Inclusion and Inclusive Growth

8/12/2019 Inclusion and Inclusive Growth

1/8

INCLUSION AND INCLUSIVE GROWTH

The immediate task after independence was to initiate and sustain rapid growth in a

stagnant economy and to ensure higher growth with social justice. However, poverty

reduction was the main concern than reducing inequality. Also it was the thinking that

economic development would take care of the social problems.

The average growth rate in GDP in the initial three decades was around 3.5 per cent.

However, with meager GDP growth, some notable achievements were

1. Creation of institutional capacities.2. Development of social institutions.3. Creation of legal framework.4. Priority to science and technology5. Establishment of capital goods

An attempt at deregulation and redistribution was made during the period of late Rajiv

Gandhi, especially during Seventh Five Year Plan (1985-90). Two committees, one led by

Abid Hussain and other chaired by M. Narsimham-recommended selected de-

regulation on controls on international trade and on control in private investment.

On redistribution front, both self and wage employment programmes, started in a

big way in the 6th Plan (1980-85). The decade of 1980s witnessed the highest growth

however there emerged some immediate problems like

Adverse balance of payment, High Fiscal deficit and inflationary pressure, Foreign reserve was limited to cover one month of imports, Macro-economic situation became unsustainable and a connection was

needed,

Gulf war and collapse of Soviet economy.

Inspite of an impressive GDP growth in Post-reform period, some of the disturbing

trends were noticed.

1. Slow rate of reduction of poverty2. Low quality of employment growth3. Increase in rural urban disparities4. Inequalities across social groups5. Regional disparities


2/8

6. Poor agriculture growth7. Infant mortality

In the first few years of the economic reforms there was a feeling that India was Shining

and there was a feel good factor in

1. Growth in services2. IT and communication revolution3. Foreign exchange reserve4. Booming stock market

On the other hand

1. Rural India and the social sector,2. Health,3. Elementary education,4. Rural infrastructure was not shining at all

Social exclusion was taking place in terms of regions, social and marginal groups,

women, minorities and children.

There is complementarity between growth and equity. Economic growth can create

opportunities for the people. On the other hand equity is important for raising economic

growth.

There are four major important areas which are interrelated and are extremely

important for inclusive growth. They are

(1) Agriculture, (2) Poverty, (3) Human Development and (4) Regional disparities

Agriculture: Its contribution in GDP is twenty per cent but it provides employment to

sixty per cent of the workforce. It is one of the paradox of the Indian economy that thedecline in the share of agricultural workers among the total workers has been slower as

compared to the decline in the share of agriculture in GDP. The share of agriculture in

total workers declined slowly like

75.9% in 1961

to

56.9% in 1999

to

56.7% in 2005

The share of agriculture and allied activities in GDP declined very fast

57.7% in 1950-51

to

25% in 1999-2000

to

20% in 2004-2005


3/8

As a result, the labour productivity in agriculture has improved marginally while that of

non-agricultural workers increased rapidly. There were about 249 million agricultural

workers in the year 2004-2005 of which 42% were females.

In terms of growth, the performance of agriculture in the post independence era has

been impressive as compared to pre-independence period. The all-crop output growth

of 2.7 per cent per annum during (1950-2000) was much higher than 0.4 per cent growthduring (1900-1950). However, growth rate of all crop output declined from 3.2 per cent

per annum in 1980s to around 2.3 per cent per annum in post reform period.

Eleventh Plan has setout a target of 4 plus per cent growth in agriculture. Higher

agricultural growth was expected to contribute directly to overall GDP growth and even

more so to inclusiveness. It would mean raising farm income for land owning farmers

and wage income for landless labourers.

There had been several positive developments in agriculture during the recent years.

(1) Total public and private investment in agriculture GDP has improved from 14.1

per cent in 2005 to 19.5 per cent.

(2) Write-off of farm debt in 2006 has helped the farmers and flow of agricultural

credit has expanded considerably in 11thPlan with Kisan Vikas Card and Kisan

Credit Card.

(3) Programmes like Rastriya Krishi Vikas Yojna (RKVY), National Horticulture

Mission are doing well.

(4) Minimum support price have been raised to give farmers greater incentives toproduce food grains.

(5) Schemes like MGNREGS, Bharat Nirman and PMGSY have focused on

improving water conservation, water shed management and improved access to

markets supporting faster growth in farm income.

During post reform period, demand for non-cereal items like dairy, poultry, edible oils,

meat, fish, vegetable and fruits is more. These enterprise being labour intensive are

suited to small holders and lead to a rise in wage employment.

With just 10 per cent of the gross cropped area, the Indian horticulture sector contributes

28 per cent of agriculture GDP. The contribution of Milk is 22% of the agriculture GDP

(The contribution of paddy and wheat being only 15.4 per cent and 9.5 per cent

respectively). India is the largest producer of fish and second largest producer of inland

fish and 11 million people are engaged in the sector.

More than 80 per cent of Indias farmers belong to the categories of small and marginal

farmers. The major underlying objective of price policy is to protect both the consumers

and producers. It has been felt that support price policy was benefiting only few states


4/8


5/8

Adequacy : Once the food stuffs are physically available, they have to satisfy the dietary needs

(Energy nutrients including the micro nutrients like iron, vitamin and iodine)

Nutrition :

(1) Calories and Protein: The per capita Calorie intake for rural population has declined

from 2364 Cal per day in 1987-88 to 2030 Cal per day in 1999-2000. The position is

extremely poor for bottom 30 per cent population.

(2) Micro Nutrients Deficiencies: Intake of vitamin A is significantly lower in youngchildren, adolescent girls and pregnant women. In these vulnerable sub-group, multiple

nutritional problems coexist including inadequate intake of energy as well as

micronutrients other than vitamin A.

