Friday, April 16, 2010

Inclusive growth in India: Is it happening?

The Brookings Institution organized an event about Indian polity and inclusive growth at Carnegie on Tuesday. Tarun Das, former chief mentor of Confederation of Indian Industry, shared his optimism about the Indian economy and economic development.

According to Das, some of the main features of the Indian economy right now:

  • Increasing number of CEOs of private companies are joining the public sector. Examples, Nandan Nilkani and Arun Maira
  • Skill development: India plans to train 500 million people by 2022. The private sector is playing a key role in this initiative. It has established National Skills Development Corporation (NSDC). A large part of its skill development efforts are directed at the unorganized sector. It is a PPP initiative.
  • Emphasis in innovation and technology, both in the urban as well as rural areas. Example: solar lamps and telecommunication
  • Enhancement of efficiency in the public sector.
  • Education sector has been open to the private sector. Private foundations such Azim Premji Foundation and Bharti Foundation are contributing to uplift the education sector.
  • Health care sector: spread of mobile health clinics; new technologies with improved supply lines; with improved technology almost 30 percent of wasted food is now stored, thus increasing supply and preserving nutrients
  • Young entrepreneurship: Emergence of self-employed youths; more than 100,000 successful SMEs…becoming more and more competitive…more will come
  • Private sector is emerging as the driving force of growth and development…dynamic private sector
  • Transformation of rural area: more rural connectivity, impact of TVs, ICT
  • Prudent entrepreneurs: high savings rate (25 to 35 % of GDP) and increasing investment rate
  • Government development schemes such as rural employment and rights to food act are helping the poor people that are not seeing the direct benefits of economic growth. Poor people and women are slowly getting empowered.
  • New economic and social development model: India realizes that both private as well as government sector is needed. It has a centrist economic model. The liberal economic policies would stimulate the private sector and social development policies of the government would uplift the poor people, thus narrowing the gap. This would then help India achieve above 10 percent growth rate.

Few comments about Das’s comments:

Das did not go in detail about how India can achieve inclusive growth. Large swathe of the people are still poor and depend on agriculture. The discussion on agricultural sector was minimal. He focused more on the corporate-end of the growth equilibrium and talked about CSR-type development initiatives led by the private foundations. I had expected from him a little bit more discussion about NREGA, the largest public employment guarantee program in the world. Even the UPA government’s election victory in the last election is accredited to this reform. It seems that this would be one of the main vehicles to creating an inclusive society and possible inclusive growth.

Additionally, the rise of Maoists and the government’s lack of reach in the remote villages were not discussed. This obviously will have a strong bearing on the growth rate at some point in the future. Right now, the urban-led activities seem to lead growth. It will saturate at some point. Then, some of the variables of drivers of growth would be based on rural economic activities. This is where the Maoists insurgents could become villain to growth. It has been one of the main internal threats to the Indian democracy, according to Prime Minister Manmohan Singh.

There were many issues that were left out. The talk was heavily focused on how to achieve high growth rate, which could not be necessarily inclusive. The inclusive growth part was discussed very little. Also, sweeping generalization about the reach and impact of mobiles and TVs was a bit too much. It has its own limit!

Overall, the discussion was a good primer on the existing Indian political economy.