Project Report of

Business
Environment
Topic : INCLUSIVE GROWTH IN INDIA
SUBMITTED TO :

PROF.(Dr.) K. M. JOSHI

PREPARED BY:

FY MBA 2010-12

RASIK MEVADA ( 13 )

PRAGNESH PARMAR ( 20 )

ABHISHEK ROYCHOWDHURY ( 30 )

PRANAV SHRIMALI ( 33 )

Faculty of Management Studies

INDEX :

CONTENTS Page No
1. Introduction to Inclusive Growth 3

2. Areas to focus

i. Agriculture 5
ii. Child Labour 8
iii. Employment 11
iv. Microfinance 16
v. Poverty 21
vi. Health & Nutrition 23
vii. Industrialization 25
viii. Regional Disparities 33

3. Conclusion 39

References 40

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 INCLUSIVE GROWTH

Inclusive growth means an equitable allocation of resources with benefits accruing to

every section of society. But the allocation of resources must be focused on the indented short
and long term benefits and economic linkages at large and not just equitable mathematically on
some regional and population criteria.

As a nation is still in the process of developing itself, it would be perhaps be very

premature to let go of the dream of inclusive growth. The Indian economy, which has over the
last six decades passed through various phases of growth, is now all set to enter an altogether
different orbit marked by a high rate of expansion, combined with ‘Inclusive growth’. The term,
inclusive growth, is finding its way increasingly in the lexicon of government leaders,
economists, planners, academicians and businessmen, not just in India but even internationally.

Although Indian economy has borne adverse effects of global economic slowdown and
figures GDP growth rate highs of 6.5% in 2009. Yet major portion of our population i.e. about
800-1000 millions are still to participate in the country’s growth and benefit from it directly and
therefore we still need solutions to mainstream social change, to enhance people’s productivity
and their wealth creating capabilities and these solutions need to be designed for scale, executed
at scale and sustained at scale to achieve inclusive growth for India.

Productivity for Inclusive growth in its simplest form means growth that is reasonably,
indeed fairly shared, and that corresponds to both equality and equity. India’s 11 th Plan includes
strategies and plans for infrastructure development and inclusive growth during 2007-2012. The
11th Plan’s strategy involves an increase in investment in infrastructure through both the public
and private sectors.

Areas to FOCUS

 Agriculture
 Health care
 Education
 Employment
 Poverty
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 Social Justice
 Infrastructure
Environment
 Women empowerment
 Child labor
 Regional Disparities
 Housing and other basic facilities
 Energy and power
 Urban Planning and Development

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 1. AGRICULTURE:
Although its share in Gross Domestic Product (GDP) has declined from over half at
Independence to less than one-fifth currently, agriculture remains the predominant sector in
terms of employment and livelihood with more than half of India’s workforce engaged in it as
the principal occupation. Agriculture still contributes significantly to export earnings and is an
important source of raw materials as well as of demand for many industries.
India’s agriculture sector has an impressive long-term record of taking the country out
of serious food shortages despite rapid population increase. This was achieved through a
favourable interplay of infrastructure, technology, extension, and policy support backed by
strong political will. The main source of long-run growth was technological augmentation of
yields per unit of cropped area. This resulted in tripling of foodgrain yields, and foodgrain
production increased from 51 million tonnes in 1950–51 to 217 million tonnes in 2006–07.
Production of oilseeds, sugarcane, and cotton have also increased more than four-fold over the
period, reaching 24 million tonnes and 355 million tonnes and 23 million bales, respectively, in
2006–07.
Traditionally, India is considered as the agricultural based country. As the majority of Indians are
engaged in agriculture for employment, the recent developments in the other sectors decreased
this major sector’s growth. Some of the problems in Indian agriculture are:
· Long term factors like steeper decline in per capita land availability, shrinking of
farm size
· Slow reduction in share of employment(still tt%)
· Low labour productivity in agriculture and the gap between agri and non-agri is
widening.
· Decline in yield growth due to land and water problems, vulnerability to world
commodity prices, farmer’s suicides.
· Disparities in growth across regions and crops, i.e., growth rate declined more in
rain fed areas.
· Thus these problems became the hurdles in the key area for the economic
development of the nation, i.e., agriculture.

AGRICULTURAL RESEARCH

The major challenges facing us in formulating policy for the Eleventh Plan are discussed below.

The following are critical research gaps:

• Integrating methods of traditional and modern biology giving attention to both yield and quality
aspects.

• An orientation of public sector research in ‘hybrid development with commercial viability’ has
to be reintroduced on a mission mode at least in crops like pigeon pea, soybean, and mustard.

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• Indigenous plant types that inherently possess genes responsible for higher nutritive value
(more protein, micronutrients, etc.) need to be identified and used for enriching nutrients in
rainfed crops.

• The implications of climate change on agriculture and vice versa need to be studied and a
dedicated research programme should be initiated to combat global warming.

• A major research thrust is warranted in areas of balanced and site-specific nutrient supply and
efficient water management strategies.

• Integrated Pest Management (IPM) needs greater emphasis. The existing package of practices
is not fully integrated between various plant protection sciences. This results in duplication,
overlapping as well as unrealistic recommendations in the name of IPM. There is a need for
interdisciplinary research in plant protection to elucidate basic issues of herbivory as well as to
develop suitable mitigations.

• In horticulture, the research agenda needs to emphasize survey of indigenous biodiversity for
resistance to various biotic and abiotic stresses for improvement in production, productivity, and
quality of produce.

• In livestock, there is an urgent need to reorient research and assess the genetic potential of
indigenous breeds. Intensive research work needs to be undertaken for genetic identification of
traits of excellence in Indian breeds, such as Jaffarabadi buffalo, Black Bengal goat, Garole
sheep, etc., and identify the functional genomics associated with their traits of excellence.

• With endemic shortage of animal feeds, research should explore technologies to augment feed
resources, including genetic modification of microorganism to utilize high lignin forage grasses.

• With large quantities of animal products now being produced, research on process
technologies, value addition, packaging, storage, transportation, and marketing should receive
high priority. In the absence of a proper slaughter regime, there is considerable wastage and an
effective package of practices for management of slaughterage needs to be evolved. Prevention
of animal losses due to disease should be the major area of focus with emphasis on development
of diagnostic kits and vaccine. The health of the human population is intimately connected to the
health of the animal with several fatal and debilitating diseases being common to both man and
animal. Serious attention to animal health care, disease diagnosis, and prophylactics will go a
long way in ensuring human health also.

• Overall, there is a need to identify integrated farming systems in different agro-ecological

regions, internalizing synergies of different components to enhance resource utilization, income,
and livelihood generation and minimize environmental loading. It is necessary to take a
comprehensive view of the functioning of the agricultural research system and make systemic
changes in the course of the Eleventh Plan. Thus far, research has tended to focus mostly on
increasing the yield potential by more intensive use of water and bio-chemical inputs. Far too
little attention has been given to the long-term environmental impact or on methods and practices
for the efficient use of these inputs for sustainable agriculture. These features are widely known

6
but efforts to correct them have not been adequate; at any rate they have not made much of a
difference. Agricultural research is underfunded but lack of resources is not the only problem.
Available resources also have not been optimally utilized because of lack of a clearly stated
strategy that assigns definite responsibilities, prioritizes the research agenda rationally, and
recognizes that the research mode is not always best suited for product development and
delivery:
• Dominance of commodity-based research and development (R&D), that is lack of a holistic
approach involving a matrix of farm enterprises.

• Strict compartmentalization of R&D agencies, i.e., lack of effective bilateral flow of

information among research, extension, and implementation departments

• Lack of large-scale on-farm validation of techniques and feedback thereon, leading to

practically no scope for their refinement.

