Inclusive Growth The Challenges for all Stakeholders

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Inclusive GrowthThe Challenges for all
Stakeholders

• Suma Varma
• Regional Director
• Reserve Bank of India, Thiruvananthapuram

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The fast growth of last 15 years
Plan Period Average Growth of GDP pa ()
1950-51 to 1964-65 3.95
1965-66 to 1979-80 3.62
1980-81 to 1994-95 5.37
9th Plan 1997-98-2001-02 5.5
10th Plan 2002-03-2006-07 7.7
11th Plan (2007-08-20100 8.7 (four years)
Source Planning Commission, 11th Plan Document, Report of the Steering Committee on Agri, PC Source Planning Commission, 11th Plan Document, Report of the Steering Committee on Agri, PC
But has it been inclusive? But has it been inclusive?
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Inclusive Growth

• Inclusive growth means growth that
• encompasses, evenly, all the sectors of the
  economy and
• where all segments of population are able to
  participate in the growth process and/or
• are able to benefit from it.
• Capability and Oppotunity

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Capability and Opportunity

• Capability of an individual would be determined,
  inter alia, by his/her access to
• education
• Health
• training and skill development
• Opportunity to participate would
• access to resources, both physical and financial
• access to markets, both as a buyer and as a
  seller of goods services
• level playing field in the market place
• employment opportunities getting created and
• Growth in the productivity (of workers/employees).
  
• Existing participants skill up-gradation

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Low Growth Income in Agriculture
Source Report of the Steering Committee on
Agriculture, 11th Plan, Planning Commission
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Trend growth rate in area, input use, credit and
capital stock in agriculture in different periods
during 1980-81 to 2003-04 percent/year
1980-81 1990-91 1990-91 1996-97 1996-97 2003-04
Gross Irrigated Area 2.280 2.620 0.510
NPK Use 8.170 2.450 1.330
Electricity Consumed in Agri 14.070 9.440 -0.860
Area under fruits vegetables 5.600 5.600 4.800
Terms of trade 0.189 0.947 -1.693
Public sector net fixed cap stock 3.856 1.917 1.419
Pvt. Sector net fixed cap stock 0.562 2.179 1.165
Total net fixed capital stock 2.004 2.055 1.282
Credit supply 3.728 7.513 14.366
Total crop area 0.430 0.430 -0.480
sown Net sown area -0.080 0.040 -0.550
Cropping intensity 0.510 0.390 0.070

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Agri.-Non Agri./Rural-Urban Divide
Whole Economy Non Agriculture Agriculture
1950-51 to 1964-65 3.95 5.59 2.66
1965-66 to 1979-80 3.62 4.40 2.76
1980-81 to 1994-95 5.37 6.56 3.33
1995-96 to 2004-05 5.81 7.07 2.0
2008-09 8.7 (11) 1.6
Source Report of the Steering Committee on Agriculture, 11th Plan, page 14, Annual Economic Survey, 2009-10 Source Report of the Steering Committee on Agriculture, 11th Plan, page 14, Annual Economic Survey, 2009-10 Source Report of the Steering Committee on Agriculture, 11th Plan, page 14, Annual Economic Survey, 2009-10 Source Report of the Steering Committee on Agriculture, 11th Plan, page 14, Annual Economic Survey, 2009-10
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High Incidence of Poverty

• All this has led to a situation where not only,
  despite more than a decade long period of fast
  growth, the percentage of the population below
  poverty line is still unacceptably high (that too
  on the basis of a poverty line that has not
  changed since 1973-74) even as it has declined
  from 36 in 1993-94 to 28 in 2004-05 ( Planning
  Commission, 11th Year Plan), the rate of decline
  in poverty has lagged the growth rate of GDP
  implying that the income and wealth distribution
  has become more inequitable and growth less
  inclusive

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Adverse HD Indicators
Male-Female Literacy Gap in India Male-Female Literacy Gap in India Male-Female Literacy Gap in India Male-Female Literacy Gap in India Male-Female Literacy Gap in India Male-Female Literacy Gap in India Male-Female Literacy Gap in India
Literacy rate 1991 Census Literacy rate 1991 Census Literacy Literacy Rate-2001 Census Literacy Rate-2001 Census Literacy
Male Female Gap Male Female Gap
Rajasthan 55.0 20.4 34.6 75.7 43.9 31.9
D N Haveli 53.6 27.0 26.6 71.2 40.2 31.0
Jharkhand 55.8 25.5 30.3 67.3 38.9 28.4
Uttar Pradesh 54.8 24.4 30.5 68.8 42.2 26.6
Bihar 51.4 22.0 29.4 59.7 33.1 26.6
Madhya Pradesh 58.5 29.4 29.2 76.1 50.3 25.8
Chhattisgarh 58.1 27.5 30.6 77.4 51.9 25.5
Orissa 63.1 34.7 28.4 75.4 50.5 24.8
Uttarakhand 72.8 41.6 31.2 83.3 59.6 23.7
J K N.A N.A N.A 66.6 43.0 23.6
Haryana 69.1 40.5 28.6 78.5 55.7 22.8
Gujarat 73.4 48.9 24.5 79.7 57.8 21.9
INDIA 64.1 39.3 24.9 75.3 53.7 21.6
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Rising Unemployment, Growing Unorganised Sector

• Unorganised Sector-Growing Presence (NSS Survey
  2000)
• 92 workforce
• 60 contribution to NDP
• work conditions are less than ideal, incomes
  less than that of organized labor and no job
  security and no safety net for housing, medical
  needs and old age.
• Decline in employment in Organised sector
  (1990-2000)
• Lower Wages
• 90.7 of the agricultural laborers
• 64.5 of the rural workers and
• 52.3 of the casual non agricultural workers
• received wages below the daily minimum
  wage of Rs. 66 (National Commission for
  Enterprises in the Unorganised Sector (NCEUS)
  2004-05)

