The concept of inclusive growth, according to the OECD, refers to the equitable distribution of economic growth across all segments and regions of society. It aims to provide equal opportunities, livelihoods for marginalized groups, and access to essential services such as healthcare and education.
Inclusive growth encompasses several aspects, including:
- Financial Inclusion: Ensuring affordable access to financial services, which promotes social mobility and financial empowerment.
- Skill Development: Enhancing the skills of individuals to capitalize on the demographic dividend.
- Social Justice: Fostering the development of historically marginalized sections such as Scheduled Castes (SCs), Scheduled Tribes (STs), women, and transgender individuals, while overcoming barriers of caste and gender.
- Technological Progress: Promoting advancements in agriculture to enhance competitiveness, implementing adaptive learning in education, establishing tele-healthcare services in remote areas, and facilitating faster public services through e-governance and m-governance.
Economic growth contributes to inclusive growth in the following ways:
- Employment Opportunities: Sectors that generate employment opportunities, particularly in the formal sector, promote livelihoods for the poor. Formal employment facilitates skill mobility and enables a virtuous cycle of productivity growth, increased incomes, savings, and human capital development.
- Enhanced State Capacity: Economic growth leads to increased fiscal resources, which can be utilized for welfare purposes. This leads to improvements in health indicators such as infant mortality rate (IMR), maternal mortality rate (MMR), and life expectancy at birth. For example, according to the India Health System Review Report by the World Health Organization, life expectancy in India improved from 47.7 years in 1970 to 69.6 years in 2020.
- Female Empowerment: Economic growth creates job opportunities for women in sectors such as information technology, textiles, and mobile manufacturing.
- Urbanization: Economic growth fosters urbanization, which can help overcome traditional social barriers related to caste and gender. Relative anonymity and economic considerations make exclusion more difficult in urban areas.
However, economic growth alone is insufficient to achieve inclusive growth due to the following reasons:
- Social Barriers: Economic growth does not adequately address social barriers based on factors such as caste, gender, and religion. For instance, the labor force participation rate (LFPR) of women in India is significantly lower (18.6%) compared to men (55.6%).
- Provision of Public Goods: Economic growth does not automatically ensure the provision of public goods such as education and healthcare. For instance, India still has a substantial illiterate population of over 304 million people.
- Income Inequality: Equitable income distribution remains a challenge, as highlighted by reports such as Oxfam’s, which indicates that India’s richest 1% own more than four times the wealth of the lowest 70% of the population.
- Jobless Growth: Economic growth that lacks sufficient employment opportunities can lead to issues such as under-employment, disguised employment, over-stressed agriculture, and regional imbalances. For example, according to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India was 7.83% in April 2022.
- Decreasing Employment Elasticity: Automation and technological advancements have reduced the employment-elasticity of growth. For instance, producing one ton of steel today requires fewer workers compared to two decades ago.
Achieving inclusive growth requires more than just economic growth. It necessitates the active role of the state in providing public goods and implementing affirmative action for marginalized sections. Additionally, there is a need to make economic growth more inclusive by creating opportunities in sectors such as agriculture and promoting employment-intensive growth. Ultimately, inclusive growth should be based on principles of freedom, dignity, and equity.