As far as possible, ICAR institutes should mainly undertake basic, strategic, and
anticipatory research in line with national priorities, while SAUs do applied and adaptive
research addressing location-specific problems, with complementarities also found between the
public and private sectors in product development. A distinction also needs to be made between
basic research which has knowledge advancement and scientific curiosity as its major focus and
strategic research which is aimed at well-defined researchable problems which are of high
development priority and worthy of multi-discipline and multi-institution effect on a mission
mode.
A major paradigm shift is needed to transform the present commodity-based research to a
systems approach. Since farm-level problems are specific to agro-climatic zones (ACZs), what is
needed is a convergence between R&D agencies within individual ACZs so as to bring region-
specificity in technologies and their time-bound assessment. This requires a seven-step
mechanism:
• Problem identification and prioritization;
• Convergence of existing technologies to match the need;
• Generation of need-based viable technologies using the holistic farming system approach;
• On-farm assessment and evaluation;
• Feedback on the technologies;
• Refinement of technologies, if necessary;
• Ensuring timely availability of inputs.

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 2. Child labour

Child labor is a very complicated development issue, effecting human society all over the world.
It is a matter of grave concern that children are not receiving the education and leisure which is
important for their growing years, because they are sucked into commercial and laborious
activities which is meant for people beyond their years.

Childhood is the most innocent stage in a human life. It is that phase of life where a child is free
from all the tensions, fun-loving, play and learns new things, and is the sweetheart of all the
family members. But this is only one side of the story. The other side is full of tensions and
burdens. Here, the innocent child is not the sweetheart of the family members, instead he/she is
an earning machine working the entire day in order to satisfy the needs and wants of his/her
family. This is what is called 'CHILD LABOUR'

CHILD LABOR IN INDIA

Child labor is a conspicuous problem in India. Its prevalence is evident in child labor
participation rate, which is more than that of other developing countries. The child labor act 1986
implemented by the government of India makes child labor illegal in many regions and sets the
minimum age of employment as fourteen years.

The main root cause of child labor in India is poverty. It is a serious & extensive problem with
many children under the age of 14 working in carpet making, glass blowing units & fireworks.

India accounts for the 2nd highest number of child laborers in the world after Africa. In Northern
India the exploitation of little children for labor is an accepted practice and perceived by the local
population as a necessity to alleviate poverty. Carpet weaving industries pay very low wages to
Child labors and make them work for long hours in unhygienic conditions.

Different NGOs working against child labor

 Action Aid India
 Butterflies
 CARE India
 Child Right and You(CRY)
 CINI Asha
 Concerned for working children(CWC)

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  CREDA (Centre for Rural Education and Development Action)
 Global March Against Child Labor
 Prayas
 Salaam Baalak Trust
 Save the Children (UK) in India
 M. Venkatarangaiya Foundation
 World Vision India

Programs working for rehabilitation of child laborers

 National Child Labour Programme

Under the Scheme, working children are identified through child labour survey,
withdrawn from work and put into the special schools, so as to provide them with enabling
environment to join mainstream education system. In these Special Schools, besides formal
education, they are provided stipend @ Rs.100/- per month, nutrition, vocational training and
regular health checkups. In addition, efforts are also made to target the families of these
children so as to cover them under various developmental and income/employment
generation programmes of the Government.

 ILO-International Programme for Elimination of Child

Labour (IPEC)

ILO launched IPEC Programme in 1991 to contribute to the effective abolition of child
labor in the world. India was the first country to sign MOU in 1992. The INDUS Project
envisages direct interventions in the identified 21 districts spread across five states for
identification and rehabilitation of child labour. The strategy under the project is to complement
and build up on the existing government initiatives.

 REVISED NATIONAL CHILD LABOUR PROGRAMME

 Transitional Education Centres

 Migrant children
 NCLP Project Society at District level
 Social Mobilisation
 Social Mobilisers
 Survey of child labour

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CHILD LABOR LAWS & POLICIES
The main legislative measures at the national level are “The Child Labor Prohibition
and Regulation Act -1986” and “The Factories Act -1948”.

The first act was categorical in prohibiting the employment of children below fourteen
years of age, and identified 57 processes and 13 occupations which were considered dangerous
to the health and lives of children. The details of these occupations and processes are listed in the
schedule to the said Act.  
The factories act again prohibits the employment of children less than fourteen years of
age. However an adolescent aged between 15 and 18 can be recruited for factory employment
only after securing a fitness certificate from a medical doctor who is authorized. The Act
proceeds to prescribe only four and hour’s work period per day for children between 14 and 18
years. Children are also not allowed to work in night shifts. 

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 3. UNEMPLOYMENT
MEANING OF UNEMPLOYMENT

Unemployment is a situation where able and willing people are not able to find a
suitable job that yields them regular income.

Criteria of unemployment:-

o Time: If a person works less than optimal hours (or days) during the year.

o Income: If a person earns an income less than desirable minimum during

the year.

o Productivity: If a persons contribution to output is less than normal and

his removal will not reduce the output.

CONCEPTS OF UNEMPLOYMENT

1) Usual Status Unemployment: It is meant to determine the Usual Activity Status - employed,
unemployed or outside the labour force. The activity status is determined with reference to a
longer period, say a year preceding to the time of survey .It is a person rate and indicates chronic
unemployment.

2) Current Weekly Status: This concept determines activity status of a person with reference to
a period of preceding seven days. In this period, if a person seeking job fails to get work for even
one hour on any day, he is deemed to be unemployed.

3) Current Daily Status: This concept considers the activity status of a person for each person
for each day of the preceding seven days .If he works for one day but less than four hours, then
he is considered as employed for half a day. Out of these concepts of unemployment, Current
Daily Status concept provides most appropriate measure of unemployment.

TYPES OF UNEMPLOYMENT
Some types of unemployment are:-

· STRUCTURAL UNEMPLOYMENT : Structural unemployment is caused by a

mismatch between the sufficiently skilled workers looking for jobs and the vacancies available.
Even though the number of vacancies may be equal to the number of the unemployed, the
unemployed workers lack the skills needed for the jobs, or are in the wrong part of the country or
world to take the jobs offered. Structural unemployment is a result of the dynamics of the labour
market and the fact that these can never be as flexible as, e.g., financial markets.
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· SEASONAL UNEMPLOYMENT : Seasonal unemployment results from the
fluctuations in demands for labour in certain industries because of the seasonal nature of
production. In such industries there is a seasonal pattern in the demand for labor. During the
period when the industry is at its peak there is a high degree of seasonal employment, but during
the off-peak period there is a high seasonal unemployment. Seasonal unemployment occurs
when an occupation is not in demand at certain seasons.

· FRICTIONAL UNEMPLOYMENT : Frictional unemployment occurs when a worker

moves from one job to another. While he searches for a job he is experiencing frictional
unemployment. This specially applies for new entrants (such as graduating students) and re-
entrants (such as former homemakers). Frictional unemployment is always present in an
economy. Frictional unemployment exists because both jobs and workers are heterogeneous, and
a mismatch can result between the characteristics of supply and demand. Such a mismatch can be
related to skills, payment, work-time, location, attitude, taste, and a multitude of other factors.

· CYCLICAL UNEMPLOYMENT : Cyclical or Keynesian unemployment, also known

as demand deficit unemployment, rises during economic downturns and falls when the economy
improves. Keynesians argue that this type of unemployment occurs when there is inadequate
effective Aggregate Demand. This is caused by a business cycle recession, and wages not falling
to meet the equilibrium level. This type of unemployment is the most serious one. This arises
when demand for most goods and services fall, i.e., in recession. When demand falls, less
production is needed and consequently fewer workers are being demanded, in such a case mass
unemployment can be expected.

CAUSES OF UNEMPOYMENT
The main causes of unemployment in India are:-

· HIGH POPUALTION GROWTH : The rapid increase in population of our country

during the last decade has further worse the unemployment problem in the country. Due to
rapidly increasing population of the country, a dangerous situation has arisen in which the
magnitude of unemployment goes on increasing during each plan period.

· JOBLESS GROWTH : Although India is a developing country, the rate of growth is

inadequate to absorb the entire labour force in the country. The opportunities of employment are
not sufficient to absorb the additions in the labour force of the country, which are taking place as
result of the rapidly increasing unemployment in India.

· INEFFICIENT AGRICULTURAL AND INDUSTRIAL SECTORS:

Industrialisation is not rapid in our country and industrial labour finds few job opportunities. As
enough other employment opportunities are not available, agriculture is the principal area of
employment in our country. Thus, pressure on land is high, as about 2/3 of the labour force is
engaged in agriculture. Land is thus overcrowded and a large part of the work force is
underemployed and suffer from disguised unemployment.

