Inclusive growth in India- prospects and challenges

India’s government has made “inclusive growth” a key element of their policy platform, stating as a goal: “Achieving a growth process in which people in different walks in life… feel that they too benefit significantly from the process.” (Ahluwalia, 2007)

1. Socio-economic divide

2. Credit seminar Inclusive Growth in I ndia: C hallenges and Prospects Presented by Jagriti Rohit Roll no: 10242

3. High GDP but EXCLUSION in terms of low agricultural growth rate , low-quality employment , poor education, Inadequate healthcare services , rural-urban divide, social inequalities, and regional disparities. Future GDP growth Currently a $ 1.73 trillion economy with a population of 1.2 billion. To sustain the economy to double digit figure, inclusion of all section of society is required. (word bank 2012)

4. India’s government has made “inclusive growth” a key element of their policy platform, stating as a goal: “Achieving a growth process in which people in different walks in life… feel that they too benefit significantly from the process.” (Ahluwalia, 2007)

5. Inclusive growth The AfDB defines Inclusive Growth (IG) as economic growth that results in a wider access to sustainable socio-economic opportunities for a broader number of people, regions or countries , while protecting the vulnerable, all being done in an environment of fairness, equal justice , and political plurality.

6. Elements of Inclusive Growth

7. Year Rural Urban Total In million 1993 – 94 50.1 31.8 45.3 403.7 2004 – 05 41.8 25.7 37.2 407.1 2009 – 10 33.8 20.9 29.8 368.9 2011 – 12 25.7 13.7 21.9 269.3 Poverty Poverty levels are high in few states like Bihar, Odisha, Madhya Pradesh, Uttar Pradesh. 80% poor are in rural areas. Source: Press Note on Poverty Estimates, 2011 – 12, Planning Commission; Report of the Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission

8. Employment

9. Problems in employment 423 million peoples in unorganised sector accounts for 92% of the total employment Growth of employment: unorganised sector Quality of employment : do not have any social security

10. Agriculture growth Deceleration in growth from 3.5% during 1981-97 to 2% during 1997-2005. Decline in yield growth Disparities Widening economic disparities between irrigated and non irrigated areas Land and water use Increase in non agri demand due to higher GDPand urbanization Institution To help small farmers in increasing their productivity and marketing Technology Uneven and slow development Inefficient use of available technology Commodity prices Vulnerability to world commodity and price volatility due to trade liberalization AGRICULTURE

11. Rural non farm sector Micro and small enterprises Weavers, artisans, hawkers, people engaged in food processing Issue: unorganized and competition Annually, India produces 205 million tonne fruit and vegetables, and is the second-largest country in the world as far as farm production is concerned. However , it processes just 4.6 per cent of its output. In contrast, countries like the United States (65 per cent), China (23 per cent) and Philippines (78 per cent) are far ahead of India in reducing wastage and enhancing the value addition and shelf-life of the farm products .

12. I nfant mortality in India is 50 per 1,000 births in 2009 , compared to 41 in Bangladesh and 31 in Nepal. Similarly, if we talk about the under-five mortality rate, it was 69 per 1,000 births in 2009 in India versus 48 in Nepal and 52 in Bangladesh, according to Unctad's Least Developed Countries Report 2011 and Human Development Report Looking at Planning Commission data, public health expenditure did not even touch 1.4 per cent of the GDP in the 11th five-year plan. The proportion Of children that dropped out of elementary school by Class VIII in 2007-08 was 43%. Social sector development

13. Six problems in Social Sector: education and health There have been significant achievements but there are problems Low levels of social indicators Slow progress Significant regional, social and gender disparities Low level and slow growth in public expenditures particularly on health Poor quality delivery systems

14. Regional disparity Post reform period income inequality increased and its worsening Benefit of economic development concentrated in developed areas significant regional disparities in India. Per capita income : Highest per capita income Rs.16,679 in Punjab; lowest per capita income state Rs.3557 in Bihar Female infant mortality varies from 12 in Kerala to 88 in Madhya Pradesh Female literacy varies from 33.6% in Bihar to 88% in Kerala ECONOMIC SURVEY 2010-11

15. In general, richer states grew faster than the poorer states. Causes for disparities;

16. Environment Degradation of land, water. Increase in pollution levels Challenges of climate change Higher economic growth should not lead to decline in our environment Change in Consumption patterns

17. India’s stand 11 th and 12 th five year plan focus is on inclusive growth To achieve inclusiveness in all the dimensions requires multiple interventions , and success depends not only on introducing new policies and government programmes, but on institutional and attitudinal changes brought about, which take time.

18. Strategies for inclusive growth Two strategies are used for inclusive growth

19. Strategies

20. Social inclusion Social Inclusive Programmes are initiatives of the government to provide access to marginalised sections to basic education and health facilities, better sanitation, better roads and other infrastructural facilities. Expenditure on health and education is very essential for the overall development of the nation. Developed nations are spending more than 10 percentage of their GDP on Health and education facilities .. But still ‘emerging economy’ like India is spending 3-4% on public health and about 6 % of its GDP on education which is quite meagre

21. In order to ensure inclusive growth government should enhance its spending on education and health . Education improves the skills and abilities of human being, whereas health is very essential for an active and productive life. Education and health are very essential to convert a human being into a human capital. Studies have also proved that health facilities would enhance life expectancy which would automatically enhance GDP figures. That is the reason why we are giving more importance to these social over head capital Planning commission 12 th plan document

