Independent [email protected]: Inclusive growth for Bharat remains an elusive dream

Achieving inclusive growth continues to be the biggest challenge for our country, as it concerns integrating 600 million people living in rural India and several million living in urban slums, into the mainstream economy, in a fair manner

While there are many reasons to celebrate 64 years of India's independence, there are good reasons to introspect as well. The primary cause for concern is that the dichotomy has rendered our nation into two unequal worlds. The miniscule part is the India 'shining', with its small number of people who have access to the majority of resources, and the larger part of Bharat, with its teeming millions struggling for even one square meal a day.

Many people take pride in the fact that the Indian economy has been growing at rates between 7%-9 % in the past few years. In fact, some people even argue that a testimony to India's progress is the improvement of the country's Human Development Index (HDI), from 0.406 in 1975 to 0.571 in 1999. They also cite legislations enacted in recent years to show that India is on the highway to progress; like the 73rd and 74th constitutional amendments passed in 1992 that are said to have strengthened political participation at the grassroots level and brought more than a million women into public life.

These trends, however positive, are accompanied by a paradox-the ever-looming spectre of the 'other' India of urban poverty and rural inequities that refuses to go away. A shocking 30%-35% of India's total population still lives below the poverty line and as the graph (Various estimates of the number of people living in poverty) suggests, more and more people are becoming vulnerable and poorer, with each passing day.

Poverty, accompanied by low health and nutrition levels, high infant mortality and illiteracy, is now almost uniform, in terms of the proportion of population in rural and urban areas. Using the Indian definition based on income needed to acquire food, to provide the minimum required calories (2,100 for rural and 1,800 for urban adults), roughly 260 million people or 26% of the population falls below the poverty line.

Using another definition of poverty—those living on less than $1 per day—the number of poor would be much larger, say around 400 million, or about 36% of the population. This becomes even more serious when one considers the report of the Arjun Sengupta Commission which estimates that about 903 million are vulnerable to becoming poor. Sixty four years after independence, these are disturbing statistics and in many ways a serious indictment of the effectiveness of our policies and the efforts so far.

And within these poor are the poorest, who live on an income of less than $0.50 per day. Most of this population lives in Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, collectively called the BIMARU states. With the carving out of the states of Chhattisgarh, Jharkhand and Uttaranchal from Madhya Pradesh, Bihar and Uttar Pradesh respectively, these are more BIMARU states.

There are several variations within these states too. For instance, very high poverty rates of up to 60% exist in southern Bihar, southern Orissa, Madhya Pradesh and southern Uttar Pradesh. These regions are either mainly tribal or rocky and dry, yet densely populated because of their agro-climatic features. Low poverty reduction in the poorer states is because of their lower initial levels of rural and human development and large disparities between rural and urban areas.

Therefore, while inclusive growth, as a paradigm, has gained significant acceptance in India among policymakers and some others, and it is being touted as the mantra for success in modern India, there are several good reasonsii  why this paradigm has not achieved serious success on the ground, so far. {break}
First, in India, a huge proportion of the population (over 60%) is based in rural areas, where agriculture is the primary source of livelihood. Barring a couple of years (2005-06), the performance and growth of agriculture has by and large been rather indifferent and continues to be so. Even when agriculture performs, the benefits accrue to the larger and better off (corporate) farmers and not the small/marginal farmers.

Indeed, what has become more apparent with this kind of skewed growth is the dualistic nature of the Indian economy, where the gaps are indeed deepening and widening across various sections of society. The classic manifestation of these gaps and the failure of the economy to re-adjust and ensure equitable economic opportunities for wealth creation, especially in relation to the work and inputs, can hardly go unnoticed. One manifestation is the suicides by small and marginal farmers and others at the grassroots. That several farmers and low-income people have committed suicide in the last few years tells us that the causes of these problems are not short-term, but they are due to serious structural weaknesses in the system of livelihood of low-income people that requires urgent and systematic attention.

