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UPSC MAINS MATERIAL 

Indian Economy and Issues Relating to Planning, Mobilization of Resources, Growth, Development and Employment

Indian economy: Pre Independence

                         The phrase 'Economy' is associated with the economic system of an area. Economic system consists of production, distribution and consumption of good and services between two representatives.

                         Historically, in prehistoric period, till 1707 AD, the history of India started with the dawn of Indus Valley civilization which thrived between 3500 BC to 1800 BC. The economy of Indus civilization appears to have depended considerably on trade, which was enabled by technical developments in transport.

                         Its inhabitants practiced agriculture, domesticated animals, made sharp tools and weapons from copper, bronze and tin and traded in terracotta pots, beads, gold and silver, coloured gem stones such as turquoise and lapis lazuli, metals, flints, seashells and pearls. They used to ship to reach Mesopotamia to do business of gold, copper and jewellery. Around 600 BC, the Mahajanapadas imprinted punch-marked silver coins. The period was noticeable by rigorous trade activity and urban growth. 

 

 

                         By 300 B.C., when Middle East was under the Greek Seleucid and Ptolemaic empires the Maurya Empire (c. 321 -185 BC) united most of the Indian subcontinent. The political harmony and military security permitted for a common economic system and improved trade and commerce, with increased agricultural efficiency. The kingdom spent substantial resources for building roads and maintaining them throughout India. The improved infrastructure joined with increased security, greater consistency in measurements, and increasing tradition of coins as currency to boost trade. In another 1500 years, India produced its classical people which generated wealth in vast amount. Between 1st and 17th centuries AD, India was projected to have had the biggest economy of the ancient and medieval world, controlling between one third and one fourth of the world's prosperity.

                         In the realm of the Mughal period (1526–1858 AD), India experienced unparalleled wealth in history. The Gross Domestic Product of India in the 16th century was estimated at about 25.1% of the world economy. An evaluation of India's pre-colonial economy puts the annual revenue of Emperor Akbar's treasury in 1600 AD at £17.5 million (in contrast to the entire treasury of Great Britain two hundred years later in 1800 AD, which totaled £16 million). The gross domestic product of Mughal India in 1600 AD was assessed at about 24.3% of the world economy which was the second largest in the world. During this period, Mughal Empire had extended to include almost 90 per cent of South Asia, and imposed a uniform customs and tax-administration system.

 

British rule:

                The British East India Company established and expanded its political power gradually in India from 1757. They used huge revenue generated by the provinces under its rule for buying Indian raw materials, spices and goods. Thus the continuous inflow of bullion that used to come into India on account of foreign trade stopped overall. The Colonial government used land income for conducting wars in India and Europe and there was less money for development of India.

                In short period of 80 years (1780-1860 AD) under Colonial rule, India’s economy changed from an exporter of processed goods for which it received payment in bullion, to being an exporter of raw materials and a buyer of manufactured goods. More precisely, in the 1750s, generally fine cotton and silk was exported from India to markets in Europe, Asia, and Africa; by 1850s, raw materials, which primarily consisted of raw cotton, opium, and indigo, accounted for most of India's exports.

                The cruel exploitation under British colonial rule totally destroyed economy of India. At that time, populace of India became poor and they had to suffer from food scarcity, pervasive malnutrition and was largely uneducated.

 

Indian economy after independence:

                   In the period of 1950-1979, when India got independence from colonial rule, the process of transformation of the economy started. India went for centralized planning. The Five Year Plans which effectively changed. First five year plan for the development of Indian economy was implemented in 1952. India as an agricultural economy, investments were made to develop irrigation facilities, construction of dams and laying infrastructure.

                   Policy makers put more emphasis in the establishment of modern industries, modern scientific and technological institutes, development of space and nuclear programmes. Though extreme efforts were made to enhance economy after independence, the country did not develop at rapid rate because there were lack of capital formation, cold war politics, defence expenditure, and increase in population and insufficient infrastructure.

                   In the period of 1951 to 1979, the economy grew at an average rate of about 3.1 percent a year in constant prices, or at an annual rate of 1.0 percent per capita. During this period, industry growth was at an average rate of 4.5 percent a year, compared with an annual average of 3.0 percent for agriculture.

                   During 1980 to 1990, the rate of economic growth enhanced. From financial year 1980 to financial year 1989, the economy improved at an annual rate of 5.5 percent, or 3.3 percent on a per capita basis. Industry grew at an annual rate of 6.6 percent and agriculture at a rate of 3.6 percent. Major factor for development of economy was high rate of investment. Investment went from about 19 percent of GDP in the early 1970s to nearly 25 percent in the beginning of 1980s.

                   Private savings had financed most of India's investment, but by the mid-1980s further growth in private savings was tough because they were already at quite a high level. Consequently, in the end of 1980s India relied gradually on borrowing from foreign sources. This trend led to a balance of payments crisis in 1990. In order to receive new loans, the government had no choice but to agree to further measures of economic liberalization. This promise to economic improvement was confirmed by the government that came to power in June 1991.

                   India has made significant growth in services sector and contributed for magnificent development in various spheres of science and technology over the years and currently it has strong network of S&T institutions, trained manpower and an innovative knowledge base. India has already become centre for manufacturing of small cars and engineering goods.

