General Studies IIIEconomy

Inclusive growth and issues arising from it

Inclusive Growth:

Inclusive Growth refers both to the pace and pattern of growth, which are interlinked and must be addressed together.” — World Bank

  • 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.

Salient Features of Inclusive Growth

  • Address the constraints of the excluded and marginalised.
  • Participation from all sections of society
  • Reduction in disparities among per capita incomes between:
  • Different sectors of economy
  • Different Sections of society
  • Rural And Urban Areas
  • Different genders
  • Non – discriminatory
  • Higher potential of poverty reduction
  • Ensure access of people to basic infrastructure and basic services/capabilities such as basic health and education. This access should include not only the quantity, but also quality of these basic services.
  • Include poor, lagging socio – economic groups and lagging regions as well as they are partners in this growth.

Elements of Inclusive Growth

  • Skill Development
  • Harnessing the demographic dividend will depend upon the employability of the working age population, their health, education, vocational training and skills. Skill development plays a key role here.
  • India is facing a dual challenge in skill development:
    • First, there is a paucity of highly trained workforce
    • Second, there is non-employment of conventionally trained youths
  • According to the Economic Survey 2017, over 30% of youth in India are NEET (Not in education, employment or training).
  • Similarly, UNICEF 2019 reports stats that at least 47% of Indian youth are not on track to have the education and skills necessary for employment in 2030.

  • Financial Inclusion
  • Financial Inclusion is the process of ensuring access to financial services to vulnerable groups at affordable costs.
  • Financial inclusion is necessary for inclusive growth as it leads to the culture of saving, which initiates a virtuous cycle of economic development.

  • Technological Advancement
  • The world is moving towards an era of Industrial Revolution 4.0. These technological advancements have capabilities to both decrease or increase the inequality depending on the way these are being used.
  • Several initiatives have been taken by the government, eg. Digital India Mission, so that a digitally literate population can leverage technology for endless possibilities.
  • Technology can help to combat other challenges too, eg:
    • Agriculture- Modern technology can help in making an agro-value chain from farmer to consumer more efficient and competitive.
    • Manufacturing- Technology can resolve the problems of finance, procuring raw materials, land, and linkages with the user market. GST was made possible only with the help of sound technology.
    • Education- Innovative digital technologies can create new forms of adaptive and peer learning, increasing access to trainers and mentors, providing useful data in real-time.
    • Health- Technologies could transform the delivery of public health services – extend care through remote health services
    • Governance- Technology can cut down delays, corruption, and inefficiency in the delivery of a public service

  • Economic Growth
  • India is among the fastest-growing major economies in the world. However, currently Indian economy is facing slowdown due to both cyclic and structural challenges.
  • However, the target of becoming a $ 5 trillion economy by 2024-25 can allow India to reduce inequality, increase social expenditure and provide employment to all.

  • Social Development
  • It means the empowerment of all marginalised sections of the population like SC/ST/OBC/Minorities, women and transgenders.
  • Empowerment can be done by improving institutions of the social structure i.e. hospitals especially primary care in the rural areas, schools, universities, etc.
  • Investment in social structures will not only boost growth (by fiscal stimulus) but will also create a healthy and capable generation to handle future work.

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.

Challenges in Achieving Inclusive Growth


  • As per the Multidimensional Poverty Index (MPI) 2018, India lifted 271 million people between 2005-06 and 2015-16, with the poorest regions, groups, and children, reducing poverty fastest. India demonstrates the clearest pro-poor pattern at the sub-national level.
  • Still, despite the massive gains, 373 million Indians continue to experience acute deprivations. Additionally, 8.8% of the population lives in severe multidimensional poverty and 19.3% of the population are vulnerable to multidimensional poverty.


  • As per the Periodic Labour Force Survey (PLFS) of NSSO, the unemployment rate among the urban workforce was 7.8%, while the unemployment rate for the rural workforce was 5.3% totaling the total unemployment rate at 6.1%.
  • The quality and quantity of employment in India are low due to illiteracy and due to over-dependence on agriculture.
  • The quality of employment is a problem as more than 80% of people work in the informal sector without any social security.
  • Low job growth is due to the following factors:
    • Low investment
    • Low capital utilization in industry
    • Low agriculture growth

Agriculture Backwardness

  • Around 44% of people in India have agriculture-related employment but its contribution to the Indian GDP is only 16.5% which lead to widespread poverty
  • Issues in agriculture are as follows:
    • Declining per capita land availability
    • A slow reduction in the share of employment
    • Low labour productivity
    • Decline in agriculture yield due to climate change, land degradation and unavailability of water
    • Disparities in growth across regions and crops

Issues with Social Development

  • Social development is one of the key concerns for inclusive growth. But it is facing some problems such as:
    • Significant regional, social and gender disparities
    • Low level and slow growth in public expenditure particularly in health and education
    • The poor quality delivery system
    • Social indicators are much lower for OBC, SC, ST, and Muslims
    • Malnutrition among the children – India ranks 102nd in Global Hunger Index

Regional Disparities

  • Regional disparities are a major concern for India. Factors like the caste system, gap between rich and poor etc. contribute to the regional disparities which create a system where some specific groups hold more privileges over others.
  • Some of the regional disparities problems are as follow:
    • In terms of literacy rate, Kerala is the most literate state with 93.1% literacy, on the other hand, literacy rate of Bihar is only 63.82%
    • In terms of per capita income, Goa’s per capita income is Rs 4,67,998 in 2018 while per capita income of Bihar is just one-tenth of that ie Rs 43,822

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)

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.

Governmental Schemes and Policies for Inclusive Growth

  1. Pradhan Mantri Jan Dhan Yojana
  2. MUDRA (Micro Units Development and Refinance Agency)Bank
  3. SETU(Self Employment and Talent Utilization)
  4. Skill India
  5. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
  6. Kisan Card
  7. Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)
  8. National Agriculture Market (NAM)
  9. Pradhan Mantri Jeevan Jyoti Beema Yojana
  10. Pradhan Mantri Jeevan Suraksha Yojana
  11. Atal Pension Yojana(Social Security Schemes)
  12. Digital India programme(for delivering benefits even to the last person)

  • Government is working with NGOs and International groupings in policy making eg:
    • DISHA Project is being implemented in partnership with UNDP for creating employment and entrepreneurship opportunities for women in India.
  • NITI Aayog’s Strategy for New India @75 has the following objectives for the inclusive growth:
    • To have a rapid growth, which reaches 9-10% by 2022-23, which is inclusive, clean, sustained and formalized.
    • To Leverage technology for inclusive, sustainable and participatory development by 2022-23.
    • To have an inclusive development in the cities to ensure that urban poor and slum dwellers including recent migrants can avail city services.
    • To make schools more inclusive by addressing the barriers related to the physical environment (e.g. accessible toilets), admission procedures as well as curriculum design.
    • To make higher education more inclusive for the most vulnerable groups.
    • To provide quality ambulatory services for an inclusive package of diagnostic, curative, rehabilitative and palliative care, close to the people.
    • To prepare an inclusive policy framework with citizens at the center


  • 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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