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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.