                   India is one of the promising markets for food and agricultural products in the world. India is the world's third largest producer of food. Agriculture accounts for about 16.1% of India‟s GDP. India has developed as the major milk producing country, with annual milk production of over 100 million tonnes.

                   It can be appraised that the Indian government has made significant effort in last 50 years to develop the scientific and technical infrastructure of the country. In educational field, there are more than 250 universities, 1,500 research institutions and 10,428 higher education institutes.

                   In India huge number of engineering graduates and another technical graduates trained in specific field have contributed a lot for enhancement of economy of India. The combination of state-of-the-art infrastructure and highly qualified manpower guarantees that India is poised to be the next Global R&D hub. This is gradually being observed in Industry as large multinational corporations including GE, Microsoft, and Bell Labs have opened there R&D Centres in India.

                   More than 100 multinational companies, including Delphi, Eli Lilly, Hewlett-Packard, Heinz, Honeywell and Daimler Chrysler, have established (R&D) facilities in India in the past few years. This makes India second only to USA and ahead of other more established hubs, such as Japan, Israel and Western Europe, and China.

                   It is observed in present scenario that the Indian economy is rapidly growing economies in the world. The increasing income and savings levels, investment opportunities, huge domestic consumption and younger population will ensure growth for future.

                   The main drivers of Indian economy are sectors like Information Technology, Telecommunications, ITES, Pharmaceuticals, Banking, Insurance, Light Engineering Goods, Auto Components, Textiles & Apparels, Steel, Machine Tools and Gems & Jewellery are sectors which are expected to grow at rapid pace world over creating demand for Indian products and services.

 

Planning:

         Planning is the procedure of thinking about and organizing the actions required to realise a desired goal. Planning involves the formation and maintenance of a plan. Economic Planning is to make decision with respect to the use of resources. 

         Economic Planning is a concept that is related to the long term plans of government to co-ordinate and develop the economy. Economic planning in India was stared in 1950. It is necessary for economic development of country.

 

Need for Planning in an Economy:

           There is an immense need for economic planning as resources in a country are limited whether natural resources or human resources. The shortage of resources compels the need for proper management at production, distribution and consumption ends.

 

Objectives of economic planning:

            Economic Growth

            Reduction of Economic Inequalities

            Balanced Regional Development

            Modernization

            Reduction of Unemployment

 

Issues relating to planning, mobilization of resources, growth, development and employment:

               In order for huge growth of any nation, it is imperative that there must be proper mobilization and utilization of resources. Resources of nation include natural resources and human resources. For proper mobilization of resources, prior planning is of great help for a holistic approach.

 

Issues with planning:

               Planning is central. Decentralized planning is still in promising stages.

               Planning commission is not a constitutional body. It has hijacked the role of finance commission.

               Often planning commission fails to comprehend ground realities. For example Unrealistic data on poverty line.

               Centralized planning may not extend in the peripheral areas.

               Alliance politics affects planning.

               Planning for 125 crore diverse population is not easy.

               Limited resources and funds available.

               Lack of visionary leadership and technological expertise.

               Lack of proper monetary mechanism to check the implementation of the plan.

 

Issues to be addressed in planning:

Besides, principal objective of growth and optimum resource utilization, these areas should be addressed in an appropriate plan.

             Population growth.

             Food production.

             Health.

             Vulnerable sections of the population.

             Transport, communication and energy self-sufficiency.

             Water conservation and air quality.

             Trade and investment.

             Peace, security and governance.

It is appraised that Economic planning assist in mobilizing and assigning the resources in desired manner. Major goal of planning is to reduce disparity, economic development, balanced regional growth, reconstruction. Each five year plan is intended to accomplish certain target. Five year plan constitute the steps toward the fulfillment of objectives of economic planning.

 

Mobilization of Resources:

                     Mobilizing is the method of assembling and organizing things to use immediately or for a achieving a collective goal. The concept of mobilization of resources should be seen in the same perspective. Mobilization of resources means to release locked resources. Every country has economic resources within its territory known as domestic resources. But often they might not be available for collective use. The percentage of resources used when compared to the potential is often very low. For the development of nation, identification and mobilization of its resources is essential. It should be available for easy use and for central and state level planning.

So initial step is identification of resources. Types of Resources of India: There are several resources available in India.

               Natural Resources such as Coal, Petroleum, Natural Gas, Water, Spectrum.

               Human Resources like the labour force and intellectual ability of a nation.

               Best utilization of these resources lead to generation of economic resources such as savings, investment capital, and tax. While mobilisation of resources is considered, the mobilisation of economic resources should also be studied.

 

Mobilization of Natural Resources:

                 India has sufficient reserves but due to policy bottlenecks, it is importing coal and iron. This is increasing our Current Account Deficit.

 

Mobilization of Human Resources

Organizing human potential for ready use is necessary for growth of India. In-fact, as country of 125 crore people, India now is eyeing more on its human resource potential. The demographic dividend is also in favour of India.

               Mobilization of human resources highlights the need to empower human resources.

