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On the Issue of 'Inclusive Growth'

 generally more labour absorbing

DISCUSSION

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On the Issue of ‘Inclusive Growth’

M A Oommen

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have long-term implications and some of the related data are available after a lag.

The critical issue is the treatment of growth and inclusiveness as two separate boxes and then considering such an approach “logical”. The fundamental question then is why underscore inclusive growth

M
ontek Singh Ahluwalia’s paper on “Prospects and Policy Challenges in the Twelfth Plan” (EPW, 21 May 2011) is very interesting and certainly illuminating. I think that among the various issues the paper has raised for “spurring a broader discussion”, the concept of “inclusive growth” is an ideal candidate for debate because of the “policy challenges” it raises. The term not only appears prominently in recent years in the documents of the Planning Commission, and in budget speeches and Economic Surveys, but it is constantly used in the speeches of the leading public persons of the country. Even so, the concept of inclusive growth is left delightfully vague. In terms of policy content, it is certainly not a focal variable. Clarity about the concept and its contents leaves many things to be desired. This paper, by one of the leading architects of India’s recent five-year plans, is important for the light it throws on the concept and some of the policy implications that follow. In this brief note, I try to make some observations that I hope will help to stimulate further discussions on the subject.

Coequal Objectives?

Presenting growth and inclusiveness as coequal objectives, the author notes: “The Eleventh Plan aimed at delivering faster and more inclusive growth and it is logical to assess performance against this dual objective” (p 88) and even goes on to say, “it is difficult to assess inclusiveness than performance on growth” (p 89). The three reasons which the author mentions may be summarised thus: (a) inclusiveness is a multidimensional concept, (b) the data on inclusiveness are available only after a lag, and (c) the impact of inclusiveness is not immediately visible. These arguments do not seem to be tenable. For one thing, concepts like growth and development are also multidimensional. Moreover, several components of growth (which in the aggregate appear as the sum-total of value added)

July 16, 2011

as a development goal and proceed to articulate the “vision and strategy” of inclusive growth in the very first chapter of the Eleventh Plan and earlier in the Approach to the Eleventh Five-Year Plan: “Towards faster and more inclusive growth”. Of course, one can quarrel with the content of the vision and strategy, but it is incorrect to treat the two as disparate entities as policy variables. Ahluwalia speaks of the “systemic reforms” since 1991 based on a wider play of market forces, gradual liberalisation of the financial sector and the opening up of the economy to world trade and capital flows. But the moot question is whether “the cumulative effect of the systemic reforms” has promoted inclusive growth. A more pertinent question is what “systemic reforms” the policymakers have initiated to strategise a well-designed vision of inclusive growth. Treating inclusiveness and growth separately and then enumerating the variables to be included (27 is an impressive number) to monitor progress is pretty easy, but

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DISCUSSION

misses out the needed vision, strategy and surely “systemic reforms”.

Exclusionary Process

According to the author, “Inclusiveness must obviously include progress in delivery of essential services” such as education, health, clean drinking water and sanitation. These services, especially education and health, are basic to capability building and freedom of any democratic society. The growing commericalisation of education and health certainly has excluded many poor and dispossessed them from the mainstream of growth. There is no dearth of evidence. Joe et al (2008) utilising the National Health Survey data undertake a state-level analysis of inequities in child health employing widely accepted concentration measures, and find that the poorer sections of population are buffeted with ill-health and malnutrition of their children, thus jeopardising the future of the already vulnerable sections of society. Using data from a nationally representative high sample of 41,554 households conducted in 2005, Sonalde Desai and Amaresh Dubey (2011), examine the relationship between social background and different dimensions of well-being and find the continued persistence of alarming caste disparities in education, income and social networks.

The author of the paper on the policy challenges in the Twelfth Plan who tries to give the latest figures and evaluation reports about the unfolding pathology of inadequate access to proper education, health and so on seems to walk past the excluded like the high priest before the wounded man in the Biblical parable of the Good Samaritan. “Accelerating agricultural growth” is indeed important for inclusion, but the problem is whether it can really be inclusive in the absence of redistributive land reforms. Some benefits may trickle down to the wage earners but surely not into the hands of the landless who remain excluded (unless they succeed in selling their labour). Growth is not an end in itself, but important only as one of the means towards human well- being and freedom.

