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Experience of India
S Prasad Lecturer, Dept. of Economics, Sree Sankara College, Kalady
One of the major discussions in the area of development economics of today is about inclusive economic growth. The developing economies like India have now given more emphasis on shaping its strategies towards inclusive economic growth. Sixty years after independence, India has presently come forth as one of the emerging economies of the world. However, does the development trajectory of India succeeded in addressing the problems of common men in India? The first section of the paper rightly observes the growth pattern of India over several five year plans and also tried to evaluate the development experience over these periods. The paper also tried to look at the changing structure of the economy over different Plan periods. The second section of the paper gives a critical evaluation of the developmental experience of India. By highlighting the poor performance of India’s social sector, the paper tried to strengthen the argument that, inclusive growth is imperative for achieving the equity objective and is essential for the achievement of sustainable economic growth.
The concept inclusive growth or inclusive economic growth is widely discussed in recent years and has greater relevance in the context of India. The word inclusive in the present context means ‘not excluding any section of society’. As a result of the higher economic growth in recent years, every segment of the society has to be benefited by way of income and employment. This is what the concept inclusive growth envisages. Sixty years after independence, India has finally entered a very excellent phase of long-term economic growth, with strong support from service sector and a booming young population. From the so called 'Hindu rate of growth', i.e., well below five percent annual growth rate, the Indian economy has soared at an average rate of over seven percent every year in the last decade and at around nine percent in the past three years. This is a remarkable achievement.
The period of analysis for the study starts from 1950-51 to 2006-07 and assorted in terms of Five Year Plans and thus covering ten Five Year Plans. were also used. India having over the years. 2008)..The unimaginable growth trajectory of India has been the corner stone of the discussions by the developmental enthusiasts and other likeminded people in India in recent years. statistics related to plan outlay during different plan periods etc.. Even at the time of the recent global recession.al. 4. diagrams. The section gives an understanding of the trend 2 . Data Source and Methodology The study made use of secondary data sources to fulfil its objectives. Database related to Global Hunger Index available in The Challenge of Hunger (Grebmer et. available with Economic Survey. 2008. were employed for the purpose of analysis. Simple techniques like tabulation. The study mainly analysed the trend and composition of Gross Domestic Product (GDP) of India (in constant prices) over the period of analysis.. It is in this context we need to look at the growth trajectory. 2. The first section addresses the issue of growth pattern of India since independence. India stood upright among the mainstream economies of the world. The data sources mainly include national account statistics. UNDP Report. 3. To find out major shortcomings in the development experience of India. growth rate etc. Sectoral distribution of GDP (constant prices) is also analysed over different Five Year Plan periods. Objectives of the Study The broad objectives of the study are the following: 1. percentage distribution. To evaluate the growth pattern of India over several Five Year Plan periods 2. WHO report etc. How far we are able to address the common men in this part of the world? To what extent we have succeeded in attaining sustainable economic growth? The paper rightly observes these issues in detail.. Scheme of the Study The present paper is arranged in three sections.
30 2.49 4.88 -5.0 3.91 5.69 -0.16 3. A look at the sector-wise growth indicates a bias of growth path towards secondary and tertiary sectors.53 5. Table 1: Sectoral Average Growth Rate during Five Year Plans (%) Five Year Plan 1st Five Year Plan 2nd Five Year Plan 3rd Five Year Plan Annual Plans 4th Five Year Plan 5th Five Year Plan Annual Plans 6th Five Year Plan 7th Five Year Plan Annual Plans 8th Five Year Plan 9th Five Year Plan Plan Period 1951 to 1956 1956 to 1961 1961 to 1966 1966 to 1969 1969 to 1974 1974 to 1979 1979 to 1980 1980 to 1985 1985 to 1989 1989 to 1992 1992 to 1997 1997 to 2002 2002-03 2003-04 2004-05 2005-06 2006-07 Source: Economic Survey. Section 1 The Indian economy has soared at an average rate of over seven percent every year in the last decade and at around nine percent in the past three years.49 2.74 7.82 10.17 4. 2007-08 It is evident from the table that over the years.60 4. Except for few years the growth rate of agriculture is very low.52 3.85 5. Section 2 deals with the analysis of the economy in terms of the major lacunas and to visualise the growth trajectory of India since independence.65 3.54 9.49 0.28 2.59 5.16 -3.and structure of the economy in a broader level.03 6.80 8.89 6. The dramatic performance of agriculture during 2003-04 was mainly due to the climatic advantage during 3 Agriculture Industry Service 2.45 8 GDP 3. India made a stunning performance with regard to overall GDP growth.87 4.40 9.91 5.47 9. Except for 1979-80 (Annual Plan).43 5.87 2.04 6.54 4.65 6.33 7.91 5.14 10. India surged towards greater level of growth rate during almost all plan periods.92 6.33 4.67 3.70 3.81 -4.41 -12.67 7.45 9.28 6.52 7.37 5.95 11.84 8.29 7.89 7.59 4.3 5.97 3. The growth performance of agriculture is not even comparable with the performance of industrial and service sectors.70 10.08 1.54 5. Section 3 sums up and concludes major findings of the paper.45 6.02 3.84 7.26 4.06 5.35 3. Table 1 shows the average growth rate of each of the sectors of the economy over Five Year Plans.62 10th Five Year Plan (2002 to 2007) .17 4.05 3.63 4 11.
