Inclusive Growth and Issues arising from it

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Relevance: GS-III: Inclusive growth and issues arising from it.


  • Inclusive growth is defined as economic growth that generates job opportunities and aids in poverty reduction.
  • It entails poor people having access to basic health and education services. It entails ensuring equal opportunity for all, as well as empowering people through education and skill development.
  • To reduce poverty quickly and sustainably, people must be able to both contribute to and benefit from economic progress.
  • Rapid growth is required to eliminate poverty, but it must be broad-based across sectors and inclusive of a large portion of the country's labor force to be long-term sustainable.
  • According to the UNDP, inclusive growth is “the process and result of all groups of people participating in growth and benefiting equally from it.”
  • According to the OECD (Organisation for Economic Co-operation and Development), inclusive growth is defined as economic growth that is evenly dispersed across society and generates opportunity for everyone.

India's Need for Inclusive Growth:

  • Many thinkers and government officials stressed the importance of inclusive growth for long-term prosperity and equitable income distribution. In India, achieving inclusive growth is a difficult undertaking.
  • In a democratic country like India, the bulk of the people lives in rural areas, and integrating them into society is a big concern.
  • The Indian government faces a difficult task in spreading progress to all sections of society and across the country.
  • The best method to achieve inclusive growth is to nurture people's abilities.
  • Government officials claim that in order to accomplish progress, a multifaceted approach to education and skill development is required. A public-private partnership can help to solve the problem of a skills shortage.
  • Since independence, India's economic and social growth has improved significantly, allowing the country to thrive in the twenty-first century.
  • The factors listed below allow India to concentrate on inclusive growth.

Components of Inclusive Development

Inclusion in the Financial System

  • It is the process of ensuring that marginalized populations have inexpensive access to financial services.
  • Financial inclusion is essential for inclusive growth because it promotes a saving culture, which kicks off a virtuous cycle of economic development.
  • “Financial inclusion” is defined as “the provision of banking services at a reasonable cost to a large number of disadvantaged and low-income people.”
  • According to the Organization for Economic Cooperation and Development (OCED), India's financial sector has advanced greatly since the 1990s and has weathered the global crisis better than other countries.
  • New private banks have been allowed to enter the banking sector, and most interest rates have been liberalized, resulting in increased competition.
  • Nonetheless, the country must strengthen and improve its financial sector, as well as assure effective capital allocation.
  • While efficient resource allocation is crucial in any country, it is especially critical in a fast-growing economy like India.

In terms of financial inclusion, there are a number of issues to consider:

  • Unrestricted access to public goods and services: Because banking services are inherently a public good, it is critical that banking and payment services be made available to the entire population without prejudice.
  • No-Frills' Account: The RBI demanded that banks provide basic banking 'no frills' accounts with 'NIL' or very low balances, as well as costs, in order to achieve broader financial inclusion.
    • The type and volume of transactions permitted in such accounts would be limited, and clients would be informed in advance and in a transparent manner.
    • To ensure greater financial inclusion, all banks are encouraged to publicize the availability of such “no-frills” accounts.
  • Maintain reasonableness of bank costs: To ensure fair practices in banking, the RBI has given directions to banks requiring them to display and keep updated the details of various service charges in a format stipulated by it in their offices/branches as well as on their website.

Skill Development

  • The working-age population's employability, as well as their health, education, vocational training, and skills, will all play a role in capturing the demographic dividend. Here, skill development is crucial.
  • In terms of skill development, India is up against two obstacles:
    • For starters, there is a scarcity of highly skilled workers.
    • Second, there is a lack of employment opportunities for conventionally educated masses.
  • More than 30 percent of youth in India are NEET(Not in education, employment, or training) according to the 2017 Economic Survey.
  • Similarly, UNICEF 2019 estimates that at least 47% of Indian young people will not be able to get the required training and skills by 2030.

