Short essay on inclusive economic growth

The Need For Inclusive Growth In India Economics Essay . the gap through innovative models, such as para-teachers or contract teachers for short durations.
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High and rising levels of income inequality can lower the impact on poverty reduction of a given rate of growth, and can also reduce the growth rate itself. High inequality also has implications for political stability and social cohesion needed for sustainable growth. Hence reducing inequality has become a major concern of development policy, a concern that has generated interest in inclusive growth.

The growth process creates new economic opportunities that are unevenly distributed. The poor are generally constrained by circumstances or market failures that constrain them from availing these opportunities. As a result, the poor generally benefit less from growth than the nonpoor.

Thus, growth will generally be not pro-poor if left completely to markets. The government, however, can formulate policies and programs that facilitate the full participation of those less well off in the new economic opportunities. We may thus define inclusive growth as growth that not only creates new economic opportunities, but also one that ensures equal access to the opportunities created for all segments of society, particularly for the poor.

True inclusive development would mean that even the poorest Indians get a chance to move into the modern, high-productivity sectors. For that, we will need greater liberalization. Three reforms will be especially important: 1. Greater ease of doing business so that starting and— equally important—shutting down a business should be less of a Himalayan task. New labour laws that will give companies a reason to use less expensive capital and more permanent labour. Public investment in education and also selective privatization so that the poor acquire the skills needed in modern jobs.

Inclusive growth and reduction in poverty are inter-related. A high pace of growth over extended periods of time is a necessary, and often the main contributing factor in reducing poverty.

Sustained, high growth rates and poverty reduction, however, can be realized only when the sources of growth are expanding, and an increasing share of the labor force is included in the growth process in an efficient way. From a static point of view, growth associated with progressive distributional changes will have a greater impact in reducing poverty than growth which leaves distribution unchanged. India has, in the last four years, witnessed a GDP growth rate of 8 per cent per annum but this has not translated into any substantial reduction in poverty.

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The rich-poor divide has increased and poverty reduction figures of India are now lower than those of Bangladesh. More than million people in India still live in deep poverty at less than a dollar a day PPP while another million live on less than two dollars a day.

The Need For Inclusive Growth In India Economics Essay

There are disparities among regions, states, sectors, and communities. Among the states, the north-eastern and the central regions, which have large tribal populations, are lagging behind. Among sectors, agriculture has fallen behind industry and the service sector. Although some of the poorest states are rich in natural and forest resources, the predominantly tribal population is unable to take advantage of this. Religious minorities, large sections of Scheduled Castes SC and Scheduled Tribal ST groups, and women still do not have access to many job opportunities and human development.

The informal sector has emerged as the largest job creator, characterized by low wages and income insecurity while wage growth is concentrated only at the top end. The term inclusive growth has suddenly acquired great importance for our country in the last 10 years or so.

In fact, the Government has been using it like some kind of magic mantra. He said that the Government has followed an inclusive model of economic growth to ensure that the benefits of growth percolate down to the poorest of the poor. One appreciates that there is a clear shift of focus from mere growth figures to betterment in the lives of the masses.

In the context of infrastructure development, this assumes a significant dimension because infrastructure by definition implies a social structure that includes all sections of the society. A road, for example, does not belong to any particular class of the society; all can use it. Paying a tax or toll is the democratic price of keeping it in running condition.

Inclusive Growth in terms of infrastructure development for Construction Week India and me personally means positive augmentation in employment opportunities and creation of a structure that is not just physical in its output but is also economically feasible, socially relevant and one that truly delivers benefits to each and every section of the society. While it may sound Utopian to most, it is important to shed our cynicism and strive for inclusive growth. The budget presented by Finance Minister Mr.

Pranab Mukherjee focuses sharply on one part of the success story, that is, inclusive growth, even as its efforts to restore the economy to the path of high growth have not been so robust. The big idea that emerges out of this budget is the Food Security Act to which there is now an express commitment of a time frame for implementation. That measure would guarantee as a right to every family below the poverty line the supply of 25 kilograms of rice or wheat at Rs. Who exactly will be eligible, when it will be rolled out, and whether it will be started on a smaller scale before it is extended to the whole country much in the manner of the NREGS remain unclear.

Unlike the NREGS, which has a works component built into it, the food security scheme would be a pure income transfer program; it is bound to have an even more direct and dramatic impact on poverty. The experience of States that have launched subsidised foodgrains program — at Rs. Prime Minister Manmohan Singh has indicated that finding the resources for such a program going by the conservative estimates of the below-the-poverty-line population adopted by the Planning Commission would be within the realm of practical politics, although a larger program based on higher poverty estimates may pose problems of funding.