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Other Indicators

• Regional Disparities
• Low Access to Financial Services

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Therefore, going forward target should not only
be faster growth but also Inclusive Growth
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Investing in Agriculture

• Challenge of investing in creating infrastructure
  for irrigation, watershed development (60 of
  agriculture is rain-fed), storage, marketing,
  processing, transportation and post-harvest
  infrastructure,
• Challenge of checking land degradation due to
  soil erosion, salinity, alkalinity etc. through
  knowledge dissemination and extension. According
  to the Department of Land Resources, Ministry of
  Rural Development, nearly 2/3rd of the
  agricultural land is degraded or sick to some
  extent or the other.
• Challenge of infusion of know-how and
  technology to check over exploitation of
  groundwater, fertilizers and pesticides and
  inculcate better farming techniques by improved
  extension services and promoting and improving
  agri-clinics and agri-businesses.

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Investing in Agriculture

• Challenge of improving the viability of the small
  farms through technology, inputs and credit since
  more than 80 of the agricultural holdings in
  India are less than 2 acres and more than 60 of
  the farmers operate less than 1 hectare each,
• Challenge of improving the market access of the
  farmer through reforming APMC Acts,
  up-scaling/replicating innovations like E-Choupal
  (ITC), Kisan Seva Kendras (IOC), Godrej Agrovet
  etc. and Village Knowledge Centres.
• Challenge of making agriculture profitable by
  improving the terms of trade vis-à-vis non
  agricultural sectors and promoting management of
  risks in agriculture better. Terms of trade for
  agriculture after 1996-97 declined annually by
  1.69

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Bridging the Rural Urban Divide

• Challenge of finding and investing adequate
  amount of resources in the rural areas for the
  creation of proper and appropriate economic and
  social infrastructure and opportunities for
  growth.
• Challenge of effective implementation of special
  plans for the weaker sections who are unable to
  compete on equal terms due to a host of factors,
  both economic and social. Attention in this
  respect is drawn to the reports of unsatisfactory
  implementation of MGNREGS.

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Shifting population out of agriculture
Share of Agriculture in economys total output and employment Share of Agriculture in economys total output and employment Share of Agriculture in economys total output and employment
Share in GDP (at current prices) Share in Employment
1980-81 38 60.5
1990-91 33.2 59.0
2000-01 25.5 58.4
2009-10 16
Source Report of the Steering Committee on Agriculture, 11th Plan, page 18 Source Report of the Steering Committee on Agriculture, 11th Plan, page 18 Source Report of the Steering Committee on Agriculture, 11th Plan, page 18
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Shifting population out of agriculture

• The challenge of improving the viability of
  smaller size holdings and imparting
  competitiveness to small farm production by
  providing access to new technology, inputs,
  credit and markets through appropriate
  institutions.
• The challenge of creating greater employment
  opportunities in the secondary and tertiary
  sectors.
• The challenge of shifting the surplus labor from
  agriculture to manufacturing and service sector
  after appropriate training and orientation

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Taking Care of the Unorganised Sector

• Challenge of ensuring minimum wages and amenities
  to the workers through strict enforcement of
  Un-organised Sector Workers Social Security Bill,
  2008
•  
• Challenge of providing training and educational
  opportunities to enable them to upgrade their
  skill and improve job prospects.
•  
• Challenge of creating an effective social
  security network through i) Centrally funded
  govt. schemes, ii) social insurance schemes
  through LIC/GIC iii) social assistance through
  welfare funds of central and state governments
  and through public initiatives like SEWA

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Improving Access to Public Goods and Services

• Education
• Challenge of bridging the male-female literacy
  gap through concerted awareness/education
  campaign and effective incentivisation.
• Challenge of achieving universal education,
  especially in the villages by educating and
  suitably incentivizing the parents and the
  children.
• Challenge of improving the quality of education
  in govt. schools to create a level playing field
  by incentivizing/motivating the teachers.
• Challenge of creating an efficient and quality
  oriented higher education system through better
  regulation and enforcement

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Improving Access to Public Goods and Services

• Health
• Challenge of providing basic health services by
  revitalizing the Primary Health centers.
• The challenge of eradicating epidemics/diseases
  through regular health campaigns and awareness
• Training and Skill Development
• Challenge for the Govt. to revitalize the
  Industrial Training Institutes for creating
  trained manpower and retraining the existing
  workforce
• The challenge of effective vocational-ising the
  education, especially after finishing the school,
  to meet the requirements

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Improving Access to Financial Services

• Challenge of improving access to basic financial
  services opening branches in all the villages
  by 2012, opening of No Frills Accounts,
  simplified KYC norms
• The challenge of up-scaling the SHG-bank linkage
  program to address the basic financial needs of
  the larger set of population and to inculcate the
  habit of financial discipline and planning by
  increasing the geographical spread, improving the
  quality of the process and directing greater
  credit to micro enterprises.
• The challenge of promoting greater flow of credit
  to Agriculture - doubling of agriculture credit
  in three years, introduction of KCCs, Farmers
  clubs, interest subvention scheme for
  agricultural loans.
• Challenge of spreading financial education and
  planning opening at least one centre for
  financial education and planning in one district.
  135 Financial Literacy and Credit Counseling
  Centers have been opened by the banks in the
  country out of which 11 are located in 8
  districts of Kerala.
• Challenge of overcoming the problem of last mile
  in reaching to the poor and disadvantaged Using
  technology of the smart cards, low cost, mobile
  ATMs and mobile phones and using processes like
  Banking Correspondents and Banking Facilitators
  and SHG-bank linkages.

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To Conclude

• Agriculture
• Unorganised Sector
• Women
• Financial Services