               Weaker sections like women, children, SC, ST, OBC etc should be brought into mainstream.

               There should be right employment opportunities for human resources, and when there is lack of skill the job demands, there should be skill development programs.

               Utilize the demographic dividend.

               India is currently levering on its technologists – engineers, doctors and scientists

 

               Organizing human potential for ready use is essential for growth of India. In-fact, as country of 125 crore people, India now is observing more on its human resource potential. The demographic dividend is also in favour of India.

               Mobilization of human resources emphasizes the need to empower human resources. Weaker sections such as women, children, SC, ST, OBC etc. should be brought into mainstream. There should be correct employment opportunities for human resources, and when there is lack of skill the job demands, there should be skill development programs.

               It is suggested to utilize the demographic dividend. India is currently forcing on its technologists, engineers, doctors and scientists. Government is making efforts to divert school dropouts to technical or vocational training program. The scheme has been formulated through private public partnership under which short term training modules will be conducted (Gupta, 2008) such as Pradhan Mantri Kaushal Vikas Yojana (PMKVY), SANKALP and UDAAN.

              Economist stressed that if nation needs to grow, more goods and services should be produced. The production can be done by government sector, private sector or in PPP mode. But for that, the economic resources of a country should be organised. In India, despite having good savings rate, domestic investment is less. Indians are investing in less productive assets like gold and consumer durable. For good economic development, India needs to invest in agriculture, manufacturing or services. In India, tax collected is very less. The tax base has to be broadened.

              Four factor of production such as land, labour, capital and organization should come together. There should be an atmosphere for growth and investment. It can be said that organizations do not “suddenly emerge” but require the mobilization of resources.

              In contemporary capitalistic society, these resources are more “free flowing” and are easier to mobilize than in more traditional societies. Many factors impact the development of the organization.

              Initial Resource Mix: There are various resource needs in a starting organization (technology, labour, capital, organizational structure, societal support, legitimacy). But the accurate mix of resources are not always available. The most important resource of an organization is its people. More savings and more productive investment.

 

Mobilization of Financial Resources

           If a country needs to grow, more goods and services should be produced. The production can be done by government sector, private sector or in PPP mode. But for that, the economic resources of a country should be mobilized.

           In India, despite having good savings rate, domestic investment is less. Indians are investing in less productive assets like gold and consumer durable.  If India needs to grow, there should be more investments in agriculture, manufacturing or services.

                  In India, tax collected is very less. The tax base has to be widened.

                  Four factor of production- land, labour, capital and organization – should come to together. There should be an atmosphere for growth and investment.

                  Organizations do not “spontaneously emerge” but require the mobilization of resources.

                  In modern capitalistic society, these resources are more “free flowing” and are easier to mobilize than in more traditional societies. Many factors impact the development of the organization.

                  The most important resource of an organization is it’s people.

                  More savings and more productive investment.

 

Taxation:

          India has organized tax structure with clearly defined authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are imposed by the State Governments. Local bodies are empowered to levy tax on properties and for utilities like water supply, drainage.

          Indian taxation system undergone revolutionary reforms during the last decade. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement.

          The procedure of rationalization of tax administration is continuing in India. Public revenue generation is for investment in social services and infrastructure.

          The private sector mobilizes the savings of households and firms through financial intermediaries, which allocate these resources for investment in productive activities.

 

Issues with Mobilization of Resources:

           Issues in mobilization of resources include all those issues and problems underlined in mobilization of natural resources, human resources and financial resources. Low-income countries confronting prevalent poverty therefore mobilizing domestic resources is particularly challenging, which has led developing countries to rely on foreign aid, foreign direct investment, export earnings and other external resources.

           Nonetheless, there are compelling reasons to give much more emphasis to DRM (Domestic Resource Mobilization). Greater reliance on DRM is important to raise economic growth, reduce poverty and underpinning sustained development. High-growth economies typically save 20-30 per cent or more of their income in order to finance public and private investment.

           DRM is potentially more consistent with domestic ownership than external resources. Foreign aid consistently carries restrictions and conditionality. FDI is mainly oriented to the commercial objectives of the investor, not the principal development priorities of the host country. DRM is more foreseeable and less volatile than aid, export earnings, or FDI.

 

Indian Economy: Growth, Development and Employment:

           In Indian economy where huge labour force is available, importance of an employment oriented growth is observable. Growth in economic terms relates to the increase in GDP (national income). GDP is the money value of goods and services produced in an economy.

           Economic growth in India has generally unsuccessful to maintain balance between growth of productivity and occupation. During the first thirty years after embarking on the planned economic development, the economy grew at a comparatively low rate averaging about 3.5 per cent per annum.

           The problem basically lay in low rate of growth, only a higher rate of growth of GDP could have afforded sensibly high increase both in productivity and employment.

           Economic growth has been increased after1980, and 1990 period. But it has been considered by the other kind of inequity. Most of it has been derived from increase in productivity and only a little from increase in employment. During 1980’s, of the 5.5 per cent annual growth in GDP, 2 per cent was accounted for by growth of employment, and 3.5 per cent by growth of productivity.

