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Sambhav-2025

  • 05 Mar 2025 GS Paper 3 Economy

    Day 81: Despite significant economic growth, inclusive growth remains elusive in India. Analyze the underlying causes and propose potential solutions. (150 words)

    Approach

    • Mention India’s economic growth trajectory since the 1991 reforms, highlighting the gap between growth and inclusivity.
    • Discuss the causes behind the lack of inclusive growth.
    • Propose measures to achieve inclusive growth.
    • Conclude suitably.

    Introduction

    India has experienced impressive economic growth since the 1991 liberalization, with GDP expanding at an average rate of 6-7% per annum over the past three decades. Despite this, inclusive growth—where economic benefits are equitably distributed among all sections of society—remains a challenge.

    Body

    Causes Behind the Lack of Inclusive Growth

    • Regional Disparities
      • Economic growth is concentrated in metropolitan cities, while Bihar, Jharkhand, and Uttar Pradesh still lag behind in key development indicators.
      • According to NITI Aayog’s Multidimensional Poverty Index (2021), Bihar has the highest poverty rate at 51.91%, while Kerala has the lowest at 0.71%.
    • Jobless Growth
      • Growth has been driven by capital-intensive industries like IT and services, leading to low employment generation in the manufacturing sector.
      • As per Periodic Labour Force Survey (PLFS) 2022-23, India’s unemployment rate is 3.2%, but youth unemployment (15-29 years) remains high at 10.3%.
    • Informal Sector Dominance
      • Over 85% of India’s workforce is employed in the informal sector, with low wages, no social security, and job insecurity (Economic Survey 2022-23).
    • Gender and Social Inequality
      • The Labour Force Participation Rate (LFPR) for women is just 37%, compared to 83% for men (World Bank, 2023).
      • Caste and tribal disparities persist, with Scheduled Castes (SCs) and Scheduled Tribes (STs) having lower access to higher education and jobs.
    • Educational and Skill Deficit
      • ASER Report 2023 highlights that only 73% of Class V students can read a Class II-level text, impacting employability.
      • Only 48% of India's workforce is formally skilled, compared to 96% in South Korea (ILO, 2023).
    • Agrarian Distress
      • Agriculture contributes only 16% to GDP but employs over 45% of the workforce, leading to disguised unemployment.
      • Average farm income in India is only ₹10,218 per month (NABARD, 2022).
    • Infrastructure and Digital Divide
      • Over 30% of rural households still lack access to reliable electricity (CEA, 2023).
      • Internet penetration is only 55% in rural India, limiting access to digital education and financial services (TRAI, 2023).
    • Weak Social Security Net
      • Only 20% of the workforce has access to formal social security benefits like pensions and insurance (Economic Survey 2023).

    Measures to Achieve Inclusive Growth

    • Employment Generation
      • Focus on labour-intensive industries such as textiles, construction, and tourism.
      • Production-Linked Incentive (PLI) schemes can be expanded to MSMEs to create job opportunities.
    • Agricultural Reforms
      • Increase MSP coverage and ensure timely procurement.
      • Promote crop diversification and irrigation expansion under PM Krishi Sinchayee Yojana.
    • Financial Inclusion
      • Strengthen PM Jan Dhan Yojana, which has already helped in opening 49.78 crore bank accounts (as of 2023).
      • Expand microfinance and digital banking penetration in rural areas.
    • Social Sector Investments
      • Increase health spending to at least 3% of GDP (currently ~2% as per Economic Survey 2022-23).
      • Improve public education and invest in vocational training through Skill India Mission.
    • Bridging the Infrastructure and Digital Divide
      • BharatNet Project aims to provide high-speed broadband to all villages by 2025.
      • Road and rail connectivity should be improved in aspirational districts under PM Gati Shakti.
    • Women and Marginalized Inclusion
      • Maternity leave, workplace safety, and equal pay policies need stricter implementation.
      • Earmark a percentage of government contracts and MSME loans for SCs, STs, and women entrepreneurs.
    • Labour Law and Policy Reforms
      • Implement the four new Labour Codes to ensure social security for gig and platform workers.
      • Expand MGNREGA-like schemes for urban workers to reduce unemployment.

    Conclusion

    While India has made commendable progress in economic growth, inclusive growth remains a work in progress. The government needs to focus on employment-intensive industries, rural development, gender equality, social security, and skill enhancement to bridge the inequality gap. Achieving truly inclusive growth requires a balanced approach, ensuring that economic expansion uplifts all sections of society rather than benefiting a select few.

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