest people live in India (Wikipedia). Unemployment/ Employment patterns in India as revealed in the 68th round of National Sample Survey also indicate that a vast section of the labor force is hardly getting any benefit from the current growth process.

In the context of the above findings about income disparities and economic inequality in India, it appears that certain fundamental changes are to be initiated in the growth strategy to adequately enhance productive employment opportunities for the economically weaker sections of people. Access opportunity in the growth process by the hitherto excluded poor, low-income and the unemployed is to be ensured for any meaningful implementation of inclusive growth in India. Obviously there are debates about short and long term implementable measures to achieve the goal. However, there are certain areas too which are relatively debate-free for policy prescriptions. What is primarily required, it seems, is to change the aim of economic growth. For inclusive growth in India macroeconomic activities, initiated and supported by the government, should be planned to uplift the standard of living of common people and must not be concentrated only to increase the pace of the growth process.

Extension of irrigation facility in India is one area which needs immediate attention in the interest of inclusive growth in the country. Conservative estimates show that nearly 60% of India's arable land is rain-dependent (Wiki). It means only 40% of agricultural land is fully under all-season irrigation facility. Another estimate shows that yearly average rain-fall in India is 3 lakh cubic feet and only one third of that is retained in the country and two lakh cubic feet drains down to sea. It implies that without disturbing the ground water level and just by using a substantial part of the unutilized rain-fall, irrigation facility can be extended massively. Hence, adequate investments to quickly extend the reach of minor/major labor-intensive irrigation projects will not only enhance land productivity but also provide access route of the hitherto excluded agents to enter the growth process. Certainly there are hurdles for jumpstart extension of irrigation facility; but the hurdles should not be insurmountable in the interest of common people of India.

Secondly, everybody agrees that in the present global economic scenario educated workers are more productive than illiterate labors. However, according to Census Data of India nearly 26% Indians were not literate at all in 2011 which is far below world average. Hence, erasing illiteracy and massive expansion of primary and technical education can enhance labor productivity and gainful employment opportunity of the excluded agents in the current growth process.

Thirdly, In India 70% of health related expenditure is made by individuals and only 30% is spent by the government - just opposite scenario of many countries. It is also estimated that only due to increasing medical expenditure 38 million Indians are joining below-poverty-line population every year. Hence for a meaningful inclusive growth and poverty reduction, massive extension of affordable health-care, control of drug prices, free availability of drinking water and sanitation facilities are to be ensured.

Emphasis on the building of physical infrastructure, particularly roadways, railways, ports and cold-chains, is another area which is to be improved rapidly. In a huge country like India physical infrastructure is far behind Asian front-runners. But targeted development of physical infrastructure can create large scale employment opportunity to the army of unskilled/semi-skilled workers in India.

As short term measure to expedite inclusive growth, Commercial Banks, Micro Finance Institutions and NBFCs must ensure cheap priority sector agricultural credit actually goes to small and medium peasants rather than to rich farmers. Lending agencies should also give adequate loans for creation of productive assets and decent affordable housing rather than luxury housing and speculative office complexes. Obviously, Reserve Bank, as regulator of commercial banks, has a role to play for channelizing cheap credit to specific destinations.

Certainly, there are many problems to take measures in the line of the above suggestions. Because it needs change in the 'priority concept' of the growth strategy and consequent change of budgetary allocations and policies of the government; this is not an easy task in the present scenario of socio-political environment and governmental constraints. But, social unrest and the very nature of political violence, basically due to "non-inclusive growth," are spreading in the country. So, it seems, corrective measures cannot wait indefinitely.

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