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· INAPROPRIATE EDUCATION SYSYTEM : After remaining at schools and
colleges for a number of years men and women come out in large numbers, having gained
neither occupational nor vocational training nor functional literacy from which all future skilled,
educated professional, and managerial manpower is drawn.

· INAPPROPRIATE TECHNOLOGY : In India, while capital is a scarce factor, labour

is available in abundant quantity. However, not only in industries, but also in agriculture
producers are increasingly substituting capital for labour. On account of abundance of labour,
this policy is resulting in large unemployment.

· WEAKNESSES IN PLANNING TECHNIQUES : The growth strategy underlying

our plans has been found to be faulty. Lack in infrastructure development and poor labour-
intensive techniques planning has made unemployment a severe issue in our Indian economy.

GOVERNMENT POLICY FOR REMOVING

UNEMPLOYMENT
· Employment Policy up to the 1980s : Direct measures to eliminate unemployment were
not preferred as the apprehension was that they could slow down the growth process by raising
consumption expenditure on the other hand, and cutting down the economic surplus on the other.
This policy was obviously inadequate to tackle the unemployment problem and as a result, the
number of unemployment rose.
Hence government decided to concentrate on self employment ventures in various
fields farm and non-farm operations.
Such as:-
o Rural development programme
o National rural employment programme
o National scheme of training youth for self employment
o The operation food II dairy project
o Integrated rural development programme
o Rural landless employment guarantee programme

· Employment Strategies during the 1990s : Defining its employment perspective the
Eighth Plan clearly stated, “The employment potential of growth can be raised by readjusting the
sectoral composition of output in favour of sector and sub-sector having higher employment
elasticity.” In certain sectors where technologies are to be upgraded to a higher level of
efficiency and international competitiveness, there is little scope for generating additional
employment. However, in respect of certain other sectors some flexibility may be available in the
choice of technologies and thus it may not be difficult to generate considerable employment.

According to the present estimates, the employment strategy as stated above will enable
attainment of the goal of full employment in any case not before 2012 A.D. Therefore, special
employment programmes as in the past should be continued to provide short-term employment
to unemployed and underemployment among the Poor and the Vulnerable.
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MAJOR EMPLOYMENT PROGRAMS

· Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched from April 1, 1999 after
restructuring the IRDP and allied schemes. It is the only selfemployment programme for the
rural poor.

· Sampoorna Grameen Rozgar Yojana (SGRY) was launched on September 23, 2001 and the
scheme of JGSY and Employment Assurance Scheme was fully integrated with SGRY. It aims
at providing additional wage employment in rural areas.

· The Swarana Jayanti Shahari Rozgar Yojana (SJSRY) came into operation from December
1, 1997, subsuming the earlier urban poverty alleviation programmes. It aims to provide gainful
employment to the urban unemployed and underemployed poor by encouraging the setting up of
self-employment ventures or provision of wage employment.

· Prime Minister’s Rozgar Yojana (PMRY) was designed to provide selfemployment to more
than a million educated unemployed youth by setting up seven lakh micro-enterprises under the
Eighth Five Year Plan.

· The National Rural Employed Programme (NREP) was started as a part of the Sixth plan
and was continued under the Seventh Plan. It was meant to help that segment of rural population
which largely depends on wage employment and has virtually no source of income during the
lean agricultural period.

· The Rural Landless Employment Guarantee Programme (RLEGP) was started on 15th
August, 1983, with the objective of expanding employment opportunities for the rural landless,
i.e., to provide guarantee to at least one member of the landless household for about 100 days in
a year.

· The Integrated Rural Development Programme (IRDP) was launched in 1978-79 and
extended all over the country in 1980-81.It was to provide selfemployment in a variety of
activities like sericulture, animal husbandry etc. in primary sector, handicrafts etc. in secondary
sector , and service and business activities in the tertiary sector.

· The Scheme of Training Rural Youth for Self-Employment (TRYSEM) was initiated in
1979. It aimed at training about 2 lakh rural youth every year to enable them to become self-
employed.

· Jawahar Rozgar Yojana (JRY) was announced in February 1989, it was supposed to provide
intensive employment creation in the 120 backward districts. It was later renamed Jawahar
Gram Samridhi Yojana (JGSY) whose objective was creation of infrastructure and durable
assets at the village level so as to increase opportunities for sustained employment to the rural
poor.

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· The Employment Assurance Scheme (EAS) aimed at providing 100 days of unskilled manual
work on demand to two members of a rural family in the age group 18 to 60 years in the
agricultural lean season within the blocks covered under the scheme.

IMPLIMENTATION OF EMPLOYMENT PROGRAMS

Till now these programmes have not been launched on a sufficiently large scale and thus
their contribution from the point of view of the reduction in the incidence of unemployment
seems to be only marginally. The three major problems which prevent pursuit of these
programmes on a considerable scale are the choice of appropriate works are to be done; finding
the resources to finance the programmes; and the lack of clarity with regard to the organisation
of the rural work programmes meant to generate employment.

4. MICRO FINANCE
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
· DEFINITION : Micro finance involves financing for Self-help Groups which are small,
informal and homogeneous groups. After its formation, the group regularly collects a fixed
amount of thrift from each member. With this amount, it starts lending to members for petty
consumption needs. The working fund grows with time and the group can approach
Microfinance Institutions (MFIs) for credit.

· NEED : Despite having a wide network of rural bank branches in the country and
implementation of many credit linked poverty alleviation programmes, a large number of the
very poor continue to remain outside the fold of the formal banking system. The existing
policies, systems and procedures and the savings and loan products often did not meet the needs
of the hardcore and assetless poor. Therefore, the concept of microfinance has gained currency
among donors and practitioners for its two significant roles:-

 In freeing the credit market of its countless dysfunctionalities that arise mainly from
political interference, imprudent financial policies and systematic deficiencies.
 In replacing state-sponsored directed credit programmes for poverty alleviation, which
are seen as basically non-feasible because of high dose of subsidy, by private initiatives.

PRESENT SCENARIO OF MICROFINANCE IN INDIA.

Microfinance Focus, Oct. 26, 2009: India’s Microfinance institutions reached 76.6 million
against last year’s 59 million, according to the “State of the Sector Report”. Quick highlights of
the report are:

 MFI’s have recorded about 8.5 million clients during the year 2008-09, a growth of 60%
over the previous year.

 More than 50 percent of low income households are covered by some form of
microfinance produce.

 The total outstanding microfinance loans posted a growth rate of 30% or 359.39 billion
over the last year’s level of Rs 229.54 billion.

 The overall coverage of the sector is estimated to have reached 76.6 million against 59
Million last year.

 The SHG loan outstanding has increased by Rs. 71.5 billion with an addition of 6.9
million clients.

 At the current growth rates, MFIs might outstrip the SBLP in portfolio volumes soon.

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  Some parts in Karnataka faced entrenched default constituting a portfolio share of less
than 0.5%.

 MFIs so far reached 234 of the 331 poorest districts identified by the government.

 SBLP registered a decline of number of women SHGs from 82.5% in March 2007 to
80.4% in March 2008.

 The microfinance penetration index shows especially in Bihar, Madhya Pradesh,

Rajasthan and Uttar Pradesh compared to extraordinary levels reached in Andhra
Pradesh, Karnataka and Tamil Nadu.

While last year’s report focused on the increased risk in the sector, this years’ report takes stock
of the uninterrupted growth rate of the sector despite several internal and external adversities.

MICROFINANCE INSTITUTIONS

SKS India launched in 1998, SKS Microfinance is one of the fastest growing microfinance
organizations in the world, having provided over US $ 1.8 Billion (9,129 Crore) and has
maintained loans outstanding of US $ 605 Million (Rs.2,937 Crore) in loans to 5,013,219 women
members in poor regions of India. Borrowers take loans for a range of income-generating
activities, including livestock, agriculture, trade (such as vegetable vending), production (from
basket weaving to pottery) and new age businesses (Beauty Parlor to photography). SKS also
offers interest-free loans for emergencies as well as life insurance to its members. Its NGO wing
SKS foundation runs the Ultra Poor Program. SKS currently has microfinance branches in 19
states across India. SKS aims to reach members 15 million by 2012. In the last year alone, SKS
Microfinance has achieved nearly 170 % growth, with 99% on-time repayment rate. Recently
share price has gone down due to the termination of the services of Suresh Gurumani.

