India s model of inclusive growth: Measures taken, experience gained and lessons learnt

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1 India s model of inclusive growth: Measures taken, experience gained and lessons learnt Dr. Pronab Sen Principal Adviser Planning Commission Government of India

2 Macro Economic Context High Growth trajectory- 8% growth during current decades in spite of economic downturn High level of domestic Investment and Saving at about 36% and 34% respectively Comfortable BOP position with CAD at less than 2% of GDP Continues increase in autonomous Capital inflow and Foreign exchange reserves Increased share of Private sector in capital formation and industrial GDP

3 Inclusive Growth-Context and Issues Regional Disparity widened PCI ratio of lowest income to highest income State declined :30.5% to 20% ( to ) Wide regional disparity in various social and human development indicators such as IMR, MMR, Life expectancy, literacy rate, poverty ratio etc Rural-Urban Divide enlarged PCI ratio of rural to urban declined 43% to 37% ( to ) Poverty ratio declined from 55% in to 36% in and 27.5% in , but absolute numbers still high. Education attainment and Health Status are low by international standard Gender gaps in all social indicators such as health, education, occupations, etc: not fully addressed Improvement in social indicators not enough for special focus group.

4 Gender Gap Male Female Total Literacy Rate (2001) Life Expectancy () GER (Elementary, ) Drop out rate (Primary ) Drop out rate (Elementary ) Sex Ratio (female per 1000 male) 933 WPR ( ) Source: Eleventh Five Year Plan Documents

5 Special Focus Group- Gaps SC ST All Poverty 27.5 Rural Urban Literacy rate Male Female Source: Eleventh Five Year Plan Documents

6 Broad Objectives of Inclusive Growth Accelerating growth GDPgrowth target of 9% Agricultural growth rate to be raised to 4% Industry & Services growth rates above 9% Inclusive development Empowerment through education Comprehensive strategy for better health Rural infrastructure Bridging divides Poverty and employment Rural-Urban divide Balanced regional development The left behind: SCs, STs, Minorities & others Gender balancing

7 The Macroeconomic Requirements Tenth Plan ( ) Eleventh Plan ( ) Targets Actual Targets Actual* GDP growth rate (% p.a.) Agriculture Investment rate (% GDP) Savings rate (% GDP) Current Account Balance (% GDP) Note: * average of first three years of Eleventh Five Year Plan

8 Major Poverty Alleviation Programme Name of the Schemes/Programmes for poverty Allevaition MG National Rural Employment Guarantee Act (NREGA) Swarnjayanti Gram Swarozgar Yojana (SGSY) Indira Awaas Yojana (IAY) Swaran Jayanti Shahri Rozgar Yojana (SJSRY) The Targeted Public Distribution System (TPDS) Antyodaya Anna Yojana (AAY) Remarks Started in 2006, which provides a legal guarantee of at least 100 days of wage employment in a financial year to every rural household, poor and non-poor, whose adult members volunteer to do unskilled manual work; a holistic programme covering all aspects of selfemployment, such as organization of rural poor into Self Help Groups (SHGs) and their capacity building, training, planning of activity clusters, infrastructure development, financial assistance through bank credit and subsidy and marketing support etc. which provides assistance for construction of dwelling units and upgradation of existing unserviceable kutcha houses for the rural families living below the poverty line provides gainful employment to the urban poor provides food grains at reduced prices to the poor provides food grains to the poorest of the poor families at a highly subsidized rate

9 Major Programmes for Socio- Economic Transformation SSA Name of the Schemes/Programmes Mid-Day Meal Scheme (1995) NRHM Skill Development SCSP and TSP Gender Budgeting Dhanalakshmi Remarks Providing elementary education to all children in the 6-14 age groups. Support universalization of primary education by providing nutritional support. Hot cooked meal provided to primary school children since Extended to upper primary children in educationally backward blocks in 2007 and universalized at elementary level in Programme components: Disease Control Programme. Reproductive Child Health Programme National Council for Skill Development for overseeing the quality of skill imparted in the technical education centre and augmentation in the number of such centers in keeping with the demand for technical manpower in the economy. Atleast 16% of the fund earmarked for SCSP and 8.2% for TSP To integrate the gender perspective into the budgeting process a scheme on Gender Budgeting was introduced. It was meant to give a gender perspective to planning, budget formulation and implementation of schemes and programmes. This is a Central Sector Scheme, fully funded by the centre, which attempts to tackle the acute problem of declining sex ratio. Cash Incentive based scheme to change mindset of the family towards the girl child.

10 Rural Infrastructure: Bharat Nirman a fully centrally funded time-bound action plan for- 10 million hectare of additional irrigation All weather road connectivity to 66,802 habitations 60 lakh houses for rural poor Drinking water supply to all uncovered habitations Electricity to all un-electrified villages Connect all remaining villages (66,802) with public telephones States should supplement by expanding coverage in coordinated manner

11 Institutions and Processes Strengthening of institutional mechanism Creation of Ministry of Minority Affairs Policy on implementation of Land Acquisition Act Resettlement and Rehabilitation Policy Right to Education Act Right to Information Act National Rural Employment Guarantee Act (NREGA) Innovation in implementation processes Backward Region Grant Fund enhanced with special focus to Bihar and KBK districts of Orissa Increased public expenditure on social services for inclusive growth

12 Source: Economic Survey, Government Expenditure on Social Services (Centre and States combined) Government Expenditure as percent of GDP Total Expenditure Social Services Education Health As percent of Total Government Expenditure Social Services Education Health Rural Development* Note: * Central Government Budget numbers

13 MGNREGS: Experience Guarantees 100 days of wage employment to rural poor Implementation more effective than the earlier employment generation programme- Adoption of innovative methods like opening up bank accounts for payment of wages Use of information technology Social auditing Inculcated competition in the rural labour market pushing up the agricultural wage Increased bargaining power of rural labourers Empowerment of rural poor: evidence of wide spread demand from the farmers to reschedule the operation of NREGS from peak agricultural season to lean season

14 Inclusive Growth: An Alternative View Redistribution with growth; Equitable growth; Growth with equity; and Inclusive growth: What is the difference? Inclusive growth should be defined as a growth process with two characteristics: (a) maximise growth by maximising returns to ALL forms of personal assets: Land, Labour, Capital and Entrepreneurship; (b) Steady improvement in the productivity of all assets.

15 Inclusive Growth: An Alternative View (contd..) Requires a shift in focus FROM: product markets and capital accumulation (standard growth models) TO: factor markets and knowledge dissemination (inclusive growth model). Requires understanding and managing conflicts of interest of different asset owners. Requires understanding of interlinkages in factor markets Requires recognition of differential access to the global economy by different assets

16 Inclusive Growth: An Alternative View (contd..) Does the Indian model conform with this alternative view? Only in part. It overlays the standard growth model with social protection + redistributive policies: closer to Growth with equity model. Some added focus on skill creation + knowledge dissemination. However, some unexpected side-effects which have inclusive growth characteristics.

17 Inclusive Growth: An Alternative View (contd..) MGNREGS was meant for supplementary livelihood for the poor. Three unexpected sideeffects: (1) Better bargaining power for landless labour; (2) Protection of land assets of small & marginal farmers; (3) Improved risk-taking capacity of farmers. All are inclusive.

18 Thank You

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