            In 1990’s, the 6 per cent growth achieved, contribution of employment was only 1.8 per cent with that of productivity rising to 4.2 per cent. When the national income escalates, perfectly it should result in development (qualitative feature such as health, education, employment).

           Employment growth in India: Economists stated that economic growth of country create more opportunities for employment and employment generates further development. Generally, employment relates to the qualitative aspect of growth. If a country is on the growth path, it will create more employment opportunities and while there is no growth, people may lose jobs.

            It is considered that employment has always highlighted as an element of development policy in India. The priority and attention have received changes in development plans from time to time and so have the approaches and strategies as well as policies and programmes for employment generation.

            During the past four decades since 1972‐73, employment has grown at an average annual rate of two per cent in India when comprehensive information on employment and unemployment started, according to survey of the NSSO. This could be regarded as a significant record, as such an employment growth has not been recorded by many countries historically or in recent periods.

            In fact, most countries in general and developed countries in particular, have had very low employment growth currently. ILO data signified that most of them saw an increase of less than one per cent per annum in their employment during the 1990s.

            According to financial analysts, India’s significant record on employment growth has not been satisfactory in view of a faster growth of labour force. Additionally, there are a few disturbing features of employment growth in recent years.

            First, employment growth has slowed. Second, employment content of growth has shown a decline. Third, sectors with higher employment potential have registered comparatively slower progress. Fourth, agriculture, despite a sharp decline in its importance in gross domestic product, continues to be the biggest employer as the non‐agricultural sectors have not generated enough employment to affect a shift of workforce.

            Fifth, most of the employment growth has been contributed by the unorganized, informal sector which is characterized by poor incomes and conditions of work. Lastly, employment growth in the organized sector which seems to have picked up in recent years has been mostly in the types of casual and contract labour. Employment growth in the secondary sector include mining, manufacturing, electricity, water and gas, and construction, has been comparatively high during 1972‐73 to 2009‐10.

           According to the recent report of International Labour Organisation (ILO) India’s economy grew by 8.0 per cent in fiscal year (FY) 2016 (April 2015-March 2016), the fastest pace since 2011-12. However, in 2016-17 the GDP growth rate slowed down to 7.1 per cent, mostly on account of deceleration in gross fixed capital formation.

           IMF’s latest growth forecast shows that disruptions caused by demonetization is unlikely to affect economic growth over the longer term, and GDP growth is expected to rebound to 7.2 per cent in 2017-18 and 7.7 per cent in FY 2019.

           On the employment front, the challenge continues to be to ensure that economic growth translates into better labour market conditions. The vast majority of workers in India are in informal jobs. Although there has been a shift out of agriculture, construction has absorbed more workers than other sectors in recent years.

            Most of the new jobs being created in the formal sector are actually informal because workers do not have access to employment benefits or social security. In addition, notable disparities in the labour force participation rates of men and women persist.

 

Recent economic trends: Growth falls

             Having seen a strong recovery in recent years, gross domestic product (GDP) growth rate declined in 2016-17. As per the latest estimates released by the Central Statistical Office (CSO) on May 31, 2017, the GDP growth rate at constant market prices declined to 7.1 per cent in 2016-17, compared to 8.0 per cent in 2015-16.

             The real growth rate in per capita income has also decreased substantially, from 6.8 per cent in 2015-16 to 5.7 per cent in 2016-17. Figures on real gross value added (GVA) revealed a 1.3 percentage point decline from the previous year

             This decline in economic growth has been accompanied by a deceleration in industry and service sector growth, though this was partially compensated by a better performance of agriculture due to the good monsoon last year. In 2016-17, growth in industry has been estimated at 5.6 per cent (compared to 8.8 per cent in 2015-16), while in the services sector, growth slowed down to 7.7 per cent, a decline of 2.0 percentage points from the previous year.

             Manufacturing slowed down to 7.9 per cent in 2016-17, compared to 10.8 per cent in 2015016. The sharpest decline has been witnessed in the construction sector, which has been linked to the impact of demonetization: an absolute decline of 3.7 per cent in fourth quarter of 2016-17, versus a positive growth rate of 6 per cent in 2015-16. Looking at the expenditure side, economic expansion in India continues to be driven by private consumption, though public consumption increased significantly in 2016-17.

             The rates of fixed investment (gross fixed capital formation (GFCF) as percentage of GDP at constant prices) declined from 30.9 per cent in 2015-16 to 29.5 per cent in 2016-17. Lower rates of GFCF are likely to affect growth of output and employment in the medium term.

             Economy’s fiscal, inflation and external sector conditions are anticipated to remain favourable. India’s current account deficit (CAD) narrowed down substantially at USD$15.2 billion (0.7 per cent of GDP) in 2016-17.

             Inflation, based on the consumer price index (CPI), has also been showing continuous declining trend, it has fallen from 5.9 per cent (2014-15) to an average of 4.5 per cent in (2016-17).

 

Looking beyond “jobless growth”

            The National Sample Survey (NSS) (68th round) showed that employment grew strongly from 2009-10 to 2011-12 in comparison to the previous period. 1 The total workforce, based on the usual status definition, increased from 459 million in 2009-10 to 472.9 million in 2011-12. In comparison, the increase in employment from 2004-05 to 2009-10 was just 1.1 million.