22. Need for social inclusion The trickledown effect of economic growth to the poorer sections of the society did not successfully lead to poverty eradication Poverty persists mainly due to the inability of some groups of people to participate in the process of economic growth Philip and Rayhan (2004): the poor are more vulnerable than any other group Social inclusion deals with both absolute deprivation and risk and vulnerabilities It deals not only with social risks (sickness, old age, unemployment and social exclusion) but also with programs that secure income such as food security, employment, education, etc., ensuring social and economic security

23. Governmental efforts Various programmes by government of India MNAREGA INDIRA AWAS YOJANA PRADHAN MANTRI GRAM SADAK YOJANA NRHM ICDS MID DAY MEAL SARVA SHIKSHA ABHIYAN

24. JNNURM ACCLERATED IRRIGATION BENEFIT PROGRAM RAJIV GANDHI GRAMIN VIDYUTIKARAN YOJANA RAJIV GANDHI DRINKING WATER MISSION RASHTRIYA KRISHI VIKAS YOJANA 12 th five year plan document

25. Financial Inclusion as the “process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular , at an affordable cost in a fair and transparent manner by regulated, mainstream institutional players”. Financial inclusion

26. The efforts to include the financially excluded segments of the society into formal financial system in India are not new. The concept was first mooted by the Reserve Bank of India in 2005 and Branchless Banking through Banking Agents called Bank Mitr (Business Correspondent) was started in the year 2006. In the year 2011, the Government of India gave a serious push to the programme by undertaking the " S w a b h i m a a n "campaign to cover over 74,000 villages, with population more than 2,000 (as per 2001 census), with banking facilities.

27. Measures for Financial Inclusion in India Introduction of ‘No-Frills’ account Relaxing ‘Know Your Customer’ ( KYC) norms General Purpose Credit Card ( GCC) Schemes Role NGOs, SHGs and MFIs Business Facilitator (BF) and Business Correspondent (BC) Models. Nationwide Electronic Financial Inclusion System (NEFIS) Project Financial Literacy Financial Literacy and Credit Counseling (FLCC ) centres Financial Inclusion Fund (FIF)

28. PRADHAN MANTRI JAN DHAN YOJANA

29. Six pillars

30. Role of Technology in Financial Inclusion

31. CURRENT STATUS On an average 1,15,000 bank accounts are being opened every day. As on 22.10.2014, a total number of 6.47 crore accounts have been opened with a deposit of Rs . 4813.59 crore.

32. Scope of inclusive growth

33. Review Has Growth Been Socially Inclusive during 1993-94 – 2009-10 ? Sukhadeo Thorat , Amaresh Dubey (2012) Economic and Political W eekly . This paper examines the changes in poverty incidence and monthly per capita expenditure in India using the National Sample Survey’s unit record data of three rounds , 1993-94, 2004-05 and 2009-10 . The results indicate that the poverty rate has declined at an accelerated rate during 2004-05 – 2009-10 for all socio-religious household groups. However , some groups benefited more than the others from poverty reduction. Inequality has also begun to adversely affect poverty reduction, particularly in the urban sector.

34. Regional Inequality and ‘ Inclusive Growth’ in India under Globalization: Identification of Lagging States for Strategic Intervention Amitabh Kundu K . Varghese (2010) The strategy of inclusive growth and balanced regional development launched since 2003-04, has led to acceleration in the average growth in the less developed states, including those in the North-East. P overty reduction has been relatively less in less developed compared to developed states, resulting in concentration of poverty in a few backward states. The correlation of economic development with amenities, although statistically significant , is relatively low, which suggests that the problems pertaining to health, education, and access to other amenities cannot be effectively addressed just by focusing on economic development

35. Bank Strategies for Financial Inclusion Rajasthan ( Yogesh Suri , 2008 , State Bank of Bikaner and Jaipur ) In August 2006, as lead bank in Rajsamand District, SBBJ was entrusted the task of achieving 100% financial inclusion in the district. 59 branches of the Bank took up the task of surveying 10004 villages and 21 semi-urban centres. About 2 lakh families were identified in the survey. Objective was to have minimum one account per household as per the voter list. Rajsamand emerged as one of the first districts where 100% financial inclusion was completed. The Bank holds number one position in credit linking Self Help Groups in the during 2004-05 to 2007-08.

36. Extension has always participated in rural development so its role in social inclusion is evident Capacity building of extension personnel to equip them with know how of financial inclusion. Catering to the need of financial literacy of the rural people. Extension can help rural people to get the latest information of various government schemes and benefits Role of extension

37. Extension personnel can provide help for organising farmers organisation and self help groups FOs should develop membership profiles to help take membership diversity into account and measure how far the organisation is representative of the community. Social inclusion can be enhanced by low thresholds for entry of new members, active policies to include all types of rural households, and a concentration on more socially mixed groups.

38. Lesson from China India leap frogged from agriculture to services with less focus on manufacturing. The share of employment in manufacturing in Malaysia is 50%, in Korea 62%, in China 31%. On the other hand, the share of employment in manufacturing in India is only 12% Diversification towards rural non-form sector in China is one of the important factors responsible for rural poverty reduction (poverty 3%). This was partly due to high agricultural productivity and investment in physical and human capital.

39. WAY FORWARD

40. Conclusion

41. CONCLUSION There is a need to have a broad based and inclusive growth to benefit all sections of society and improve economic growth. I ssues and challenges in five elements of inclusive growth (poverty and employment, agriculture, social sector, regional disparities and environment ). Tackling theses dimension will lead us to prosperity.