World economy has grown at 4.9% (Source: CIA) per annum in 2010-11 as measured by GDP at constant prices. There has been an unprecedented growth in most parts of the world during the last couple of years except in some of the European countries. This year, Indian economy is expected to grow at 8.6% (Source: CMIE) as measured by GDP at constant prices. Though Indian economy and most of the world’s economy are growing at a fast rate, this growth has not touched all parts of our society. Also, recent economic crises in some of the European countries have forced many economists and policy makers to re-think the way the economy should be growing. On-going financial crisis in The European Union and economic downturn in US in late 2008 has opened some of the new challenges in front of us. Every challenge is a new opportunity. The economy in most part of the world is growing at a rapid pace but growth is not consistent across the world and across the various sectors in the economy as described in graph 1.
The great and immediate challenge of the current century is to generate inclusive and thus a sustainable growth.
Graph 1: Various leading economy’s GDP composition by sector: Source: IMF, Data for the year 2010.
Many sectors are not performing up to their level, for example- India has immense opportunity to grow in Agriculture. Agriculture contributes to only around 16 per cent of overall GDP measured at constant prices whereas around 78 per cent of Indian population lives in rural areas. There have been various policies to improve the contribution as a per cent of GDP but nothing has been substantial enough. India has very good soil resource but India’s agriculture potential is unleashed.
Many people living in rural areas and sub-urban areas fall below poverty line and do not have basic means to survive. However, a recent study has shown a decline in number of persons below poverty line. There were 32 per cent of the people below the poverty line in 2009-10, against 37.2 per cent in 2004-05 (Source: Planning Commission). Also, half of the world's population owns less than 1 per cent of the wealth. There are 69 billionaires in India with a combined net worth of 100 richest people at US$300 billion as per the Forbes India rich list, 2011. (Source: Forbes, Sept 2010). It is very clear that growth in India has not resulted in equitable distribution of income. We need an honest effort to improve the situation and inclusive growth which will be sustainable in the future. Below is the graph which presents the distribution of average income for developing regions in 2010. South Asia and Sub-Saharan Africa are still among the lowest earning regions in the world. We have to improve the life standard of these regions.
Average incomes for developing regions, 2010. Source: World Bank
As for the employment situation, 93 per cent of the workforce is either in employment of poor quality, unemployed or under-employed in India (Source: Planning Commission). Also, the addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of underemployment, pollution, waste-disposal, epidemics, water-shortages, famine, over-fishing of oceans, deforestation, desertification, and depletion of non-renewable resources (Source: CIA). The graph below represents the labour participation rate as a percentage of total population aged above 15.
Labour participation rate, total (% of total population ages 15+). Source: World Bank
Sustainable growth meets the needs of the current without comprising the needs of the future generations. Some of the key points in sustainable growth are:
- To protect the environment
- To build a low-carbon economy, reduce emissions and biodiversity loss
- To improve contributions of all the sectors proportionate to their representation.
- To improve the business environment, in particular for SMEs and entrepreneurs
Priority for Inclusive growth can vary from country to country. For the US, employment is the current priority and poverty is not an issue. However, it is not the same with a country like India. For inclusive growth, one should take care of the points stated below:
- To reduce the poverty, unemployment rate,
- To increase the literacy rate,
- To increase the participations of women in the society in all the sectors.
- To encourage people of all ages to participate and represent their share in the society
- To improve the infrastructure and living standards for the needy people.
· To improve the infrastructure for research and innovation
Conclusion: Growth can be achieved at a higher rate if we follow sustainable and inclusive approach for growth. The conventional approach to attain Sustainable and Inclusive growth is with the help of Government. There is a need in changing the approach. We can involve public-private-partnership in many of the sectors which needs reform. For example – when there was energy crisis in Spain in ninety eighties. They have addressed their energy problem successfully with public-private-partnership particularly in wind-energy. In education sector too, it has been a success so far. If the PPP model is implemented successfully, it can act as a catalyst to GDP. Governments can also introduce foreign players in some of the markets. It will increase the competition in the market and it will benefit the economy overall. The Government can also create a positive environment to nurture entrepreneurship. There are various social programs to achieve sustainable and inclusive growth like the UN Millennium Development Goals (MDGs), WB-ADB loans, endless welfare programs in education and healthcare for the poor, housing and transportation for the poor, and so soon. Healthcare and education are the two important issues in India which needs reform. Hence India needs to spend more on basic health care and education if economic growth is to benefit all members of society.