            Taking a longer-term perspective, employment has grown faster for men and in urban areas. In this regard, male employment grew by 1.9 per cent per annum from 1999- 2000 to 2011-12,  while female employment increased by just 0.3 per cent on an annual basis.2 Over this period, urban areas accounted for 57.2 per cent of the growth in employment, though only 31 per cent of the population live in urban areas (as per the 2011 Population Census).

            India has amongst the lowest women’s labour force participation rates (LFPR) in the world. Not only women’s participation rates are low, but has been showing a declining trend since 2004-05. Women’s LFPR dropped from 42.7 per cent in 2004-05 to 31.2 in 2011-12. The latest data from the Labour Bureau indicates a further decline in the participation rate of women in 2015-16 (27.4 per cent).

           Participation rates are even lower in urban areas and among educated women, and when women work they tend to end up in marginal jobs, often in home-based work (as contributing family worker/unpaid worker) and the domestic work sector.

 

Uncertain structural transformation of the labour market

            Changes in employment status are linked to the process of structural transformation, as resources (capital and workers) are moved from low to high-productivity sectors. Although this has been a characteristic feature of the development processes of other parts of East and Southeast Asia, in India (and South Asia in general) the shift from agriculture to manufacturing has not yet taken place to the same extent.

            In India, a large proportion of the workforce is still dependent on the agricultural sector (48.9 per cent employment share in 2011-123, which reduced further to 47.3 per cent in 2015-164).

            The agricultural sector still accounts for 62.7 per cent of India’s rural employment, although this share has fallen significantly, from 77.6 per cent in 1993-94 (Figure 3). At the same time, agriculture’s share in gross value added has fallen rapidly, from 18.5 per cent in 2011-12 to 15.2 per cent in 2016-17.

           The Indian economy is dominated by the services sector, which accounted for 53.7 per cent of GVA in 2016-17. In terms of employment, the share of the services sector in urban areas was 58.7 per cent (2011-12), compared to just 16.1 per cent in rural regions. The share of industry (which consists of both manufacturing and construction), stood at 31.2 per cent of GDP in 2016- 17, as compared to 31.5 per cent in the previous year.

           At the sectoral level, the construction and manufacturing sectors saw sharpest decline among others5, and stood at 7.9 per cent and 1.7 per cent of GVA in 2016-17. 6 In terms of employment, the manufacturing sector provides employment to 12.6 per cent in 2011-12.

            Between 1999-00 and 2011-12, there was a considerable increase in rural non-farm employment (12 per cent, as per the usual principal status definition). The greatest increase was in the states of Jammu and Kashmir (33 per cent), Goa (21 per cent) and Punjab (20 per cent). Overall, the proportion of households, whose principal source of income depends on agriculture, declined from 63 per cent in 2002-03 to 58 per cent in 2012-13.

            8 The largest increase in non-agricultural employment has been in the construction sector, where the share of employment in rural areas increased from 14.4 per cent (1999-00) to 30.1 per cent (2011-12). This has been accompanied by a change in employment status, with a rise in casual wage employment and a decline in selfemployment.

 

Informality persists: the quality of employment remains the main challenge

           The majority of workers in India are in informal employment. Behind this there are two underlying, but diverging, trends. Firstly, the share of workers in the unorganized sector fell from 86.3 per cent in 2004-05 to 82.2 per cent in 2011-12.

          9 At the same time, the share of informal workers in the organized sector (i.e. workers without access to social security) increased significantly because of a greater use of contract and other forms of casual labour. The share of contract labour in organized manufacturing increased from 15.6 per cent at the end of the 1990s to 34.7 per cent in 2011-12. 79 per cent of non-agricultural wage workers had no written contract and only 23.8 per cent were eligible for social security benefits.

          Because of these countervailing trends, the overall proportion of informal workers in total employment (e.g. unorganized sector workers plus informal workers in the organized sector) has remained relatively stable, at around 92 per cent. Within the overall category of informal workers, the largest group is own-account workers (32.2 per cent), followed by informal employees in the informal sector (30.0 per cent) and contributing family workers (17.9 per cent)

          A more positive trend is the increasing share of regular wage and salaried workers in the Indian labour market, who now account for 17.9 per cent of total employment in 2011- 12. Interestingly, in urban areas, the gender gap for this indicator has narrowed considerably. By 2011-12, the share of urban men in regular employment increased marginally, from 42 per cent in 1993-94 to 43.4 per cent in 2011-12. For urban women, the share of workers in regular employment increased to 42.9 per cent (albeit, representing only 11.7 million working women), compared to 28.5 per cent in 1993-94.

 

Working children in India

         Significant progress has been made towards the elimination of child labour in India. Nonetheless, though the incidence of child labour has decreased by 2.6 million between 2001 and 2011, India is still home to 10.1 million10 working children in the age group of (5-14) years (Census, 2011).  

        In addition, more than 42.7 million children in India are out of school. The five states with the highest incidence of working children are: Uttar Pradesh, Bihar, Rajasthan, Maharashtra, and Madhya Pradesh; these states constitute nearly 55 per cent of working children in India. 