Technological Progress

  • The government has made several initiatives, like the Digital India Mission, to ensure that technologically literate people can make use of technology's limitless possibilities.
  • The world is rapidly approaching the fourth industrial revolution. Depending on how these technology breakthroughs are implemented, they have the potential to reduce or worsen inequality.
  • Agriculture, for example, can benefit from modern technology to improve the efficiency and competitiveness of the agro-value chain from farmer to consumer.
  • Manufacturing technology can handle issues like financing, obtaining raw materials, acquiring land, and establishing connections with the user market. GST was only possible thanks to cutting-edge technology.
  • New types of adaptive and peer learning can be created using innovative digital technologies, which provide access to trainers and mentors while also delivering relevant data in real-time.
  • Technology has the potential to change the way public health services are delivered – for example, by extending care through remote health services.
  • In the delivery of public services, technology can reduce delays, corruption, and inefficiency.
  • According to OCED estimates, India is one of the largest and fastest-growing research and development (R&D) players in the world.
  • However, when compared to sophisticated OECD countries and growing economies like China, India has a relatively low capacity in science, technology, and innovation.
  • This significant improvement in India's R&D performance is the result of a strategic approach to encouraging innovation that emphasizes local capacity development, inclusive innovation, and cost-cutting.
  • India has a large number of talented English-speaking workers, making it a global hub for outsourcing knowledge-intensive services.

Economic Development

  • India is one of the world's fastest-growing major economies. However, the Indian economy is currently slowing due to both cyclical and structural issues.
  • However, India's goal of having a $5 trillion economy by 2024-25 can help the country reduce inequality, expand social spending, and provide jobs for everyone.
  • India is the world's seventh-largest country by area and the second-largest by population.
  • At current market exchange rates, it is the world's one of the largest economies. However, development is not noticeable in India, while the neighboring country, China, is rapidly developing.
  • The nation's difficulties include low agricultural growth, low-quality employment growth, low human development, rural-urban differences, gender, and social traits, geographical discrepancies, and so on.
  • Through inclusive growth, the nation's main goals are to reduce poverty and other inequities while also increasing economic growth.
  • According to studies, the cost of corruption in India is more than 10% of GDP. One of the evils that prevent inclusive growth is corruption.
  • To create the trained workforce required for increased growth, literacy levels must rise.
  • Outdated beliefs and allegations by politicians and opposition groups in India are obstructing the country's economic progress.
  • The achievement of 9% GDP growth for the country as a whole is one of the boosting factors that emphasize India's inclusive growth.

Social Progress

  • This implies empowering all the marginalized of the population such as SC/ST/OBC/minorities, women, and transgendered people.
  • Empowerment can be achieved by the improvement of social facilities, i.e. in the fields of rural hospitals, schools, universities, etc.
  • As well as boosting GDP (through fiscal incentives), investment in social structuring will provide for a healthy and able generation that can undertake future labor.
  • If some groups are discriminated against, whether overtly or secretly, growth will not be inclusive. Group prejudice is generally based on caste, race, gender, and religion, according to empirical evidence from around the world.
  • For the country's inclusive growth to be successful, these groups must be taken into account.

Inclusive growth challenges


  • Because of illiteracy and over-dependence on agriculture, India's employment quality and quantity are low.
  • The lack of quality employment is a concern because more than 80% of individuals work in the informal sector and are not covered by social security.
    • According to the NSSO's Periodic Labour Force Survey (PLFS), the unemployment rate for the urban workforce was 7.8%, while the rural workforce had a rate of 5.3 percent, bringing the total unemployment rate to 6.1 percent.
    • The following factors contribute to sluggish job growth:
    • The industry has a low capital utilization rate.
    • Low initial budget
    • Agriculture's expansion has been slow.
  • According to economists, what is being referred to as a “demographic dividend” could turn out to be a moment of crisis defined by high unemployment and social unrest.

Backwardness in Agriculture

  • Agriculture employs 60% of the Indian population, either directly or indirectly. Agriculture, on the other hand, has a dismal growth rate of only 2%.
  • Agriculture production must be improved by policymakers and government officials in order to be more inclusive.
  • Lack of access to capital for agriculture and small and medium enterprises, as well as a lack of social protection, have all contributed to underprivileged communities being left out of the growth picture.
  • The following are some of the issues in agriculture:
    • A gradual decrease in the employment share
    • Land availability per capita is dwindling.
    • Labor productivity is low.
    • Agriculture yields are declining as a result of climate change, soil degradation, and water scarcity.
    • Growth differences between regions and crops.
  • Some recommendations for improving the country's agriculture growth include shifting public spending away from price support and input subsidies and toward productivity-enhancing investments that support the agriculture sector's long-term competitiveness and improving agriculture innovation systems, such as research and development, technology adoption and transfer, education, and farm training.

Social Development Problems:

  • One of the most important concerns for inclusive growth is social development. However, it has some issues, such as:
  • Regional, societal, and gender differences are all significant.
  • Public spending, notably in health and education, is at a low level and growing slowly.
  • The delivery system's poor quality
  • OBC, SC, ST, and Muslims have considerably lower social indicators.
  • Children's malnutrition – India is ranked 102nd in the Global Hunger Index.

