In it’s Winter 2010 Occasional Papers released last week, the RBI has included a research paper on inclusive growth in India and it’s regional dimension.
The paper has been authored by P. K. Nayak, Sadhan Kumar Chattopadhyay, Arun Vishnu Kumar and V. Dhanya and can be downloaded below
Dr. P. K. Nayak is Assistant Adviser, REMD, DEPR Central Office and Shri Sadhan Kumar Chattopadhyay, Shri Arun Vishnu Kumar and Smt. V. Dhanya are Research Officers attached to DEPR, RO of Kolkata, Bangalore and Kochi, respectively. The views expressed in this paper are of the authors and not of the organization they are working with.
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Inclusive Growth and it’s Regional Dimension
Inclusive growth has become a buzzword across the globe. Inclusiveness – a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions – is an essential ingredient of any successful growth strategy (Commission on Growth and Development, World Bank, 2008). The Commission of Growth and Development (2008) considers systematic inequality of opportunity as “toxic” as it will derail the growth process through political channels or conflict.
Indian economy has been registering a steady growth in the recent years. However, poverty continues to be a major concern. While some level of growth is obviously a necessary condition for sustained poverty reduction, there is an increasingly unanimous view that growth by itself is not a suffi cient condition for eradicating poverty (Ali and Son, 2007). Growth can marginalise the poor sections and increase inequality. High and rising levels of inequality can hinder poverty reduction, which in turn, can slowdown the growth process.
One important indication of inadequate inclusion in India is that poverty reduction has been muted in the last decade even with rising growth. The poverty rate has declined by less than 1 per cent per annum over the past decade, markedly below trends in neighboring countries such as Nepal and Bangladesh where both average income levels and growth are lower (World Bank, 2007).
The importance of inclusive growth is well acknowledged among the policy makers. The approach paper of 11th Five Year Plan adopted in December 2006 describes the need for inclusive growth in its discussion. The approach plan points out that the growth oriented policies should be combined with policies ensuring broad based per capita income growth, benefiting all sections of the population, especially those who have thus far remained deprived.
While the need for inclusive growth is stressed, it is to be seen, whether it is the inadequate growth of certain sectors like agriculture or the inability of certain groups like SC/STs to form part of the growth process or the lack of both physical and financial infrastructure that pull back the particular regions/sections from enjoying the economic growth. It is possible that a combination of all these factors is preventing certain sections/areas to be out of the growth process.
In that case it is necessary to know the major determinants that pull down inclusive growth. The inter linkages between different development indicators and growth in the context of various regions and sections needs to be analysed to understand the nuances of India’s growth process. In this context, a study on regional perspectives of inclusive growth is of utmost importance.
With this backdrop, the paper is organized as follows. Section II deals with the concept of inclusive growth. Section III analyses the inter-state growth performance. Here we look into the growth of Net State Domestic Product and per capita income from 1980-81 onwards.
We also examine the sectoral contributions of economic growth across different states. Section IV discusses socio-economic inclusiveness as well as the poverty and unemployment which help in understanding the inclusiveness of our growth processes vis-à-vis select developing countries. Section V deals with relationship between finance and growth. It also highlights state-wise, sector-wise allocation of credit over the years. Section VI concludes the paper.