Inclusive Growth of India: a Study of the Informal Sector in India

Topics: States and territories of India, Uttar Pradesh, Arunachal Pradesh Pages: 52 (7570 words) Published: October 4, 2012
Inclusive Growth in India: An Introduction
India’s post 1990’s economic growth has made it one of the world’s fastest growing economies in the world. Its GDP growth rates of about 9% in the last few years are historically unparalleled except by the neighbo ring China. With the rapid growth rates, however, come new challenges and new questions. One such challenging question concerns the spread of the benefits of growth across different segments of society. To ensure that growth has been well distributed, India’s Planning Commission has made Inclusive Growth their explicit goal in the eleventh five-year plan. The concept of Inclusive Growth has dominated discussions across India. Its popularity has sparked intense discussions among politicians, economists, policymakers and the general public. In addition, Inclusive Growth has been the focus of studies by bilateral and multilateral aid agencies such as the UN, World Bank, Asian Development Bank, Foundations such as the ICICI Foundation, NGOs, and Civil Society Organizations alike. However, Inclusive Growth should not be confused with Poverty Reduction Strategy Papers (PRSP).Despite all the attention that Inclusive Growth has received in the last few years, there lacks a precise and agreed upon definition of the te rm. Overall, the literature is divided between two concepts; whether the benefits reach the poor and whether the benefits reach the poor proportionately more than it reaches the non-poor. By the first definition, India may have performed quite remarkably i n the last two decades, although the magnitude is hotly debated. By the second definition, India’s performance against inclusive growth seems more lackluster. Gini coefficient indicates that income inequality in India has increased from 0.209 in 1980-81 to about 0.257 in 2005-06 both at an overall level as well in almost all

of the states both for urban and rural areas . There are evidences suggesting that growth in the lower income states is relatively lesser than the growth in high income states. Not only this, but studies have shown that the rising disparity is also present at an intra-state level too. To address these challenges going forward, evidence suggests that there are a number of macro and micro level interventions that are poverty reducing and th us conducive to Inclusive Growth. At macro level, there is little doubt about the usefulness of the augmented Washington Consensus (Rodrik, 2006). At micro level, evidence suggests that improving the following factors will help accelerate poverty reduction : reduction of inequality, not limited to income inequality, access to public infrastructure and services especially health and education, access to markets, accountability and voice, good governance, and the role of civil society organizations, women empowerment. Inclusive growth can also be studied as a clash between the informal as the formal sector. Various literatures are available in the following context by noted economists and policy makers. A firm stand to improve the condition of the economy is subsided in the entrepreneurship sector of the country, which holds huge potential.

The Indian economy today boasts of many magnificent opportunities but sadly enough, not many of them are fully utilized. The entrepreneurship front of the country epitomizes such a condition. Liberalization of economy started by the PV Narasimha Rao government in 1991 and the Information Technology boom of the mid and late 90′s have ushered in tremendous changes and set the stage for a wave of entrepreneurship taking India by storm. The capacity of Indians for entrepreneurship is substantial. However, the society and government have not been very encouraging towards entrepreneurship in India. The rankings of India

have also been deteriorating in the recent years. From a rank of 2 in the field of Total Entrepreneurship Activity (TEA) according to the Global Entrepreneurship Monitoring Reports, India’s position has...
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