Why is this happening? The key point to note here is that the case of farmer suicides is neither a cotton specific problem nor a paddy crop germane issue. Rather, it concerns fundamental problemsiii  associated with one of India's largest livelihood sectors, agriculture and allied activities, a sector in which over 600 million people and a majority of India's low-income and pooriv  people still depend on to earn their living. More importantly, it is a sector without whose produce/products we will be deprived of sustenance and cannot survive in the long run. Therefore, without question, agriculture and allied areas, as sectors, and with low-income people dependent on it for their livelihood, must be 'properly and fairly' included in the overall growth paradigm.

This is an urgent imperative and the inclusive growth paradigm must redress this immediately. Merely relying on new top-down schemes like the National Rural Livelihood Mission (NRLM) will not help. Fundamental changes will have to occur with regard to inclusion of agriculture and rural livelihoods in the Indian economy and this must draw on a variety of lessons from past programmes/schemes which have a lot of valuable lessons.

Second, from the perspective of supply-side management, growth in agriculture is very vital for keeping manufacturing prices under check, ensuring food security and keeping inflation under control. India knows this better from its own experience of the last few years. In fact, if there is a single dominant issue in the minds of the masses today, it is burgeoning prices of essential commodities.

Therefore, price stability is not merely important as an anti-poverty measure, but also as an instrument to ensure stable and sustained growth. And let us not forget one important aspect here-the fact that the farmers who grew these commodities hardly got returns/rewards commensurate with their effort, investment and risks taken. This again points to very fundamental weaknesses in the structural aspects concerning agriculture and low-income livelihood systems.

Here again, the inclusive growth paradigm must build on practical lessons from the experience of the past few years, so that the bargaining and staying power of low-income people, including farmers, is enhanced, so they can get returns commensurate with the efforts/investments and risks they have undertaken. That alone will ensure their natural participation in the growth process as equal partners.

Third, the limitations on increasing production and productivity in agriculture are forcing people to migrate to urban areas, which results in increased population pressure in urban areas as well as larger numbers of urban poor. And this burgeoning urbanisation has several important consequences for low-income people who tend to migrate and live in slums. As an NSSO survey revealed (a few years ago), nearly 40% of farmers claimed that they would like to quit farming if they had the option to do so. Unfortunately, there is little option for them, except moving into urban slumsv .

Thus, migration to urban areas primarily implies greater growth of urban slums, which hold a lower quality of life for the poor. This growth of urban slums, typically, is associated with greater unemployment for the poor living there, harsh living conditions, enhanced crime, greater negative impact on health and several aspects including environmental degradationvi . Therefore, the major point to be noted is that the infrastructure in urban areas is simply not enough to cater to the growing needs of these migrants. Huge and appropriate investments are therefore needed in housing, sanitation, water, lighting and power, solid and other waste management, education, health, and so on and so forth.

Therefore, we need "inclusive and enabling investment" in these areas to deal with the huge and ever-increasing flow of low-income migrant population into urban areas. This is yet another new area of focus for the inclusive growth paradigm. It also calls for a serious paradigm shift in urban planning, which must also become more inclusive and pro-poor.

Fourth, in countries such as India, the growth process is essentially knowledge-based and primarily services-led. These new growth areas will continue to have a lot of potential going forward. Hence, the requirement of skilled labour is rather huge in comparison to the current levels of availability. Therefore, in order to ensure availability of adequate supply of labour skilled enough to tackle opportunities in the new growth areas mentioned above, we also need huge enabling and inclusive investments in areas such as practical education and skill development and this has to happen quickly. This is to enable the vast majority of people who have the latent potential, but cannot afford these to gain access to such practical skills and knowledge, and thereby perform to their potential. This is one more aspect for the inclusive growth paradigm.