SPANDANA has crossed the cumulative disbursement mark of Rs 15,000 crore as on August
31 2010 & its disbursement stood at Rs 15,135 crore. Spandana gives these small loans to
economically active but low income households across rural and peri-urban areas which have a
large, unmet demand for credit. Spandana, which has been successful in reaching out to a large
section of the under-banked population, now touches the lives of over 50 lakh households.
Mrs.Padmaja Reddy, Managing Director of Spandana Spoorthy Financial Ltd,said: There are
large no. of low income households in India who need an opportunity to participate in the India
growth story. Spandana’s customers know how to judiciously deploy money. They have proved
that they are bankable.

BANDHAN (meaning togetherness) was born in 2001 under the leadership of Mr. Chandra
Shekhar Ghosh, a Senior Ashoka Fellow. The main thrust of Bandhan is to work with women
who are socially disadvantaged and economically exploited, for their social upliftment and
economic emancipation. With this aim in view, Bandhan is mainly engaged in MF activities with
target women residing in rural and urban areas across the country. Bandhan commenced group-
based microfinance operations in West Bengal in July 2002. Presently, all microfinance activities

17
are carried under Bandhan Financial Services Private Limited (BFSPL), incorporated under the
Companies Act, 1956 and also registered as a Non Banking Financial Company (NBFC) with the
Reserve Bank of India (RBI). In December 2007, Forbes magazine ranked Bandhan as the best
performing MFI in India. Bandhan has also been honored with the Skoch Challenger Award for
financial inclusion in 2008 and the Pro Poor Innovation Challenge (PPIC) Award by The
Consultative Group to Assist the Poor (CGAP), an affiliate of the World Bank in 2006. Very
recently, it won the 'Microfinance India Award 2009' under the category 'Institution of the Year'.

CASHPOR INDIA mission is to identify and motivate poor women in the rural areas and to
deliver financial services to them in an honest, timely and efficient manner so that our vision is
realized and CASHPOR itself becomes a financially sustainable micro finance institution for the
poor.

GRAMEEN KOOTA recognizes the future competition and challenge of retaining exclusivity
of clients. Instead of targeting a high market share in high competition areas we will focus on
increasing the ‘mind share’ amongst client and becoming a preferred microfinance provider. We
will leverage our existing goodwill with the community and have a strong focus on orienting our
field staff towards this

MYRADA through its various programs reaches out to people in various districts of Karnataka,
Tamil Nadu and Andhra Pradesh and is providing on-going support including deputations of
staff to program in 6 other States. It also promotes the Self Help Affinity strategy in Cambodia.
While the objective is to help the poor help themselves, MYRADA achieves this by forming Self
Help Affinity Groups (SHGs) and through partnerships with NGOs and other organizations.

ASMITHA is engaged in micro finance activities with a vision to improve the rural poor
women. Microcredit has enabled the underprivileged to access credit by providing doorstep
delivery of credit and other financial services. The poor especially women in rural areas are
empowered to become entrepreneurs.

MICROFINANCE WORKS.
 Microfinance helps very poor households meet basic needs and protect against risks.

 The use of financial services by low-income households is associated with improvements

in household economic welfare and enterprise stability or growth.

 By supporting women's economic participation, microfinance helps to empower women,

thus promoting gender-equity and improving household well-being.

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  For almost all significant impacts, the magnitude of impact is positively related to the
length of time that clients have been in the program.

MICROFINANCE CAN BE A GOOD TOOL FOR EMPOWERING WOMEN

Microfinance programs have generally targeted poor women. By providing access to

financial services only through women-making women responsible for loans, ensuring
repayment through women, maintaining savings accounts for women, providing insurance
coverage through women-microfinance programs send a strong message to households as well as
to communities.

Many qualitative and quantitative studies have documented how access to financial
services has improved the status of women within the family and the community. Women have
become more assertive and confident. In regions where women's mobility is strictly regulated,
women have become more visible and are better able to negotiate the public sphere. Women own
assets, including land and housing, and play a stronger role in decision making.

In some programs that have been active over many years, there are even reports of
declining levels of violence against women.

CRITICISMS

 There has also been much criticism of the high interest rates charged to borrowers.
 Muhammad Yunus has recently made much of this point, and in his latest book argues
that microfinance institutions that charge more than 15% above their long-term operating
costs should face penalties.
 The Consultative Group to Assist the Poor (CGAP) recently commented that "a large
proportion of the money they spend is not effective, either because it gets hung up in
unsuccessful and often complicated funding mechanisms (for example, a government
apex facility), or it goes to partners that are not held accountable for performance.
 There has also been criticism of micro lenders for not taking more responsibility for the
working conditions of poor households, particularly when borrowers become quasi-wage
labourers, selling crafts or agricultural produce through an organization controlled by the
MFI.

SOME ALTERNATIVE STRATEGIES

 Investments in infrastructure, such as roads, communications, and education, provide a

foundation for economic activities. Community-level investments in commercial or
productive infrastructure (such as market centers or small-scale irrigation schemes) also
facilitate business activity.
19
  Employment programs prepare the poor for self-employment. Food-for-work programs
and public works projects fit this model. In many cases, these programs may be out of
reach for cash-strapped local governments but within the purview of donors.

 Non-financial services range from literacy classes and community development to

market-based business-development services. While non-financial services should be
provided by separate institutional providers, there are clear, complementary links with the
demand for and impact of microcredit. For example, improved access to market
opportunities stimulates - and depends on - securing credit to cover the costs (product
design, transport, etc.) of taking advantage of those opportunities.

 Legal and institutional reforms can create incentives for microfinance by improving the
operating environment for both microfinance providers and their clients. For example,
streamlining micro-enterprise registration, abolishing caps on interest rates, loosening
regulations governing non-mortgage collateral, strengthening the judicial system, and
reducing the cost and time of property and asset registration can foster a supportive
climate for microfinance.

Thus, Microfinance is fast emerging as an attractive asset class for investors across the world,
particularly because of the social impact coupled with high returns. India, which currently has
about 20% of the world’s poor, presents a large market for microfinance, with the unmet demand
being close to Rs 70,000 crore. The Indian microfinance sector is growing at a fast pace, with
some of the largest MFIs showing growth rates close to 100% year on year.

Microfinance has changed the face of the India through the release of loans at lower rate of
interest to the people in the rural areas. This has led many rural women to establish small scale
businesses of their own.

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 5. POVERTY
Poverty in India: Current Situation

Poverty is one of the main issues, attracting the attention of sociologists and economists. It
indicates a condition in which a person fails to maintain a living standard adequate for a
comfortable lifestyle.

Though India boasts of a high economic growth, it is shameful that there is still large scale
poverty in India. Poverty in India can be defined as a situation when a certain section of people
are unable to fulfill their basic needs. India has the world's largest number of poor people living
in a single country. Out of its total population of more than 1 billion, 350 to 400 million people
are living below the poverty line. Nearly 75% of the poor people are in rural areas, most of them
are daily wagers, landless laborers and self employed house holders. There are a number of
reasons for poverty in India. Poverty in India can be classified into two categories namely rural
poverty and urban poverty.

Reasons for Rural Poverty

Some of the basic reasons of rural poverty in India are:

 Unequal distribution of income.

 High population growth.
 Illiteracy.
 Large families.
 Caste system.

Problems Of Rural Poverty

 Presence of malnutrition, illiteracy, diseases and long term health problems.

 Unhygienic living conditions, lack of proper housing, high infant mortality rate, injustice
to women and social ill-treatment of certain sections of society.

Steps Taken by Government to Reduce Rural Poverty

The government of India has been trying its best to remove poverty. Some of the measures which
the government has taken to remove rural poverty are:

 Small farmer’s development Programme.

 Drought area development Programme.
 Minimum needs Programme.
 National rural employment Programme.
 Assurance on employment.
 Causes for Urban Poverty.