By its own logic, market mediated growth prices out or excludes those without exchange entitlements, the latter including not only assets, but also income, employment, social security entitlements, initial endowments, credit worthiness and so on. Apart from market exclusion, there are several institutional failures and market failures. There are also several social exclusions like caste, gender discrimination and so on. While some of these can be addressed through affirmative action, economic exclusion can be taken care of effectively only through relevant policy choices on redistributive strategy and then with sustained action. Charity can help one to participate in the market. But certainly that is not what one bargains for in an inclusive growth regime.

Strategy, Not Mitigating Factor

Inclusiveness is not a mitigating act, but a strategy of participation in the social production (growth) process and settlement of claims on the product on a fair basis. For the Asian Development Bank which has been advocating inclusive growth in the region, “growth is inclusive when it allows all members of a society to participate in and contribute to the growth process on an equal basis regardless of their individual circumstances” (Ali and Zhuang 2007: 10). This definition is positive but does not indicate the structure and pattern of growth and rules out a distribution strategy. A growth process that works towards effective equality of opportunity must define the boundaries of the market, the composition of the commodity flow, the structure of initial endowments, the social arrangements for enhancing the capabilities of individuals and the freedoms needed to achieve the capabilities and so on.1

Equality is a universally acclaimed value and is generally affirmed as a basic human right. Amartya Sen famously asked the question “equality of what”? The answer to this question is important for identifying the policy variables that have to be chosen for action.2 Ahluwalia’s paper rightly asserts that inclusiveness must address the concerns about inequality and identifies some variables for focal action. Basically one has to review the rationale and interrogate the ethics of the existing social arrangements that exclude some and enrich others in order to propose a meaningful strategy of inclusive growth. Even without any such plea for radical structural transformation one can be more positive than the following remarks of the author on inequality.

It is sometimes argued that inequality should not matter as long as the poor are getting better off and it is probably true that a rapid rate of improvement in incomes for the poor may make them willing to accept some increase in inequality. However, large increases in inequality accompanying only modest improvements in the levels of living of the poor, are unlikely to be acceptable (p 89, emphasis added).

This type of approach obviously is not inclusive, but willy-nilly keeps the poor excluded in perpetuity. It is a matter for debate whether you can build the road map to inclusive growth on such postulates. I have no hesitation in saying that the wedge between “Shining India” and “suffering India” will keep growing unless strong “systemic reforms” are initiated for promoting a sustainable inclusive growth path similar to what has been done since 1991 to ensure the unfettered freedom of capital. The indifferent way in which inclusive growth is handled in India is probably because “they could get away with it” as when Sen (1973, 1998) points out how the Athenian intellectuals of direct democracy fame left out the slaves and women from the orbit of their discourse and discussion.

M A Oommen (maoommen09@gmail.com) is emeritus professor, Institute of Social Sciences, Thiruvananthapuram.

Notes

1 The capabilities and freedom perspective mentioned here is due to Sen (2000) and are not elaborated.

2 As Sen rightly points out human beings are deeply diverse in their internal characterstics (e g, age, gender, general abilities, inborn talents, proneness to disease, physical and mental incapabilities, etc) and external circumstances (such as ownership of assets, residential location, social backgrounds and so on). Obviously you cannot have equality in everything and the policy space for remedial action has to be identified and acted upon.

References

Ali, Ifzal and Zhuang Juzhong (2007): “Inclusive Growth toward a Prosperous Asia: Policy Implications”, ERD Working Paper Series No 97, Asian Development Bank. (downloaded from the website: http://www.adb.org/Documents/ERD/Working_ Papers/WP097.pdf)

Desai, Sonalde and Amaresh Dubey (2011): “Caste in 21st Century India: Competing Narratives”, Economic & Political Weekly, 21 March.

Joe, William, U S Mishra, S Navaneetham (2008): “Health Inequality in India: Evidence From NFHS-3”, Economic & Political Weekly, 2 August.

Sen, Amartya (1973, 1998): “On Economic Inequality”, Oxford India Paper backs, Oxford University Press.

– (2000): Development as Freedom, Oxford University Press.

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