India’s Economic Rise: Need for Inclusive Growth

Despite relatively comparable economic success, the wealth generated by our growing economy has been slow to impact the dire situation of its country’s poor and has in fact broadened it’s already gaping inequality. This situation is, of course, compounded by massive population. Of 1.15 billion people, 70 crores Indians strive to live on Rs.60 a day or less and few have access to indoor lavatories or sanitary water. Of those, 22-23 crore Indians live below the country’s poverty threshold of Rs. 16 day. The obstacles facing the country’s leadership concerning its rampant poverty are immense and numerous. India’s decades of socialist-type aspirations did little to change the economic landscape of India. Market protection led to little growth and years of stagnation. Economic growth has been slowed in India due to a complex bureaucratic apparatus, which has in the past been plagued by corruption, fractious party system, and the idea that economic growth alone is not enough to eliminate poverty.
The economic liberalization that took place in the early 1990’s reversed this trend and jump started the success that we are witnessing today. India now has one of the fastest growing economies in the world and is expected to be among the top three by as early as 2025.
Though ending poverty has been on the lips of Indian leadership for decades, many promises and policy expectations have not come to fruition and in some cases have hindered further development. But there are many reasons why India’s success is not felt throughout society. One being that 2/3 of India’s population depends on agriculture for its livelihood. Yet its agricultural sector is growing at a rate of 1.5-2% a year and contributes only 28% to its GDP compared to, for instance, its manufacturing, service, and information technology industries which are expanding at upwards of 10% a year. The poverty of those millions reliant on agriculture is perpetuated by their low productivity and the fact that many of them have no education and no other vocational skills. This leads them to be forced to make the decision of whether to continue their fruitless labor in the fields or move to a city where they will, no doubt, work as low skilled laborers making little to nothing. Either choice seems to guarantee poverty.
It is plain to see that the economic growth has not been inclusive. The wealth being made at the top is not being reinvested . India is ripe for investment, both foreign and domestic. However, the prospects are made unattractive by the overall state of public services, lack of basic infrastructure, and by discouraging government policies like regulatory and foreign investment controls and restrictive labor laws.
Because of these impediments, many Indians prefer to invest in, and acquire firms abroad in order to gain access to wider channels of distribution and to take advantage of technology and infrastructure. If India’s economy is to continue to grow at a rate of 8% plus per year there must be massive investment in infrastructure and other vital retail ventures. There have been grand schemes proposed to introduce railways to connect metropolitan cities, build power plants, and construct modern highways. These goals, though long-term, are essential to creating a more attractive impetus for investment and improve the overall efficiency of the country.
Comprising around 15% of the global population, India is also home to a disproportionate, 22% of the world’s poor and surprisingly ranks 126th out of 177 countries listed in the World Human Development Index. Its growing population can easily be seen as a cause of India’s perpetual poverty, yet it has been found that in many cases, poverty, and more specifically, the lack of access to basic education, leads to population surges in underdeveloped regions.
Most would agree that investment must not be confined to the corporate and the structural in India but must also be allocated for education, healthcare and sanitation. The acceleration of economic growth is of utmost importance in the overall progress of India as an emerging global entity, but without a concerted effort on our part to attack the issue of poverty at all levels including the most basic, the process of development will be much more arduous and to many millions, unrecognizable.