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Causes for Urban Poverty

The causes of urban poverty in India are:

 Improper training
 Slow job growth.
 Failure of PDS system

Problems Of Urban Poverty

 Restricted access to employment opportunities and income.

 Lack of proper housing facilities
 Unhygienic environments
 No social security schemes
 Lack of opportunity to quality health and educational services.

The steps taken by government to remove urban poverty are:

 Nehru Rozgar Yojna.

 Prime Minister Rozgar Yojna.
 Urban Basic services for the poor Programme.
 National social Assistance Programme.

But these processes can be helpful only if the policies go to those people for whom it is meant.
The clash between the central government and the state government often results in the lack of
implementation of these policies. So it is very important that the governments do not play power
politics when it comes to a serious issue such as poverty.

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 6. HEALTH AND NUTRITION
Good health is both an end in itself and also contributes to economic growth. Meeting the
health needs of the population requires a comprehensive and sustained approach. Our health
services should be affordable and of reasonable quality. The Eleventh Plan will try to strengthen
all aspects of the health care system preventive, promotive, curative, palliative and rehabilitative.
This will be accompanied by emphasis onaccess to clean drinking water, sanitation, diet,
hygieneand feeding practices, which will significantly affect the health status of the people.
Public health spending will be raised to at least 2% of GDP during the Eleventh Plan period.
Both the Central and State Governments will have to augment resources devoted to health.
This will be accompanied by building absorptive capacity for enhanced allocations and
innovative health financing mechanisms, including health insurance for the poor, in which the
premium for basic coverage will be borne by the Centre and the States. There is a strong case for
experimenting with different systems of PPP and risk pooling. The Eleventh Plan aims to
establish 60 medical colleges and 225 new nursing and other colleges in deficit States through
PPP. Incentives linking payment to performance will also be introduced in the public health
system. The following targets have been set during the Eleventh Plan to ensure an efficient
public health delivery system under the National Rural Health Mission (NRHM), which was
launched in 2005.
 Over 5 lakh Accredited Social Health Activists (ASHAs), one for every 1000 population
in 18 Special Focus States and in tribal pockets of all States by 2008
 All sub-centres (nearly 1.75 lakh) functional with two auxiliary Nurse Midwives by 2010.
 Primary Health Centres (PHCs) (nearly 30000) with
three staff nurses to provide round the clock services by 2010.

 community Health Centres (CHCs) strengthened or established with seven specialists and
nine staff nurses by 2012.
 1800 Taluka or Sub-Divisional Hospitals (SDHs) and 600 District Hospitals (DHs) to be
strengthened to provide quality health services by 2012.
 Mobile Medical Units for each District by 2009.
 Functional Hospital Development Committees in all CHCs, SDHs, and District Hospitals
by 2009.
 Untied grants and annual maintenance grants to every Sub-centre, PHC and CHC
released regularly and utilized for local health action by 2008.
 All District Health Action Plans completed by 2008.

During the Eleventh Plan, special attention will be paid to various aspects of women’s
health, including maternal morbidity and mortality, and child sex ratio. Besides encouraging
institutional deliveries under NRHM, Traditional Birth Attendants (TBAs) will be trained to
upgrade them as Skilled Birth Attendants. Reducing travel time to two hours for emergency
obstetric care will be a key social intervention.
For reducing infant mortality, focus will be on Home Based Newborn Care (HBNC)
complemented by

23
Integrated Management of Neonatal and Childhood Illnesses. HBNC will be provided by a
trained Community Health Worker (such as ASHA) who will guide and support the mother,
family and TBA in the care of the newborn, and attend to the newborn at home if she is sick. The
strategy during the Plan is to introduce and make available high quality HBNC in all
districts/areas with an infant mortality rate of more than 45 per 1000 live births.

Eleventh Five Year Plan

Improving all district hospitals will be a key intermediate step in the health strategy, till
health care through PHCs and CHCs is fully realized. During the Plan period, six AIIMS-like
institutions will be set up and 13 medical institutes upgraded to that level.
For meeting the health needs of the urban poor, particularly slum dwellers, a health
insurance based National Urban Health Mission will be launched.

The Eleventh Plan also focuses on developing human resources to not just meet the
needs of the health care system, but also to increase employment opportunities and make India a
hub for health tourism. This will involve reintroducing licentiate courses in medicine, and
establishing medical, nursing, dental and paramedical colleges in the under-served areas.

Good governance, transparency and accountability in the delivery of health nutrition and
related services will be ensured through involvement of local self governments, community and
civil society groups. The Eleventh Plan aims to establish 60 medical colleges.

High levels of malnutrition continue to influence morbidity and mortality rates in the
country. According to the NFHS-3 (2005–06), 38.4% of children under 3 years are stunted,
19.1% wasted and 45.9% underweight. These figures have not improved much since 1998–99
(NFHS-2); in fact the proportion of wasted children has increased. The Body Mass Index (BMI)
of 33% of women and 28.1% of men is below normal. Prevalence of anaemia is very high among
young children (6–35 months), ever married women (15–49 years) and pregnant women and has
increased since 1998–99 in all the three groups.

A variety of interventions consisting of dietary diversification, nutrient supplementation

and public health measures involving better hygiene, sanitation and deworming will be
undertaken to tackle the problem of malnutrition. The Inte grated Child Development Services
(ICDS) scheme, the government’s main programme for addressing the problem of malnutrition,
will be universalized on a fully decentralized on-demand basis and restructured in the Eleventh
Plan as described below. The implementation of ICDS will be improved by giving responsibility
of execution to the community and PRIs. Besides, there will be wider coverage of hot cooked
meals and extensive promotion of infant and young child feeding practices.

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 7. INDUSTRIAL DEVELOPMENT

 Role of industrialization:-

Industrialization play very crucial role in achieve inclusive growth. It is also

helpful to national development. Industrialization development is necessary for any countries
development. India’s post 1990’s economic growth has made it one of the world’s fastest
growing economies in the world. Its GDP growth rates of up to about 9% in the last few years
are historically unparalleled except by the neighboring China. With the rapid growth rates,
however, come new challenges and new questions. One such challenging question concerns the
spread of the benefits of growth across different segments of society. So it’s also helpful to
improve GDP. If industries are developing then employment will be increase and social
standard of living increase, also. Ultimate whole nation will developing.

If industries are increase then employment level will be increase and then social
living of standard will be increase. Industries develop in rural area then rural people get
employment and there families also develop and ultimate whole societies develop and than
whole nation will be develop. People who live in rural area they will not move in urban area so
that equally whole nation will develop due to industrialization. We know that in India many
state and area there were not any industrial development so they very poor and that’s why they
move towards the develop cities and there where over population problem is increase.

When they are not get any employment then they was diverted in wrong direction, so that
develop area are more develop and backward are more backward. Ex: - Bihar, Jarkhand etc
they are very backward in industrial development.

Industries are the base of economic development of the any countries. Industries are
developed then people get income and then they provide education for them children and literacy
ratio is growing up. This is good for nation. India is main emerging country in the world as the
GDP of country growing since last 20 years and also reduction in poverty of the country. One of
the main reasons for reducing poverty is the development of industrialization. First of all,
industrial development is a powerful tool for poverty reduction. Proper industrial services will
help the poor increase income, accumulate assets and reduce external risk. With industrial
development services, low-income rural households can make plans for their future
development, improve their housing and health conditions, and receive better education.

25
 Industrialization is most helpful to decrease the migration from rural to urban area, so
that national development areas equally increase. Not only are the urban areas developing. That’s
why education is increase day by day. According to the 2001 census, the total literacy rate in
India is 65.38%. The female literacy rate is only 54.16%. The gap between rural and urban
literacy rate is also very significant in India. This is evident from the fact that only 59.4% of rural
populations are literate as against 80.3% urban population according to the 2001 census. This
problem solved to increase industrialization.

Since it is impossible to approach improvements in skill, or workforce development

without considering the role of business in the process, we propose to engage the most
innovative thinkers and corporate leaders to help chart a bold new path leading to job and
workforce development in ways that meet their bottom line interests while growing sustainable
economies in Mission countries. How can this project help grow initiatives that demonstrate
how imagination, and creativity can move low income people from the unorganized to an
organized cluster. We will explore a number of innovative approaches, including the use of the
internet to form new, cross-national labor markets, providing jobs and skills for workers in poor
countries.

