Rethinking inclusive growth

Unlike in past decades, when governments had a larger role as economic players, national development plans now are set against the backdrop of the state's gradual withdrawal from economic activities. Flowing from this shift is the need for the state to redefine its role as a strong regulator and policy-setter, directing the economy towards the set goals. India's officially proclaimed economic goal of ensuring that high growth rates are also inclusive is mostly empty rhetoric. The Eleventh Plan's strategy was to ensure that key sectors of the economy grew at acceptable rates and, secondly, to make critical interventions in the social sector. That this approach has failed to yield the desired results is evident from two official sources. The Mid-Term Appraisal (MTA) of the 11 {+t} {+h} Plan, released last year, for instance, put the likely growth rate at 8.1 per cent during the Plan period, against the targeted rate of 9 per cent.

Further, sectoral contributions to the GDP fell short of expectations across the primary, secondary, and tertiary sectors in all but one category, ‘personal and community services.' A more significant admission came earlier this month when the Planning Commission noted, with more than a touch of euphemism, that the “progress on inclusiveness” was “less than expected.”

The Twelfth Plan process is set to commence at a time when there is serious concern over government finances. The changing role of the state, the near-jobless growth in the primary sector, and the increasing informalisation of workforce in the secondary and tertiary sectors call for strong state action to redress poverty. Growth is important; but higher economic growth rates do not, by themselves, bring inclusiveness or a reduction of inequalities. The extent to which policymakers are able to carry forward the apparently conflicting objectives of stepping up government's role as the ‘agent of change' and maintaining fiscal prudence will determine how successful they are in lifting millions out of poverty.

Equally important is policy-setting that mainstreams inclusive growth through strong regulatory and oversight mechanisms that prevent leakages. The current plan to increase spending in critical sectors such as health, education, skill development, and infrastructure is welcome. International experience demonstrates that it is easier to meet targets that are related to provision of access to social opportunities — education, for example — than those linked to outcomes, such as improving school-completion rates. But focussing on progressive outcomes will be crucial in meeting the challenge of poverty reduction and inclusiveness. Hindu News