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Reasons why India has not been able to achieve inclusive growth in the economy

Reasons why India

Growth vs. Development

  • Since the economic reforms in India, the GDP growth, often seen as the key indicator, hasn’t necessarily improved the lives of the less privileged.
  • A study by the Indira Gandhi Institute of Development Research reveals that the “trickle-down” effect hasn’t favored the poverty-stricken in both rural and urban areas.
  • Urban growth is even called “anti-poor,” leaving those below the poverty line marginalized.
  • This points to a need for clearer vision and strategy in policies, with a shift towards inclusive growth, ensuring benefits reach historically disadvantaged groups.

Low Technology and Innovation

  • India faces a challenge in keeping up with developed nations’ tech advancements, especially in agriculture, a vital sector for growth and employment.
  • The dilemma is adopting high-tech solutions may raise unemployment, yet not embracing them hampers productivity.
  • To address this, we urgently need green and renewable energy adoption to ease resource strain.
  • Policymakers must balance tech progress with social and economic considerations.
  • Inclusive innovation, focusing on products benefiting the impoverished, is key. SMEs, MSMEs, and organizations like the National Innovation Foundation can drive this.
  • To thrive, inclusive innovation needs a solid foundation in finance, competency, and infrastructure, ensuring benefits reach all of society.


  • In budget allocations, a significant chunk goes to major projects like power generation, freight corridors, and airports. Unfortunately, this leaves rural areas with a severe lack of proper infrastructure.
  • Rural areas are often overlooked, with insufficient attention given to crucial aspects like cold storage houses, processing facilities, and rural transport. These are vital for supporting agriculture and its backward linkages.
  • The government’s focus on infrastructural development tends to lean heavily towards industrial growth. Unfortunately, this means that sectors like agriculture don’t receive the attention they need.
  • The gap between rural and urban infrastructure development has become glaring. For instance, despite the booming telecom sector, there exists a significant digital divide between urban and rural areas, impacting access to mobile, landline, internet, and broadband connections.
  • The Eleventh Plan recognizes the irony that while the telecom sector is growing rapidly, rural areas still face challenges like the lack of electrification. Approximately 7.8 crore rural households remain without electricity, hindering inclusive growth and agricultural development.


    • The government is enthusiastically working to decrease the poverty rate, and even the UN’s MDG report supports this effort by stating that India’s poverty rate is expected to drop to 22% by 2015 from 51% in 1990.
    • However, amidst these positive strides, there are persistent issues that have intensified over time, such as child malnutrition. Many challenges contribute to this, including inadequate skilling and professional competencies, a lack of women in mainstream economic activities, and poor indicators in nutrition, health, and education.
    • A startling revelation from the Hunger and Malnutrition Survey 2011 highlighted a concerning fact: in the 100 focus districts with the poorest child development indicators, over 40% of children were underweight, and almost 60% were stunted.
    • Regional disparities, inadequate infrastructure, and social inequality and discrimination further compound these challenges. In addressing this, the Prime Minister expressed his concern, labeling the problem of malnutrition as a matter of national shame. He lamented the growing gap between the rich and poverty-stricken, emphasizing that poverty has disproportionately affected backward classes, and SCs and STs, making it crucial to address these disparities.

    Ill-effects of LPG

    • Liberalization, privatization and globalization of Indian economy has ushered the poverty-stricken to vulnerability and irony. Liberalization and privatization have particularly suited to the Indian private corporate, elites and rich.
    • Globalization has created a question of existence in-front of small and medium enterprises (SMEs). Have a look at the plight of the women employed in the cotton fields of northern India. Now, India’s share of textile industries in world trade is remarkably low.
    • All this have limited the growth potential and created the problem of unemployment.
    • The malfunctioning of LPG in Indian scenario has surmounted new issues viz. gender inequality and threat to women empowerment.

    Fiscal Deficit

    • Development schemes run by the govt. have created a dilemma of expanding fiscal deficit. India’s current fiscal deficit situation has limited the prospect of development schemes.
    • India has significantly high debt to GDP ratio, balance of trade (negative) and current account deficit (CAD).
    • Last year’s estimates were: fiscal deficit: 5.2% of GDP; CAD: USD 92 billion; stimulus package: Rs. 1.84 lakh crore (3% of GDP). The govt. has set a target of reducing fiscal deficit to the level of 3 per cent by 2016-17.
    • Fiscal deficit also creates the problem of inflation which in turn makes the poverty-stricken even more vulnerable. Increasing CAD is comparatively more detrimental to INCLUSIVE GROWTH than fiscal deficit.

    Read Also: Definition of Inclusive Growth

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