 Problems face by industries:-

India is developing country. Industries are faces lots of problems. Many industries are not
developing very well.

1. Lack of finance:-
Finance is the primary source for establishing any industry and also to running the
industries. Human body work because of blood, without blood we can’t live. As same Finance is
the Blood of the Industries, without finance its can not moving. In India many people interested
to start his own business but due to lack of finance they can’t start. Small and medium scale
enterprises feces this problem. Because of they have not enough capital to run the business or
resources to compete with the big or all ready running industries. The financial problems include
investment risks, procurement of loan from banks and their repayment, meeting day to day
expenses and the like. MNC’S come and establish her business and they have enough finance to
run her business so that our small and medium enterprise can’t fight with them, and they sold his
business or stop. Because lack of finance.

26
2. Lack of technology:-
Indian is big country and ‘golden bird of the earth’, and natural resources are more
available. But due to lack of technology we can not utilized properly. If we see the big and
multinational companies they have more technology and they utilize properly all available
resources. MNC’S are come in India and utilize our natural resources. Crud Oil, coal, petroleum,
nuclear etc are available but we can not use. MNC’S utilized latest technology and develop very
fast while the Indian industries use old technology or traditional method, so that industries feces
more problem to survive in the market.

3. Lack of Infrastructure:-
Indian infrastructure is not to much develop. Road, power supply, bridge many state or
area there is not reaching any facilities, because there are no road and power supply. Those areas
are more backward and there are no any industrial developments due to lack of infrastructure
development. If industries are establish then infrastructure development are require. Industries
require transportation facilities for there raw material and sending goods to the market.

In India many area there were road, water, electricity etc not available so that industries were not
develop because of poor infrastructure. Transportation facilities were there so that industries
easily send their goods and services to the final customer. We know that without develop
infrastructure industries are not develop.

4. Multinational Competition:-

This is the basic problem of every developing country. MNC’S was come in India and
then established their business. There policy to breakdown the Indian Small and big industries,
and achieve more profit. They have more powerful in financially and technologically, so that
they took very less time to produced goods and services and quality are also good compared to
us. They used new technology and maximum utilized the available natural resources. While
Indian industries cannot compete with them because of our industries use old and traditional
method for producing goods and services.

27
5. Defective government policy:-

Government should make good policy for considering the industrial development. If
policy makes and it is so good but there proper implementations are require. But in India
government made policies 100 % and his implementation was only 40%. Before 1991 many
industries faced these problems. On government side they were not provide full support so that in
Indian industrial development are lower than other countries. Many backward areas there are
require industrial development. They are really very poor and not any developments are there.
Many industrialists are Willingness to establish there industries in that area. But government side
they get less support so that in India industrial development are very less.

6. Economic factors:-

In economic condition many changes are arise. Mainly there are two basic factors affecting
the whole economic development. One is inflation and second is deflation. In inflationary
situation country faces lots of problems. And in 2008-2009 many countries faced inflationary
condition. In U.S.A and U.K they were more affected and many industries and services sector
were closed down and

Big ‘Lehman Brother’ was also gone bankrupt. Many other countries were also getting affected
due to inflation. India affected but not more, and these economic factors directly influence our
industrial development. During this period our industries growth also decrease and per capital
production, exporting industries they all were faced inflation condition. Economy getting affect
and prices of all products and materials are increase, so that those small and medium scale
industries not suffer this kind of situation.

7. Monopoly of any sector:-

Monopolistic market condition also the barrier of industries growth. These situation
whole markets are controlled by the one company. In many company control one area so in that
area other industries are not develop, so industries growth stop in that area. Indian Railway is the
best example of monopolistic sector. No one enter in this business and no any competitor in the
market. In India Railway is monopolistic sector and there are no one enter in to competition.

28
 8. Political factors:-

In Industrial development political factors are play very crucial role. The big
industrialist maintain good relation with political parties and on that basis they got big
government tender so that already developed industries get more benefits and developing
industries not get tender. So that one is growing and other are working on that place.

9. Licensing policy:-

In India before 1990 many legal restriction were there, so that industrialist or entrepreneurs
faced lots of problems to established industries in India. Hindustan lever ltd and many other
companies were running and other small and medium scale industries they first follow long
procedure for established industries and the government was highly restricted on this.
Government had some licensing policy so that some product reserve for public company and
therefore private company were not survive in the market or established industries.

 How government helps to develop industries in

India :-

1. Policy of self-reliance:-

In this policy governments helping those industries who are manufacture Export products or
technological products. After 1991 government main focus on this industries so that now a day we
slowly growing on self- reliance. Government provides enhance support to the small scale sector
and encouraging of entrepreneurs developing the technical unit. In India many industries expand
there business in outside countries also and many foreign companies took over by Indian
industrialists. Government more focus to became independent, not depend to other country. We
manufacture technology or other products in our country.

29
2. Abolish the monopoly:-

Government play very crucial role in developing industries. But many big industries and
multinational industries were already existed so that they capture the whole market and one type of
monopoly established, so that new and small industries can not fight and industrial development
not arises. There government play very important role to stop this kind of monopoly in the market
and abolish them. Government takes some action like fixing the price of products not more or not
less so that both parties get equal benefits. Government will Endeavour to abolish the monopoly of
any sector of any individual enterprise in any field of manufacture.

3. Developing the infrastructure:-

India is developing country and there are many states those are not developing and not get
any facilities like water supply, transportation, road, electricity etc. For developing infrastructure
government take help of private sector. If government develops road or any infrastructural
development then they give the contract of private sector so that they are also developing. In
India many infrastructure development agencies are working.

Ex:- For development of infrastructure Gujarat state already set up ‘GIDB’ (Gujarat
infrastructure development board). This is the main part or basic requirement of any industrial
development. Industries must require water supply, road transportation and electricity for there
running business.

4. Welcome the foreign investment:-

Indian industries are not vastly growing due to lack of finance. Now a day many
industries are developed and growing more compare to past. After industrial revolution
government more focus on industrial development and more helping them. Government
welcomes the new foreign investment, so that many foreign company and financial institute
come in India and invest here. India is very vastly growing country so that many foreign
investors interesting to invest in Indian industries. In Gujarat Mr. Narendra Modi was attracting
foreign investors to invest in Gujarat for establishing more industries. That’s why they organized
“Vibrant Gujarat” and this was successfully done to invite foreign investment. In that case many
companies were involved and sign for legal documents.

30
5. Entrepreneurship development:-

Government motivate the entrepreneurs to establishing there business, so that they

helping them by providing financial supports or any other facilities. Governments are arranging
many entrepreneurship developments programs. In those programs they are motivating them and
providing all the guidance to require starting the industries. In Gujarat government established
“Gujarat industrial development corporation” (GIDC). Here government provides land, power
supply, water and other services for establishing industries. Here entrepreneurs easily start there
business. Now a days small scale industries are developing more than the past year. The number of
small scale units increased from 67.9 lakh in 1990-91 to 123.42 lakh in 2005-06, registering a
growth rate of about 5.84% annually. This survey conducted in economics survey of India in the
year of 2005-06.

6. Motivating the export industries:-

On the other hand, developing countries are advised to liberalize their imports, on the
expectation that this will result in welfare gain as consumers enjoy access to cheaper goods, and
local producers are pressurized to become more efficient or to shift to more suitable activities in
which they have a comparative advantage. In reality, many countries that rapidly liberalized their
imports have experienced the collapse or reduced output of local industries, and the displacement
of the market of local farmers. Moreover, as imports raised by more than exports, many
countries suffered wider trade deficits, making it more difficult for them to improve their
external debt situation. India needs to move from the lower-end markets to middle level value-
for-money markets and export high value-added products of international standard. Thus the
industry should diversify in design to ensure quality output and technological advancement.

TATA STEEL exploring the possibility of setting up a 13,371 crore steel project in
collaboration with the worlds fourth largest steel producer Nippon steel corporation of Japan.

