What Does Inclusion Being Key To Growth Mean?

Source: The post is based on an article “What Does Inclusion Being Key To Growth Mean?” published in The Times of India on 29^th November 2022.

Syllabus: GS 3 – Inclusive Growth

Relevance: problems with inclusive growth and measures to improve it

News: The article discusses the problems faced in achieving inclusive growth at the time of Nehru and measures that can be taken to improve it.

How did the concept of inclusive growth fail during the Nehru period?

At the time of Nehru, it was argued that poverty can be reduced by focusing on growth. However, this concept failed to provide the desired result.

The failure led to the emergence of cottage industry under the title of “New Economics” which argued that redistribution was the only way to reduce poverty.

However, this argument does not hold importance as inclusive growth is important for the overall growth of a nation.

Why is inclusive growth important?

Growth raises incomes of the poor along with revenues of the government which help the government to launch anti-poverty programmes.

Inclusive growth is important for the overall growth of a nation and the government should focus on inclusion in its policies and programmes.

Why did the growth during the Nehru era not achieve the desired result?

India at the time of Nehru was at the early development stage. Therefore, in the early stage of development the most abundant resource of developing countries is labour.

A country at an early stage can only grow by using the full potential of its labour force.

For example, 68% of the South Korean workforce was employed in agriculture in 1960. This proportion fell to 18% by 1990. In the later decades, industry and services absorbed an additional half of the workforce with real wages rising 8-10% annually.

However, India under Nehru adopted a development strategy that was centred not on the utilisation of its abundant labour force but on its low capital.

Indians had a low level of income with a saving rate of just 7-9%. With these low capital resources, the government chose to invest them almost entirely in heavy industries which employed less than 5% of the nation’s workforce.

Even though, this development strategy created a modern industry, 95% of the workforce was excluded and relied on sectors such as agriculture, cottage and household enterprises.

Census data show that the proportion of workforce in agriculture remained unchanged at 69. 7% between 1951 and 1971 whereas workers in countries like South Korea became skilled at the same period of time.

However, with the change in policies, the growth rate in India began to change.

What changes were brought in India?

As per the Employment-Unemployment Survey, the proportion of workforce in agriculture fell from 58. 5% in 2004-05 to 48. 9% in 2011-12. These years also saw the annual growth rate reach 8%.

However, the process of direct inclusion of workforce into the mainstream of the economy remains slow in India compared to other fast-growing economies of Asia.

What are the concerns?

Policy-makers focusses on capital and skilled-labour-intensive industries such as automobiles, railways, steel, telecom equipment, IT, finance for output but for employment, they rely on MSMEs which have little capacity to impart skills to their employees.

Therefore, to grow at 8% or higher rates India must recognise that inclusion is an integral part of rapid growth and only then India’s labour-intensive industries can grow leading to overall development of the nation.