Inclusive Growth - Arthapedia

The focus on inclusiveness continues through the increased allocations for the flagship programmes, with the NREGS getting a per cent increase to a total of Rs. A total of The Bharat Nirman programme and the National Health Mission are also to get substantially higher allocations. The extension of the Integrated Child Development Services to cover all children under six is a measure that was overdue.

An attempt has been made to take advantage of the changing demographic profile with the continuing increase in the working age population through the emphasis on skills development programmes. Where the budget falls short is in the area of stimulating growth. The increased expenditure of Rs. Not much need be made of the reaction of the stock markets that had gambled on some parts of their wish list coming through and were disappointed. Yet there is nothing in the budget that is particularly significant or dramatic enough to change the mood of uncertainty and pessimism that has gripped business and industry.

The Finance Minister was not inclined to reduce the corporate income tax rate on top of the plethora of exemptions that result in lost revenue but the corporate sector did get some relief through the abolition of the fringe benefit tax. This tax was meant to discourage the loading of personal benefits on to companies as business expenses but was regarded as too burdensome in terms of record-keeping and compliance. Also, the sharp cuts in excise duties effected at the beginning of the slowdown have not been reversed. In customs duties, the goal that has been set by the government is to take the peak import duty rate close to the levels prevailing in the ASEAN countries.

Yet at a time when industry has been hit by the downturn, a measure of protection was considered necessary and the Finance Minister did not move towards that goal.

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The increase in the personal income tax exemption limit by Rs. Mukherjee did not really have headroom to give away much more. While the budget may be short on measures that have an impact on business sentiment, the increased outlays on infrastructure, particularly agricultural and rural infrastructure, will strengthen the foundations for long-term growth.

The Finance Minister has made a huge gamble in moving so far from the Fiscal Responsibility and Budget Management Act targets and leaving a fiscal deficit of 6. Add to this the off-budget items and the deficits of the States, the combined total fiscal deficit may well exceed 12 per cent of GDP.

Excess capacity in many industries does provide a cushion against an immediate spurt in inflation but after a period when the slack is taken up, the build up of liquidity is bound to have its impact on prices. Further, as the excess of expenditure over income is to be funded almost wholly through government borrowing, there will be a hardening of interest rates at a time when a lowering is called for.


Mukherjee has promised a return to the process of fiscal consolidation at the earliest, but he will have to reckon with several imponderables, among them the recommendations of the Finance Commission that will have a deep impact on central finances. The widening deficit certainly poses a major risk but it is a risk taken in pursuit of the broader objective of inclusive growth and may well be politically justifiable. But the present situation is completely different.

Low agricultural productivity: In India, 70 per cent of the landholding belongs to tenant farmers. Some of the big landholders are busy making money in the US and rest of the world.

Reason for India to embrace Inclusive Growth:

They have all but abandoned their traditional agricultural occupations back at home, so higher farm productivity is not a priority anymore. For States such as West Bengal where the ruling Left Front governments were successful in initiating land reform program, land owners and share tenants have little resources to invest in high-yielding variety crops. As crop output is more dependent on rainfall, landowners are risk averse — investing in low-yielding varieties such as rice, pulses, bajra rather than investing in high-yielding varieties such as ground nut, castor.

Lack of rainfall-linked insurance schemes, cold storage facilities, irrigation system, dams and tanks, connectivity of the rural to the urban market and ban on futures trading in agricultural commodities have contributed more towards this volatility and lower productivity of agricultural output. Skill formation: This is an important issue. Workers in India need to be more skilled and productive. To increase productivity, there is also reason to invest in health. Indeed, government with all good intention have increased allocation of funds from Rs 34, crore in to Rs 50, in , for its eight flagship projects on health, education, water supply and national rural employment guarantee NREG schemes.

Inclusive Growth, Poverty and Economic Development in India

However, the results in form of outcomes are not satisfying. Improving efficiency: From the demand-side perspective, the Government is also spending money on schemes such as the National Rural Employment Guarantee NREG scheme in the backward districts in India with the objective of providing guaranteed wage employment to each rural household typically, unskilled labour opting for it.

However, such demand management policies some time can be self-defeating. For instance, if these people are hired to build a road and the project never gets completed then the money allocated for the purpose will add to inflation. A recent study by Subhashish Gangopadhyay has found evidence of causal linkage between NREG schemes and inflation — showing these funds are not efficiently utilised.