       Child labour has different ramifications in both rural and urban areas. In rural regions, the majority children are working as agricultural labourers and cultivators, whereas in urban areas, they are mostly engaged with household and informal industries.

         Trends in rural agricultural wages Though measuring wages is inherently difficult in a country where the majority of workers are self-employed and in agriculture, most trends show that rural agricultural wage growth has been robust.

         11 Figures from five agricultural operations – ploughing, sowing, weeding, transplanting and harvesting – show the rapid growth in rural agricultural wages in the 2000s The challenge is to ensure that these drivers of growth are associated with the creation of more decent jobs that are accessible to youth, women and all segments of society, particularly in rural areas.

        This was especially so during the period from 2004-05 to 2013-14. The fundamentals to sustain high rates of growth are in place in India: favourable demographics, high savings and investment rates (assuming the current rates will rise back to the longer term trend), and increased resources for infrastructure and skills development.

 

 

 

 

Following are major issues in growth development and employment in India: 

               India's growth is decreasing.

               India's growth is principally backed by service sector. There is sluggishness in the manufacturing sector.

               Indian agriculture sector is still dependent on monsoon. Nearly 50 % of population dependent on agriculture which contributes only 14% of GDP.

               In India there is a big issue related to investment. It is stated that for high growth of any nation, there should be investment in productive areas. There should also be supporting infrastructure. But India is lacking in these areas.

               Due to external and internal factors, there is drop in foreign investment. This is broadening Current Account Deficit.

               For providing welfare schemes, subsidies and defence expenditure, India is borrowing. The Fiscal Deficit of India is widening.

               India's export sector is not developing with respect to the demands of import goods.

               Growth is not entirely inclusive. There are still a significant portion of people below poverty line.

 

Challenges of employment:

            Unemployment is matter of sizeable debate in the academic and policy research. It is well recognized that every country wants to attain full employment for its growing population. However, unemployment rates are still worrying in developing countries. Unemployment is the major macroeconomic variable and it is directly related to the GDP of the country.                                 

            Unemployment leads to inflation and retarded growth. The major factors that augment unemployment are economic crisis. There are many issues with employment. The average salary and per-capita income of Indians are very low.

            In the Indian job market, middle to senior level specialists are in great demand in industries, with employers seeking strong management skills and some international exposure. The problem of unemployment in developing countries differ from industrialized countries.

           The issue of unemployment in developed country is just social problem where as in developing countries like India it arise from shortage of capital formation. Major aspect of employment in India is low return of work. Indian government has introduced many programs to counter problem of unemployment but magnitude of problem could not be reduced (Purna Nand Pande, 1998).

           To summarise, India has been a significant part of world economy. It took initiative in the early 1990s towards economic liberalization which altered the nature of integration with world and shaped global perception of India.

           Today, international communities are enthusiastic to work with India and develop relationship of mutual benefit and interdependence. IMF report noted that Indian economy is continuing to reap the rewards of more than 15 years reform.

          There are numerous issues related to Indian economic planning population explosion, low level technology or low standard of living (Gupta, 2008). There is a need to mobilize country’s natural and human resources to enhance economic development. It is documented in studies that despite of effective planning since many decades, India continues to exhibit underdeveloped economy. Though it had progressed in many areas but country has to make efforts to reach the standard of developed countries. 

                             

                                        Inclusive Growth and Issues Arising from It

 

Need for Inclusive Growth in India:

                   Many intellectuals and government executives accentuated that inclusive growth is required for sustainable development and impartial distribution of wealth. For India, it is a tough task to accomplish inclusive growth. In a democratic country India, majority of population living in rural India and to bringing them into the mainstream is main concern.

                  The challenge for Indian government is to take the levels of growth to all section of the society and to all parts of the country. The best way to realize inclusive growth is through developing people’s talents. It is said by government authorities that a multidimensional approach towards education and skills development is essential to achieve growth.

                  The challenge of skills shortage can be addressed through public private partnership. Since independence, noteworthy improvement in India’s economic and social development made the nation to grow strongly in the 21st century.

 

The following factors enable the India to focus on inclusive growth. 

               India is the 7th major country by area and 2nd by population. It is the 12th largest economy at market exchange rate. Yet, development is not visible in India and it’s the neighborhood nation, i.e., China is progressing at speedy rate.

               The exclusion in terms of low agriculture growth, low quality employment growth, low human development, rural-urban divides, gender and social inequalities, and regional disparities etc. are the problems for the nation.

               Decreasing of poverty and other disparities and raising of economic growth are major objectives of the nation through inclusive growth.

               Political leadership in the country plays a vital role in the overall development of the country. But, the study has found that politicians in India have a very low level of scientific literacy.

               Studies assessed that the cost of corruption in India amounts to over 10% of GDP. Corruption is one of the ills that prevent inclusive growth.

               Though child labour has been banned by the law in India and there are stringent provisions to deter this inhuman practice. Still, many children in India are unaware of education as their lives are spoiled to labour work.

               Literacy levels have to rise to provide the skilled workforce required for higher growth.

               Economic improvements in the country are overwhelmed by out dated philosophies and allegations by the politicians and opposition parties in India.

