Saturday, September 7, 2013

Inclusive Growth

Inclusive Growth has become a buzzword in the political discourse of India. Simply put, inclusive growth refers to a process of growth in which people from all walks of life benefit significantly from the process.

Inclusive Growth should result in reduction of poverty and elimination of disparities -social, economic and regional. The 12th Plan is titled "Faster, More Inclusive and Sustainable Growth", hence, bringing the debate on inclusive growth to the forefront. In the Indian context, it has been realized that the rapid rate of growth achieved in the post-reforms period has not been inclusive.

Poverty in India continues to be a major socio-economic problem as it was in 1950. The rate of poverty reduction has not been very fast in the post-reform period as was expected. Regional Disparities have increased with foreign investment flowing more to regions that are already more developed. In such a scenario, inclusive growth is the need of the hour.

How can we achieve inclusive growth?
Some strategies that can work in the Indian context are ->
a) Growth in Agriculture - Agriculture in India continues to be a key sector with more than half of the population engaged in it. However, its share in national income has been declining over the years. In such a situation, growth in agriculture will ensure greater prosperity to our farmers, will further enhance the demand for industrial products and services, thereby providing impetus to our industrial and services sector.

Growth in agriculture can be achieved through strict implementation of land reforms, better infrastructure and proper marketing.

b) Increase Expenditure on Education - Education is the key to alleviating poverty as it enhances employability. The public expenditure on education has not yet crossed 4 percent of GDP when several education commissions have, from time to time, said that it needs to be hiked to atleast 6 percent of GDP. RTE needs to be implemented more strictly, and supported by increase in secondary and tertiary education capabilities to absorb the students emerging out of primary schools

c) Increase Expenditure on Health - Poverty and Health are interlinked. Poor Health can bring even the non-poor to poor category. The public expenditure on health is low at just over 1 per cent of GDP. This needs to be raised to atleast 3 percent of GDP as has been recommended from time to time by various committees.

d) Governance - Now, this is something that is very crucial for inclusive growth. Poor governance leads to less than optimum outcomes of the outlays. Red Tapism and Delay also contribute to poor investor sentiment ultimately affecting investment and production. The system needs to get rid of corruption which poses huge economic costs and affects the poor adversely.

Though India's growth in the past decade has been able to benefit the poor to some extent, it certainly needs to be made more inclusive.

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