Disparities by Region

  • India's regional differences are a key source of concern. Factors such as the caste system, the wealth gap, and others contribute to regional inequities, resulting in a society in which certain groups enjoy greater privileges than others.
  • Kerala is the most literate state in the country, with a literacy rate of 93.1 percent; nevertheless, Bihar's literacy rate is only 63.82 percent.

Measuring Inclusive Development

Inclusive Development Index (IDI)

  • India was placed 62nd out of 74 emerging countries in the World Economic Forum's Inclusive Development Index (IDI) and was among the least inclusive countries in the Group of 20 (G-20).
  • The IDI is based on the assumption that most people measure their country's growth by their personal level of living rather than GDP.
  • It calculates inequality based on three factors: 
    • Inclusion
    • growth, development, and poverty.
    • Equity and sustainability throughout generations.
  • India was also not among the top ten most inclusive emerging and developing economies, a list that included Nepal, China, and Sri Lanka.
  • India ranked 44th in terms of “intergenerational equity and sustainability,” which can be ascribed to the country's demographic dividend.

Global Slavery Index

  • The Walk Free Foundation of Australia has released it.
  • Slavery in the modern sense refers to a scenario in which one person has taken away another's freedom in order to control their body and exploit them.
  • Government measures to combat contemporary slavery: By criminalizing human trafficking, slavery, forced labor, child prostitution, and child marriage, India has taken a step in the right way.

India's Efforts to Achieve Inclusive Growth

  • National Rural Health Mission (NRHM)
  • Swachh Bharat Mission
  • Pradhan Mantri Jan Dhan Yojana
  • Deendayal Antyodaya Yojana- National Urban Livelihoods Mission (DAY-NULM)
  • Prime Minister’s Employment Generation Programme (PMEGP)
  • etc.,

For inclusive growth, the NITI Aayog's Strategy for New India @ 75 has the following goals:

  • To achieve inclusive, clean, sustained, and structured rapid development that reaches 9-10 percent by 2022-23.
  • By 2022-23, we want to use technology to promote inclusive, sustainable, and participatory development.
  • To ensure that the urban poor and slum inhabitants, especially new migrants, can use city services, cities must have an inclusive development strategy.
  • To make schools more inclusive by removing barriers in the physical environment (for example, accessible restrooms), admission procedures, and curriculum design.
  • To make higher education more accessible to those who are most marginalized.
  • To deliver high-quality ambulatory services in a community setting for a comprehensive package of diagnostic, curative, rehabilitative, and palliative care.
  • To develop a policy framework that is inclusive and puts citizens first.

World Economic Forum on social inclusion and economic growth:

  • Firstly, governments should develop the capacity of their citizens in public and private investment, and that is the most essential way of sustainably increasing the pace of growth in productivity.
  • Secondly, governments should modernize national labour regulations and institutions cooperation with employers' and workers' groups. This affects the amount and distribution of employment and remuneration opportunities, hence the purchasing power level and aggregate demand in the economy.
  • Third, governments should enhance public and private investment to provide broader social benefits in labor-intensive economic sectors. These include sustainable infrastructure for water, electricity, digital infrastructure, transport, healthcare, rural economy, education, and training.


  • To enhance the lives of India's people, the Indian government, along with state and local governments, should continue to focus on eradicating poverty and attaining sustainable development.
  • Inclusive and equitable growth can be targeted through innovative partnerships with international organizations, civic society, and private firms.
  • Inclusive growth will aid in the empowerment of disadvantaged and marginalized communities, as well as the improvement of livelihoods and skill development for women.
  • India's economy has risen at a remarkable rate in recent decades as a result of several structural changes aimed at opening up the economy and making it more competitive.
  • Currently, activity has slowed, revealing not only a weak global environment, but also the appearance of strains caused by rapid economic growth's reliance on energy, natural resources, infrastructure, and skills.
  • In short, inclusive growth is a concept that allows impartial economic opportunities for participants with benefits from all sections of society during economic progress.
  • Inclusive growth is the advancement that eliminates disparities in per capita farm and non-farm incomes, in rural, urban and various socio-economic categories, especially among men and women, and between ethnic groups.
  • As a result of inclusive growth, vertical (individual) inequalities and horizontal inequalities are decreasing (group inequalities).

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