How will you define inclusive growth? Is it an illusion or will it ever be a reality?
Inclusive growth has various definitions, one of which is growth which generates employment opportunities for the unskilled and semi-skilled variety of work force and not just for the skilled workers. In a developing country inclusive growth is important because the economy is characterised by a large supply of unskilled labour. Employment planning is required for their productive absorption. It is not an illusion if proper strategies are adopted: for example if labour intensive manufacturing sector takes the lead role in the context of economic growth, then it obviously leads to a concomitant growth in employment opportunities.
The basic pre-requisite for pro-poor growth is a faster expansion in productive employment opportunities through which the benefits of growth can be shared with the deprived lot. In other words, employment growth at wages higher than the minimum subsistence level of consumption is crucial for poverty reduction and also to create a stable society that would be free from social turmoil and insurgency. Of course economic growth is a necessary condition but growth alone, as widely noted, is not sufficient for pro-poor growth. To ensure that the beneficial effects of growth reach all sections of the population, special efforts need to be made in terms of employment generation. A high employment policy is also a way of reducing many other administratively costly government interventions.
Inclusive growth, in terms of notion, is not an illusion. The way it is pursued in India is obviously far away from reality.
How does the principle of inclusive growth apply differently to rural and urban areas?
In the rural context the growth of labour intensive agro industries is essential to shift labour from agriculture to nonagricultural activities. On the other hand, in the urban context, export oriented industries may take the lead role. Urban industries must have avenues for both unskilled and semi-skilled labour absorption. Besides, its linkages with the services sector are essential for greater effects on employment.
What are the major factors that will contribute to inclusive growth in India?
Labour intensive technological progress is essential for which innovation is important. Usually it is believed that technological progress is always capital intensive. However, with innovation and rapid expansion in the scale of production it is possible to realise both total factor productivity growth and employment growth. At present the capital intensive technology which is imported from abroad by many firms adds to growth but not to employment generation. Also skill formation is important to make labour more employable.
In the present context of globalisation, countries are vigorously pursuing strategies to maximise economic growth. However, growth alone may not be sufficient to bring in any major improvement in economic and social well-being of the population, particularly those who are located at the lower echelons of the socio-economic ladder.
The composition of growth, nature of growth (factor intensity) and the extent of positive spill-over effect of growth from one sector to another are some of the important determinants of pro-poor growth. On the other hand, the quality of labour available, scope for skill formation and employability of the labour force are equally crucial in bridging the gap between the demand and the supply forces.
What are the hindrances that you feel affect inclusive growth?
At present services sector is the engine of growth and not manufacturing. The high productivity services sector is more conducive to absorbing only the skilled labour.
What is the possibility of inclusive growth if it is industry-led and not services-led?
Certain stylized facts which have emerged in the process of economic growth help understand the relationship between composition of growth and employment and well-being. The role of industry as the engine of growth is one among the best historically documented facts as it plays a crucial role in generating high productivity employment and enhancing the standard of living of the population. The potential for productivity growth is highest in the manufacturing sector. This provides the theoretical rationale for the patterns of structural change that was observed in the case of advanced countries during the process of their economic development. Since economic growth is historically associated with employment growth, the work force structure is also seen to undergo a similar shift away from the primary towards the industry though that has not been happening in the Indian context.
Agriculture sector is not faring well. Farmers’ suicides are still a matter of concern. What should be done to push agriculture growth with a view to achieving inclusive growth?
Productivity in the agriculture sector has to improve significantly. Besides, rural diversification is important for creating new sources of livelihood. Rural based micro enterprises have to grow significantly utilising the local resources. Irrigation facilities need to be enhanced in order to improve yield and expand land under cultivation.
What about the food subsidies and fertiliser subsidies given by the government? Does it help in any way?
Fertiliser subsidy is more of a response to large farmers’ lobby. Yes, food subsidies are important for poverty reduction. However it is effective only in the short run. From long run point of view asset creation, infrastructure development, credit and marketing assistance, and entrepreneurship development are pertinent.
What are your observations on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)? Will it be of help in achieving inclusive growth at least in some respect in rural areas?
It is applicable in the rural context but it has a very limited role. It augments to some extent the cash income in the household which is used for consumption purposes. It tends to reduce consumption poverty in the very short run. MGNREGA is a very short term measure to provide some consumption support to households below the poverty line. So obviously it is not an effective strategy in empowering the poor to overcome poverty in the long run.
Infrastructure development is also seen as a major contributor to inclusive growth. How do you think this can be achieved and how will it impact the marginalised?
Yes, infrastructure development is crucial to inclusive growth. It can improve productivity of the working poor. It can create new livelihood opportunities for those who are not gainfully employed.
Can you share some information about your book Insight into Inclusive Growth, Employment and Wellbeing in India?
The book is published by Springer. It focuses on a number of inter-connected issues relating to pro-poor growth, e.g., while talking about the composition of growth and its relevance in the context of poverty reduction, it also analyses the causes of path differences and their impact on employment generation and levels of living. In addition, it also draws evidence both at the international level and at the national level. The book does not remain confined to the domain of pure economics only as it looks into issues on networks and upward mobility in explaining rural to-urban migration and changes in well-being levels.