Last but not the least, whenever we talk of rural areas, the sector that comes first to our mind is agriculture. However, there is the (unorganised and informal) non-farm sector which continues to play an increasingly important role in absorbing large numbers of rural people. All put together, this non-farm and value-added agriculture MSME sector has huge potential for growth. This again requires investment in 'inclusive infrastructure and enabling mechanisms' for ensuring easier/quicker access to assets, skills, appropriate technology, wide range of vulnerability reducing financial services (including credit for post-harvest and post-production) and fair linkage to various markets and other market development infrastructure (both private sector and government procurement).

Without question, the inclusive growth paradigm should lead such efforts and facilitate these hitherto excluded sectors to become expanding bases for wealth creation for low-income people in a competitive manner.

Thus, it is clear that inclusive growth is very necessary for sustainable development and equitable generation of wealth and prosperity. However, achieving this inclusive growth continues to be the biggest challenge in a democratic country like India as it translates to the concern of integrating 600 million people living in rural India, and several (growing) million living in urban slums into the mainstream economy in a fair manner commensurate with their hard work and the investment and risks undertaken. Unless and until that happens, inclusive growth will continue to remain an elusive dream.

iSource: PRB, based on different recent estimates of the percent below poverty.
iiThis draws from several resources including: Inclusive growth - the role of banks in emerging economies by Mrs Usha Thorat and other web based resources as well as papers by this author
 iii"Farming is both a way of life and the principal means of livelihood to 65 per cent of India's population of 110 crore, Our farm population is increasing annually by 1.84 per cent, The average farm size is becoming smaller each year and the cost-risk-return structure of farming is becoming adverse, with the result that farmers are getting increasingly indebted. Marketing infrastructure is generally poor, particularly in perishable commodities. The support systems needed by farmers, like research, ex-tension, input supply and opportunities for assured and remunerative marketing are in various stages of disarray. Small farmers are forced to borrow money from money-lenders at high rates of interest, since less than 60 per cent of the credit requirements of farmers is met by institutional sources." (Dr M S Swaminathan, Chairperson, National Commission on Farmers, 2006 as cited in The Hindu Survey of Agriculture).
 ivAs noted earlier, despite significant progress made by India during the last decade or so, a large proportion of the total population still lives below the poverty line.
 vINDIA has always been considered a country that lives in its villages. But increasingly rural Ind1a is moving towards the town and the city.  The 2001 Census established that almost one- third of India's population, an estimated 285 million people, lived in urban areas. By 2020, half the country's population is expected to be city-based.
 viIn fact, as the data suggest, almost 50% of country's population and a large majority of the poor are likely to reside in urban slums in India by 2020. And Noted environmentalist Chandrasekar confirms the above trends and summarizes the issues with rapid urbanization, "Although on paper all cities have some kind of development plan, the actual development follows no particular pattern except that dictated by expediency, patronage and privilege. As a result, every city in India is the epitome of urban chaos - lacking in adequate water and sanitation, affordable housing, all weather roads, decent public transport and clean air. Cities generate wealth but increasingly Indian cities have become home to the urban poor. Every city is marked by the informal settlements where the poor are forced to live without access to basic services like water and sanitation. City administrations are unable to check the flow of poor people into the city and have failed to build affordable housing where the poor can live. As a result, in some cities like Mumbai, for instance, half the population lives in slums. And in Maharashtra, India's most urbanized state, 61 cities and towns have slum populations that together makeup over 27 per cent of the total urban population and a third of the total population of the State. Indeed, the slum has now become an inescapable part of the Indian urbanscape" (The Hindu, 2006).

(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments.)

nagesh kini
1 decade ago
You are very right Arun. The gap between the haves and the BPL less than $1 a day earners is widening day by day. The numbers of billionaires is also rising, Jaganmohan Reddy and other netagan are disclosing more and more assets. It is time for the authorities like the EC,CVC,CBDT,CBI set up separate wings to suo moto long prosecution without waiting for either the Joke Pal or Jan Pal to come into existence.

First make effective use of our available existing laws. IAC and Annagiri will take time.

Strike when the iron is hot. The investigating authorities can be assured of enough support fom whistleblowers if they choose to act, it is now or never!
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