Social Safety Nets for the Poor

Approaches to Direct Programme:

(1) Pre 1970 approach

Community Development programme started in 1952.

Abolition of Zamindari and Jagirdari.

Third Five Year PlanIntroduction of modern technology which resulted into Green

Revolution.

(2) Approach of 1970

Direct attack on poverty like, Rural Works Programmes, Drought Prone Area

Programme (DPAP), Desert Development Programme (DDP).

(3) Programmes in 1980

Self employment and wage employment programmes such as IRDP, NREP, RLEGP

PDS and nutritional programmes were spread in rural areas.(4) Post Reform period approach 1990 and beyond

Large funds were allocated for wage employment programmes.

Emphasis on Human Development and Infrastructure.

Expenditure on roads increased.

NREGS, Social Security for urorganised workers.

Empowerment of women, protection to vulnerable group.

Rights approach to improve the effectiveness.

Employment

The growth rate of rural employment was around 0.5 per cent per annum between 1993-

94 and 1999-2000 as compared to 1.7 per cent per annum between 1983-1993. This

slowdown is largely confined to rural areas in particular.

Employment Growth during 1999-2000 to 2004-05 was 2.6 per cent per annum. It

declined particularly in rural areas while in urban area it marginally increased.


6/8

The growth rate of rural non-agricultural employment was more than double in 1999-2005 as compared to 1993-94 to 1999-2000. Self employment was faster than wage

employment.

Social Security for the Unorganised Workers

Out of the total 340 million unorganised workers, 70 per cent are from unorganised

agriculture sector. Among total unorganised male workers, 62.5 per cent are inunorganised agriculture while corresponding figure for females is 80.4 per cent. In other

words, agriculture is more important for females as compared to male unorganised

workers.

Anti Poor Laws:

Indian Forest Act, Forest Conservation Act had been more harmful to the tribals.

The systems of buying and selling the land, rent control Acts all need a through revision.

A farmer cannot setup a brick kiln unit, nor a rice shelling plant, nor a cold storage. The

process is quite difficult.

Macro Strategies:

Sustained high level of agricultural growth are essential for poverty reduction.

In allied sectors, there is a lot of scope for growth and increase in employment. Sectors

like poultry, dairy, fisheries and forestry have a lot of employment potential.

Joint forest management should be pursued more rigorously to increase employment

and reduce rural poverty.

Women and Youth should be the target for providing productive employment. Theskills of women should be improved and enhanced in order to shift them from low

productive to high productive areas. Focussing on youth employment is important

because unemployment in them can lead to frustration and social tension.

Micro Strategies:

Support services can be provided on a viable basis. The govt. should identify selected

rural growth centres for the purpose.

In manufacturing and service sector units cluster approach should be adopted. This will

ensure that all infrastructure and support services can be provided on a viable basis.

The govt. should identify selected rural growth centres.

Missing links have to be identified links markets and training facilities.


7/8

Market Failures:

The failure in labour market is due to lack of information, inadequate rural-urban

transportation linkage and insufficient difference in wage rates to compensate for the

risk of migration. These things are common in powerloom and handloom weavers. Also

this leads to use of mechanical equipment.

There is huge unmet demand for credit. Due to inadequency of loan amount, time

delays and excessive paper work involved in sanction of loan, a majority of theproducers rely on informed channels.

Infrastructure Constraints:

Lack of power in rural areas has affected both the agriculture activities and powerlooms.

The farmers are willing to pay more provided they got assured supply and voltage.

There has been notable improvement in rural roads and in the communication system

which is a welcome sign.

Social Security for the Unorganised Workers:

Following measures have been taken in India.

Land reforms to help the poor

Wage employment such as EGS, JRY, NREGS, etc.

Self employment programmes such as IRDP and SJGSY.

Basic needs like universal primary education, basic health services, etc.

PDS and nutritional programmes such as ICDS and mid-day meal schemes.

Reservation for certain classes.

Social security schemes that seriously affects the poor, as also sickness, accidents, oldage and maternity.

Inclusion During Eleventh Five Year Plan

Inclusiveness, a critical element in the strategy was to be achieved by ensuring that

growth was broad and was combined with programmes aimed at overcoming

deficiencies in critical areas, which affect large number of vulnerable sections of our

population, particularly the SC, ST, OBC, women and minorities. The plan sought to

deal with these deficiencies through programmes aimed at providing access to health,

education and other essential services and programmes of livelihood support.

The Eleventh Plan aimed at an average growth rate of 9 per cent per annum.

As in other countries, the govt. responded to the global recession by introducing fiscal

stimulus. The growth rate in 2008-09 declined to 6-7 per cent but rebounded to 7.4 per

cent in 2009-10 despite the fact that agriculture showed negligible growth rate at 0.2 per

cent.


8/8

There are several reasons for the superior performance on the growth front.(1) India's financial system was not exposed to the toxic assets which affected the

financial system in most industrialised countries.

(2) Indian economy is still much less dependent on exports but still dependent todomestic demand.

(3) India's economic fundamentals were strong and both public and private savings arehigh.

(4) An important sectoral target of the Eleventh Plan was to raise the growth of GDP inagricultural growth was expected to contribute to inclusiveness since more than half

of the labour force still derives its income from agriculture.

(5) The Eleventh Plan called for double digit growth in manufacturing sector if wewanted to shift substantial number of labour force out of agriculture into formal

sector.

(6) The Eleventh Plan vied inclusiveness as a multi dimensional objective and listed 27monitorable targets relating to poverty reduction, employment, education, health

services, child nutrition, gender balance, access to basic infrastructural services and

environment.

Inclusion and Inclusive Growth

Documents

Transcript of Inclusion and Inclusive Growth