               Achievement of 9% of GDP growth for country as a whole is one of the boosting factor which gives the importance to the Inclusive growth in India.

               Inclusiveness benchmarked against achievement of monitor-able targets related to

                             Income & Poverty

                             Education

                             Health

                             Women & children,

                             Infrastructure

                             Environment

             At global scale, there is a concern about dissimilarities and exclusion and now they are also taking about inclusive approach for development.

 

Major Elements of Inclusive Growth:

             Agriculture Development

             Industrial Development

             Environment Protection

             Poverty Reduction

             Employment Generation

             Reduction in Regional Disparities

             Equal Distribution of Income

             Social Sector Development

 

Challenges of Inclusive Growth in India:

               'India' is expanding business at global scale. The economy growing at a remarkable rate, combined with a booming democracy is making people sit up and take notice across the world. Still, India is far from reaching its true potential. The country remains shackled in dishonesty, red tape, traditional social hurdles and a bewildering lack of transparency. It is witnessed that growth is not uniform across sectors and large cross-sections of the population remain outside its purview. Numerous social, political and economic factors need to be tackled for sustaining a high rate of growth, as well as to make this growth inclusive. Indian society has to seriously introspect major issues such as eradication of child labour, women empowerment, removal of caste barriers and an improvement in work culture.

               Tackling corruption in high places, removing the ills of the electoral system, snubbing politics of agitations and keeping national interest above petty politics may not be too much to ask to the country’s policy makers. In order to accomplish major objectives for progression Indian government must focus on rapid growth in the rural economy, well planned and targeted urban growth, infrastructure development, reforms in education, ensuring future energy needs, a healthy public-private partnership, intent to secure inclusivity, making all sections of society equal stakeholders in growth, and above all good governance.

 

               The social limits of Indian democratic politics: In top business person around the globe, many Indian entrepreneurs are listed but the sarcasm still remains that there is a marginal farmer in many states of India who is struggling to feed his five children, the youngest of whom is a son, uneducated and unemployed, and the farmer cannot afford her daughter’s marriage. There are jobs escalating in the IT sector in big cities like Bangalore and Hyderabad, disposable income for the ‘Call Centre’ crowd, that is spurring on the foray of several luxury goods never before seen in the nation, is becoming all the more accessible but the poor are still poor even though the rich have become super rich and the previously not so rich.

               The growth is far from inclusive in India. There is worst condition in country. Many beggars are found on the streets, and there are reports for farmer suicides in states like Maharashtra. People understand their dilemma and they even sympathize and empathize with them.

              Overcoming difficulties to rural growth and urban transformation can escalate growth. People living in cities earn far more than those dwelling in rural areas. The majority of whom live below poverty levels, are undernourished and just survive. It is this population, very nearly forgotten by the power brokers, who need to be brought into the development scheme. They must be given the option of living and working on jobs in non-agricultural sectors, jobs that guarantee the basic subsistence for themselves and their families. Simply transferring resources from one head to another, which has been done, cosmetically sometimes, by politicians has not changed much. The reality remains that the fund is limited. Even if national funds distribution is perfect, it will not reduce poverty level in country.   

               Every leading industrialized economy in the world has followed a path which began with agriculture being the major source of income for the mainstream of the population and ended with agricultural occupation being a very small fraction of the total labour force. For economic development, agriculture growth is necessarily be two-fold. One, experts have to develop villages, improve agriculture and agro-industries and infrastructure in rural India. Secondly, it is imperative to empower the rural people and give them new opportunities and provide jobs outside villages and agriculture. As India develops, the intervention of Government in people’s lives must come down.

               It is necessary that Government officials must change their mind set from overseas masters to facilitators. It is well observed that corruption is wide spread in the country. It is weakening the economic status of India. Though effective schemes and plans are device with extravagant aims and claims of potential success equally extravagant to garner the support of the upset public, but they are of no use unless the delivery systems are improved considerably. That would require a truly massive effort from changing the working style of administration, tackling corruption to involving the private sector fully in the development process.

              In India, government devised effective policies and making sustained effort to improve the life style of those living below the poverty line and to streamline delivery systems so as to ensure that the benefits reach the intended beneficiaries. It was said by authorities that ‘Inclusive Growth, is a challenges for Corporate India. This was especially timely since the media, both print and electronic, have hardly been sensitive to this issue, taken up as they are by stories of mega mergers, super rich tycoons, and eyeing corporate sponsorships.

 

Inclusive growth has many positive aspects:

               Lower incidence of poverty.

               Broad-based and significant improvement in health outcomes.

               Universal access for children to school.

               Increased access to higher education and improved standards of education, including skill development.

               Better opportunities for both wage employment and livelihood.

               Improvement in provision of basic amenities like water, electricity, roads, sanitation and housing.

 

Major Causes for Less Inclusive Growth:

                There are several reasons for disrupting inclusive growth. Firstly, growth has been jobless, and the employment growth has declined for the same level of economic growth. Despite of remarkable growth which has made India the world's fourth biggest economy, "employment in different sectors has not been rising. This jobless growth in recent years has been accompanied by growth in actualization".