7. Established SEZ:-

Indian government established “special economic zone” for trading freely with other
countries. Here all foreign producers and our industrialist come together and sale their products
or buy products also. Governments are not imposing more duties so that small and medium scale
industries directly doing trades, so that international trade become easier. In a consideration of
the development implications and effects of the multilateral trading system, a good starting point
is to review the relationship between a country’s degree and nature of “trade openness” and
development. In recent years, there has been major controversy over the nature of this
relationship. According to the current orthodox view, trade openness is essential for growth.
Countries that liberalize their imports and orientate production towards exports are assumed to

31
 have faster growth than those that do not, and the faster the rate of opening, the greater will be
the prospect for development.

8. Government incentives:-

Those industries are developing in rural area then government provides incentives. These
incentives are very beneficial for any new industrial development.

Indian businessmen they have not enough capital for sustaining there business efficiently.
First of all they require land for establishing industries, power and water supply for running
machinery and main requirement is finance. While government provides incentives because, In
India, small and medium industries play a vital role in the growth of the economy. Small industries
have a 40% share in industrial output, producing over 8000 value-added products. They contribute
nearly 35% in direct export and 45% in the overall export from the country. They are one of the
biggest employment-providing sectors after agriculture, providing employment to 28.28 million
people.

Today organizations are knowledge based and their success and survival depend on
creativity, innovation, discovery and inventiveness. An effective reaction to these demands lead
to innovative change in the organization, to ensure their existence. The rate of changes is
accelerating rapidly, as new knowledge idea generation and global diffusion are increasing.
Creativity and innovation have a bigger role in this change process for survival.

Here we can see that the industrial development are very important for an inclusive
growth, and also contribute in GDP for national development. Industrial development maintains
balance of trade for import and export. Indian Balance of trade was negative all time; we have
paid many debts to IMF.

Industries are develop so that people get job and ultimate employment level will be
increase, people standard of living will be improve, Education , etc will improve due to Industrial
developments. Indian economy ultimate increase and balance of trade come to positive.
Industries developed product and now day our industries more focus on independence or self
reliance so that technology or any other products manufacture in our country. Directly import of
technological products will be decrease and we more exporting to technical products.

8. REGIONAL DISPARITIES
32
 There are serious regional disparities among different states of our country. Similarly, we
have regional inequalities among different regions in a state. Even in a district there are
disparities among different mandals. Fruits of development are not reaching all people equitably.
If these disparities are not addressed immediately, then they may generate friction among various
sections of the society with tragic, undesirable, and even violent outcomes.

Profile of Regional Disparities for Different Growth Scenarios

An analysis of the historical trends, especially the more recent trends, leads to the
inevitable inference that regional disparities are bound to aggregate in the coming decades.
Regions, which are characterized as backward in our foregoing discussions, have very weak
growth impulses.

Their demographic disadvantage is implicit in the fact that major States in this region,
viz., Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh are likely to have fertility rates
exceeding the replacement level well beyond 2025, a level which some of the forward States like
Kerala and Tamil Nadu have already achieved and others are expected to achieve within a
decade or so. We have noted that if the current trend is projected, Madhya Pradesh will reach
replacement level only by 2060, and Uttar Pradesh only by 2100.

The implications of these divergent demographic trends on population density,

employment opportunities, social sector investments and the overall development can be
extremely grave. One of the major objectives of development planning initiated immediately
after Independence has been, among others, reduction of regional disparities in social and
economic development. Direct investment by the Central Government and Centrally directed
investment of the private sector have been two powerful instruments to achieve this objective.

During the first four decades of development planning, most of the large units in basic
and heavy industries were set up in the public sector in a regionally well-balanced manner.
Indeed, their location, other things being equal, was biased towards backward regions as natural
endowments such as mineral deposits were concentrated in those regions. Massive public
investments have been made to provide economic and social infrastructure in the backward
regions to accelerate their overall development.

The natural tendency of the private sector is to set up industries and other related
activities in developed regions. To counter-balance this tendency, various incentive and
disincentive schemes have been introduced as public policies to direct private investments to
backward regions. Fright equalization scheme was just one of them.

33
 The efforts of the first four decades of planned development to reduce various imbalances
across the regions have been only partially successful. At best they have ensured that regional
disparities in terms of various indicators of development are not aggravating. Of course, even
this is no mean achievement.

Economic reforms initiated in 1991 implied among, other things, that the private sector
would be the principal engine of economic growth. Most of the restrictions on private investment
have been removed. Mounting debt burden of the government has imposed a cap on public
investment. As a result, while there was significant increase in the quantum of private
investment, there was a sharp fall in the public investment over the last decade.

The flow of private investment, both domestic and foreign, has been extremely biased in
favour of the more developed regions of the country. This has enabled the developed regions to
achieve accelerated economic growth during the 1990s. On the other hand, backward regions of
the country, which were unable to attract any significant private investment flows, experienced
decelerated economic growth during this period.

The net result of this divergent growth performance of the developed and backward
regions has been a widening of the regional disparities in the country in terms of per capita
income and other indicators of well-being of the people.12

The ability of the governments at the Centre and in the States to counter this trend by
effecting countervailing public investment also has been reduced considerably. In the context of
macro-economic stabilization policies initiated in 1991, the ability of the Centre to finance public
investment by borrowings has been severely constrained. Revenues of the Centre also
experienced reduced buoyancy in the wake of tax reforms especially due to reduction in customs
tariff to levels comparable to those of our trading partners.

The factors which attracted more and more private investments to developed regions have
been their better developed economic and social infrastructure as well as more efficient and
investor friendly State governments. The backward regions, to be attractive to the private
investors, have to improve their infrastructure facilities, both economic and social, considerably.
This needs substantial public investment. The State governments in the backward regions are,
however, strapped for funds even to meet the current expenditure.

Almost all the State governments in the backward regions find that their entire revenues
are not sufficient to meet even the committed revenue expenditure like interest liability, salaries
and pensions. A sizable share of their borrowings is diverted to fill the gap between the revenue
receipts and revenue expenditure. There are several States where borrowings have been steadily
increasing, but investments have been decreasing secularly.

34
 The adverse impacts of the deteriorating State finances are much more severe for the
backward States as compared to the developed States, where investments of the past have created
adequate social and economic infrastructure to attract private investments. The backward States
are facing multiple dilemma. They are not able to attract investments due to lack of
infrastructure. They are not in a position to provide these facilities on their own due to lack of
investible funds. Unlike in the past, Centre is not in a position to help them either as the Centre
itself has a serious fiscal constraint.

Alongwith social and economic infrastructure, efficiency of administration and the

quality of governance including law and order situation are important factors in attracting private
investment. Studies conducted by NCAER and some of the apex associations of industries have
indicated that prospective investors give higher weight-age to these factors than various
incentives, including fiscal incentives offered by the State governments. Indeed, there are
enough evidences to the effect that the investors don't mind paying speed money to get things
done fast. In other words, a corrupt but efficient regime is preferred to an honest but inefficient
regime in the context of investment decisions. Other aspects of governance like the law and
order situation, trade union activism, etc., are also important factors affecting the flow of private
investments.

On almost all indicators of governance discussed above, the backward States are at a
disadvantage. Indeed, even perceptions about the governance issues based on past may haunt the
States in such matters. The cases of Kerala and West Bengal are typical in this regard. All the
efforts of these two States during the last decade to woo the investors, both domestic and foreign,
have not yielded any significant results. This was mainly on account of the general perception of
investors that these States are dens of militant trade union activism, though in reality such
militancy, of late, has been significantly subdued in these States.

To conclude this section, it will be appropriate to state that there are hardly any signs of
reversing the recent trend of accentuating regional disparities in the country in the coming
decades. Indeed, almost all the relevant forces are such that the disparities are likely to widen
deriving the next quarter century. It will require Herculean tasks on the part of the Centre and
the leadership in the concerned regions to ensure that the gap does not widen further.

