Published:Coolavenues(November 18, 2010)
http://www.coolavenues.com/mba-journal/human-resources/inclusive-growth-necessary-survival-indian-economy
A country’s prosperity is determined not by the prosperity of a few elite citizens but by the emancipation of its entire population. While our nation boasts of having a 8.6% GDP growth rate, we still have more than half of our population wallowing in hunger, poverty and misery. We are still fettered by the shackles of illiteracy, slums, child labour, lack of health care etc. Booming IT and retail sectors , burgeoning telecom sector and galloping FMCG market present a skewed picture of the Indian economy.
Our Indian society is evidently segmented and there is a huge disparity between the urban and rural people, between higher caste and lower caste, between non-agricultural workers and farmers, between the organized sector and un-organized sector employees, between men and women and also between developed states and underdeveloped states. Inclusive growth aims at bridging the gap between these divided sections. All sections of society must get the benefits of our country’s growth in full measure and then be able to take this growth forward by participating fully and wholeheartedly.
The general consensus about inclusive growth has always been positive and a lot of prominent figures from various fields have been strong proponents of the concept of inclusive growth. The government too has followed policies which foster inclusive growth, though the reasons for this have largely been political. In fact it is widely acknowledged that inclusive growth is good for the economy. But the underlying question is whether inclusive growth is necessary for the survival of the economy.
Currently the Indian economy is dependent to a large extent on foreign demand. This can be seen from the fact that export constitutes 13% of the GDP and the outsourcing constitutes 7% of the GDP. Clearly we are very sensitive to volatility in international economy. But still during recession India was not affected as much as other countries because the growth of the economy was fuelled by the domestic demand. The principal reasons for this sustainable demand were two-fold. The first one was due to the increased focus on inclusive growth in our nation and the benefits accruing from the social welfare schemes like NREGA and better education opportunities.
This was a conscious effort by the government to provide productive employment rather than income distribution. The other reason that helped us in maintaining the demand is that increased employment in any sector like the IT/BPO sector further created a chain of indirect jobs at the lower level. These jobs required a varying spectrum of skills and employed people from different sections of the society. These jobs are automatically created by the market and are not done intentionally by the government, but still their ultimate effect was inclusive growth. In a sense the financial crisis acted as a catalyst, and brought the importance of inclusive growth to the limelight.
The Indian economy is in a very important phase right now, the growth of the Indian economy up to this point has been on the back of India’s ability to provide cheap skilled labour. India was a labour intensive economy and the cost of labour was less, this fact was used by the developed nations of the world which were capital intensive and this resulted in the flow of capital and business from the developed world to India. But the current scenario is different, the cost of labour has been steadily increasing and the cost of capital has been reducing. As a result of this India has been facing stiff competition from countries like Philippines, Vietnam etc and in these countries the cost of labour is less than that of India. The implication of this scenario is that though India is able to retain its current business, opportunity for growth is limited as new projects are going to countries like Vietnam, Philippines. Thus to sustain the same growth which India has seen in the recent past there is a need to look within, not beyond to foreign countries.
The robustness of the Indian economy over the long run can be achieved by strong domestic focus rather that its dependence on foreign trade. We should thus strive to strengthen domestic demand so that our dependence on international market is reduced to a marginal rate. Assuming that at least 50% of our 1 billion strong population start consuming, it could fuel our economic growth at an exponential rate. Thus the true potential of the Indian market can be realized only when the domestic demand increases. If this increase in domestic demand is due to growth in some segments and not all segments of the society then there will be increase in demand for some time but over time the demand will get saturated. The only way to sustain a strong domestic demand over time is when growth encompasses all segments of the society.
For exponential and long term growth we will need employment generation at a proportionate rate. Given the fact that organized sector including the public sector cant be expected to make any large impact on employment generation, the desired economic growth can’t be achieved unless the bulk of GDP growth takes place in the unorganized sector. Thus there is a need to provide unorganized sector with an enabling environment and a level playing field for achieving rapid growth.
In our country, agriculture provides employment to 50% of the population but it contributes only 17% to overall GDP. With rising costs of cultivation, low remuneration, high risks of crop failure and mounting debt , farmers are getting discouraged to pursue agriculture and getting more attracted to other non-agribusinesses. If this trend continues unchecked, it can cause huge food scarcity which will ultimately hamper the economic health of our country. So we need to give proper incentives to our farmers so that they are encouraged to pursue better agricultural activities. This will also increase the contribution of agriculture toward the total GDP of our nation.
Furthermore, the disparity between the developed states and the poor states in india is very large. Out of the 28 states in India only eight states account for two-third of the population below poverty line.This is because of the lack of industrialization and infrastructure growth in these states.It is pertinent to note that if these states continue to remain poor, they would impede the development of the entire nation. We can never achieve economic prosperity while certain geographical parts of our country remain deprived. Evidently large scale investment in infrastructure and social welfare programs are necessary to bolster the economic condition of these backward states which would in turn help in prosperity of the entire nation.
Apart from considering the backward states we also need to focus on backward castes. The vulnerable sections like the scheduled castes (SCs), scheduled tribes (STs), backward classes, minorities and the handicapped form a major part of the country and without their emancipation no constructive progress of the nation can be achieved.So, they need be made stakeholders in the economic prosperity of our country.
Another important aspect for achieving long term growth is the need of education. Primary, vocational , technical education and skill development in rural areas are essential for boosting self-employment and entrepreneurships to encourage new units and expand existing ones.T hese can create new avenues for economic growth for our country. Furthermore, women empowerment also presents an important feature of inclusive growth. Well educated women can provide a great impetus for accelerating growth of our nation.
I would like to conclude by stating that although short term economic growth is achievable by not taking all sections of our society into stake, we will need a focused approach of inclusive growth for achieving a long-term economic prosperity.
No comments:
Post a Comment