                Secondly, growth has been uneven across sectors and locations. For instance, agriculture has been lagging behind and in countries such as India and China, some regions have advanced faster than others. Policies are also relatively ignored the agriculture sector.

               Third is the rapid rate of globalization. Due to trade competitiveness, foreign direct investment and new technologies has demanded skilled labour. In some cases, labour laws also often discriminate against formal employment and encourage 'casualization' of labour.

                In India, there is need to create large-scale job otherwise growth becomes, lower down. Millions of people are looking for structured work and unable to find it. The problem becomes more persistent when one factors in India's prospective demographic "bulge" in the coming decades, as ever-increasing numbers of young people join the workforce every year before fertility rates fall and the population stabilizes around 2040 at about 1.5 billion. Economists project is as a ''demographic dividend" could turn out to be a period of crisis marked by sheer unemployment and rising social turbulence.

 

               In Indian land, 60% of population is directly or indirectly dependent on agriculture. But growth rate of agriculture is miserable, just 2%.Policy makers and government officials need to work on agriculture productivity, in order to be more inclusive. Lack of access to credit for agriculture and small and medium enterprises and lack of social protection have all contributed to the exclusion of deprived groups from the growth scenario.

               A major weakness in the Indian economy is that the growth is not perceived as being adequately inclusive for many groups, especially Scheduled Castes (SCs), Scheduled Tribes (STs), and weaker section. Gender inequality is also a major problem and some of the structural changes taking place have an adverse effect on women. Growth will not be inclusive if some groups are discriminated against, overtly or covertly. Empirical evidence across the world designates that group discrimination is largely on the basis of caste, ethnicity, gender and religion. These groups cannot be ignored for good inclusive growth of country.

               This huge task cannot be done by government alone. Industry and civil society must partner with government to drive inclusive growth. Issues like income disparities and growing aspirations of the people must be collectively resolved by the government and society.

                There has been a gap between the pace and pattern of growth in India. The country’s progress on various fronts has not been translated into overall improvement in life of poor and marginalized sections of society. India’s 131st rank on UNDP’s Human development Index substantiates this fact. In India, a need has always been felt to broad base economic growth and share the benefits of the growth process to make it more inclusive. The concept of “Inclusive growth” was first envisaged in the Eleventh five year plan document which intended to achieve a growth process with broad-based improvement in the quality of life and equality of opportunity to all. Twelfth plan document highlighted this agenda more emphatically with specific focus on reducing poverty, improving health and education facilities and livelihood opportunities.

                Inclusive growth means economic growth that creates employment opportunities and helps in reducing poverty. It includes providing equality of opportunity and empowering people through education and skill development. The Government has launched several initiatives to ensure this by bringing excluded sections of the society into the mainstream and enabling them to reap the benefits of faster economic growth. One of the major steps in the direction of bringing about financial inclusion, Pradhan Mantri Jan Dhan Yojana, PMJDY, has yielded impressive results within ten months of its launch with 98 per cent households having a bank account.

               MUDRA Bank, SETU, Skill India Mission are strong measures expected to create skilled workforce and provide livelihood opportunities. Pradhan Mantri Jeevan Jyoti Beema Yojana, Pradhan Mantri Jeevan Suraksha Yojana and Atal Pension Yojana have been introduced with the intention of creating sustainable security net in the country. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), has improved the standard of living of people and has been able to check migration to a great extent. Kisan Card, Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), National Agriculture Market (NAM) are aimed at benefitting largely the agrarian community, an important indicator of socio economic wellbeing of the country.

                However with a diverse population of 1.2 billion, the biggest challenge is to take the levels of growth to all sections of the society and to all parts of the country and this is where the role of appropriate technology comes into play. Digital India programme launched this month proposes to address these challenges and use technology effectively and efficiently for the benefit of people by delivering governance and services to the last person. The mission aims to use technology to bring about complete transformation in the basic sectors of education, health, agriculture and manufacturing thereby improving general quality of life. With Indian economy now headed in a new direction with a broad objective of “Inclusive Growth”, it is poised to secure to its citizens, the equality of status and opportunity in real sense. The result of inclusive growth is lessening in vertical inequalities (individual inequalities) and horizontal inequalities (group inequalities).

                Economic growth in simple terms refers to the increase in an economy’s output over time. But this increase might not always be generated by or distributed equally among all the sections/segments of the society. Identifying such divergences between growth and distribution, India has adopted a growth strategy that would be inclusive and at the same time sustainable.

               The World Bank, refers to the pace and pattern of growth. That is, the speed at which an economy grows and how far the benefit spreads. The word ‘inclusive’ necessitates participation of larger section of the labour force, irrespective of socio-economic background, and regions in generation as well as accessibility of growth. The idea rests on the idea of ‘pro-poor’ growth which in absolute terms refers to growth benefitting the poor.

               Policies and programmes usually aim at redistribution of income to the poor rather than working on generation of the same. However, in literature as well as in the public policy sphere, poverty and growth have been addressed separately, which in itself created some disjoint between the two outcomes. Of late, in India, the discussion is also on achieving inclusive development, which, compared to inclusive growth, refers to growth in addition to achieving equal opportunities to all and not just the poor.

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