Policy initiatives for balanced regional growth

We shall initiate the discussion on initiatives for balanced regional growth by illustrating
two instances of initiatives in the past. One relates to agriculture and the other relates to
industry, the two most important sectors of our economy. The strategy to boost agricultural

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production and to ensure food security was evolved in the mid-Sixties when the country faced a
grim situation following two consequent years of severe draught. The strategy consisted of
various incentives to farmers to adopt high yielding seeds of wheat and paddy along with
complimentary inputs, assured minimum support prices for the output, buffer stocking of the
foodgrains and supplying the same to the States to distribute through the public distribution
system (PDS) to the consumers, especially in the deficit regions. To back up this strategy,
institutions like Agricultural Prices Commission (APC), Food Corporation of India (FCI) and
Warehousing Corporation of India and other ancillary institutions were established.
Arrangements were made to spread the message of high yielding seeds and the associated
package of inputs and practices.

The above strategy ushered in a green revolution, which resulted in doubling of wheat
and rice production in the country over a short period. Adequate foodgrains surpluses were
generated to build up the needed buffer stock. India was no more a ‘basket case’.

The initial success of green revolution strategy was restricted to Punjab, Haryana and
western Uttar Pradesh where assured irrigation networks already existed. Subsequently it was
extended to a few irrigation commands in the South and West also. It was, however, expected
that with the expansion of assured irrigation the green revolution would spread to other parts of
the country soon. In the event this did not happen. Even today almost the entire foodgrain
surpluses are generated by the small region, which benefited initially. Though massive public
funds are spent on food subsidies, very little is spent on spreading irrigation. Besides food
subsidies, large implicit subsidies to farmers for power, diesel, canal irrigation, fertilizer and
credit are born by public exchequer at the Centre and in the States. Agricultural Price Policy
which was evolved by APC to ensure adequate protection to the interests of the producers and
consumers has been ‘high-jacked’ to serve the interests of the large farmers who produce for the
market. It hardly serves the interests of farmers in the emerging surplus regions. The distinction
between support price and procurement price is no more there. Similarly, the Food Corporation
of India and the associated procurement agencies operate, by and large, only in the traditional
surplus regions and farmers in newly emerging surplus regions almost invariably end up selling
their surpluses in distress.

Today the foodgrain management and the food security system is near collapse. As
against a total requirement of 24 million tonnes of foodgrain for buffer stock and PDS together,
the public stock is over 60 million tones as on July 1,2001. A substantial share of this is not even
properly stored and may not be suitable for human consumption. On the other hand due to
severe drought conditions large scale unemployment and hunger are reported from several
States. Per capita net availability in the market has come down. PDS system has virtually
collapsed. Poor people cannot afford the ‘so called economic price’ of foodgrains available in
the PDS shops.

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 This is a classic case of a public policy evolved with much thought and resulted in
significant gains for the country, as a whole, for several years initially but gone sore
subsequently. Instead of adjusting the agricultural and food security policies to expand the scope
of green revolution technology to the other regions of the country, they were allowed to be high-
jacked by vested interests.

The other example of a major public policy, which had gone sore after initial success is
the industrial policy. In the Fifties, when India initiated a policy of import substitution by
starting various industries in key sectors there were very few critics both within the country and
abroad. Indeed, the industrial policy embedded in the second Five Year Plan, giving emphasis to
basic and heavy industries, was lauded equally by Russian experts as well as western experts.
That policy enabled the country to lay the foundations of an industrial base.

Gradually the ills of public sector undertakings and the stifling effects of a market
without competition became more and more evident. By late Sixties and early Seventies, several
perceptive observers noted that there was need to deregulate the industrial sector to allow
competition. Government, instead, went ahead with nationalization of more and more key
sectors of the economy and also further throttling of private sector to control concentration of
wealth and industrial power. The result was further retrogression and immiserization of the
economy.

The above two examples have been described in some detail to make the important point
that major public policies initiated with thought and foresight and which initially yielded results,
subsequently generated into fiefdom of powerful vested interests who will try all the trides in
their trade to frustrate corrective measures. Kulaks and the so-called ‘Deshi’ industrialists who
benefited from ‘licence-permit raj’ are not the only vested interests who stand in the way of
programmes and reduction in regional disparities. The list includes politicians, trade unions,
bureaucracy, various monopolists in the economy and the educated intelligent who occupy
positions of power and patronage. Most of them collect one kind of ‘rent’ or other which they
are not willing to give up only when there is crisis they will loosen their stranglehold, that too
only a little which will suffice to defuse the crisis.

The economic reforms initiated in 1991 was also essentially crisis driven. It was the
international payment crisis which forced the country to carry out deregulation of trade and
industry. Again, once the crisis was overcome reforms also slowed down. There are several
vital areas of reforms, which we have been talking about for the last one decade without doing
much—public sector reforms, reform of labour laws, reform of the legal system, establishment of
effective regulatory bodies and so on. Again, it is the politicians, the bureaucrats, the ‘Deshi’
industrialists and the trade union leaders who are standing in the way. They do not want to give
up the powers, perks and monopoly profits, which they have been enjoying.

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 The main interest of the foreigners in India is its large potential market. Unless the rural
incomes grow, especially in the backward regions this potential market will not be realized.
Corporate India must realize that its future lies with the masses. Raising rural incomes should no
longer be looked upon only as a philanthropic objective.

Also reduction of regional disparities should be looked upon as a national objective. The
strength of a building depends on the strength of its weakest pillar. In a similar way the strength
of the Indian economy depends on the strength of the economy of Bihar. Similarly, the
bottomline of India’s human development will depend on the incomes and socio-demogrpahic
indicators of development in northern and eastern India.

While the development of depressed regions is a national responsibility, the solution

mainly rests with the local leadership. Unless the local leadership—political, bureaucratic and
intellectual—resolve to usher in development based on sharing the gains on egalitarian basis
with the masses, results will be hard to come by. Resources are not the real constraint. It is the
way resources are spent. Large sums are spent on education and health care in the backward
States. But the results are not there. This happens because the teachers and medical personnel
who are expected to provide the requisite services draw their salaries but provide poor services
or no services. Unless this kind of work culture in public services changes, funds alone will not
solve the problems.

Lastly, with divergent trends in various sectors of development, there emerges a

resistance to vertical and horizontal fund transfers to the backward regions by forward regions.
Immediately after the report of the Eleventh Finance Commission there was an uproar from the
so-called ‘performing States’ against increased tax revenue devolution to the backward States.
One of the main arguments was that non-performing States are rewarded for their non-
performance. It is imperative that Centre and the leadership of the backward States should
evolve institutional arrangements to ensure that funds transferred result in the best use in terms
of development.

Conclusions:

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 1. Since, agriculture holds the key to rural income, food self sufficiency, relative stability
in prices, the budget package for farmers, the 11 th five year plan also gave 8.55% to the
Agriculture and Irrigation to the total Plan outlay. Hence, these benefits are expected to
contribute for improved farm productivity and thus contribute to the economy as well as for
inclusive growth.

2. Gender equality and women’s empowerment are human rights that lie at the heart of
development and the achievement of the Millennium Development Goals.

3. Government’s initiatives to achieve inclusive growth should reach to the end needy
people in due time. If it is done, definitely inclusive growth can be achieved at a less time span.

4. Poverty and Employment has a good relation. If Poverty is to be removed, then

definitely the employment is the key.

5. Better infrastructure facilities and through investments in public and private sector is
likely to strengthen further, giving a boost to economic growth.

6. The Urban-rural divide has to be bridged ad rural areas integrated with the economic
processes to ensure equitable and inclusive growth.

7. The private sector has an important role to play in enhancing employment

opportunities in farm and non-farm enterprises in rural areas, and should provide the necessary
expertise to these areas.

8. Education, Increased technology, women’s economic and social empowerment,

economic reforms and efficiency improvements in the economy will reinforce the country’s
confidence in the high-growth phase and thus contribute to inclusive growth.

9. Development of production sector, BPO’s, infrastructure and structural change in

agriculture – industry – services will create productive employment.

10. For the global competition, country needs to have inclusive growth, hence all the
above challenges and opportunities will contribute to the inclusive growth strategies in India.

References :
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 www.smallindustryindia.com

 www.techshowindia.com

 www.wikipedia.com

 www.childlabor.in

 www.indiachild.com

 www.laborright.org

 www.indiatogether.org

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