contributing to a better economic growth.the year. Figure 1: Trend of Agriculture/Industry/Service sectors during Five Year Plan Periods. Both the industrial and service sectors go hand in hand in recent years. The year 2003-04 only gives a greater momentum in the growth path India experienced in recent years. On the whole. agriculture sector cannot be ignored in the march to attaining higher economic growth. This gives India a very practical lesson that. The performance of agriculture was chiefly responsible for the historical growth rate of about 9 percent during that year. Figure 1 is expressive of the trend the economy has experienced over the Plan periods. The Figure 2 gives the trend in GDP over several plan periods. the trend in the GDP shows a rather lopsided growth rate. 4 . 15 10 5 Agriculture 0 1961 to 1966 1980 to 1985 1951 to 1956 1956 to 1961 1966 to 1969 1969 to 1974 1974 to 1979 1979 to 1980 1985 to 1989 1989-1992 1992 to 1997 1997 to 2002 2006-07 2003-04 2004-05 2005-06 2002-03 Industry Service -5 -10 -15 Plan Period/Year From the diagram it is clear that the performance of agriculture sector has almost struggled to set a better trend.
95 29.72 1952-53 56. The problem with respect to 1979-80 was mainly due to the political disturbances occurred in changing the Congress Government to the Janata Government. the trend in GDP is almost in affirmative and gives an impressive trend over the years.19 29.66 29. a look at the contribution of each of the sectors to GDP during several plan periods gives a broad idea about the paradigm shift in the structure of the economy. 12 10 8 6 Growth Rate (%) 4 GDP 2 0 1997 to 2002 1951 to 1956 1956 to 1961 1961 to 1966 1966 to 1969 1969 to 1974 1974 to 1979 1979 to 1980 1980 to 1985 1985 to 1989 1989-1992 1992 to 1997 2005-06 2002-03 2006-07 2003-04 2004-05 -2 -4 -6 Plan Period/Year As the diagram (Figure 2) shows except for 1979-80 (Annual Plan Period). 5.59 13.83 1953-54 57. For instance. 2007-08 5 .Figure 2: Trend in GDP growth rate over different Five Year Plan periods.09 Source: Economic Survey.71 14. Let us have a look at the structure of the economy during the First Five Year Plan (See Table 2) Table 2: Contribution of different sectors to GDP (%) during First Five Year Plan Year Agriculture Industry Service 1950-51 56.64 1951-52 56.70 13.97 1954-55 56. Structure of the Economy The structure of the Indian economy has changed tremendously over the years since independence.62 28.42 13.33 13.58 29.
96 52.04 24.31 6 Service 50.85 23.00 0. the service sector became the largest contributor to GDP. the share of service sector increased greatly in comparison with the other two productive sectors.00 20.40 21.19 23. However. the change took place only in a slow pace. agriculture contributed more to the GDP during the First Five Year Plan period. Figure 3: Trend in the Contribution of different sectors to GDP over the years 70.00 Agriculture Industry Service 30.00 10.02 .52 23.00 40. During the Plan period more than half of the GDP was contributed by the primary sector alone.00 50.90 22.00 60. The Plan gives more thrust to the industrial development.00 1954-55 1958-59 1960-61 1972-73 1976-77 1978-79 1984-85 1990-91 1996-97 2000-01 2002-03 1950-51 1952-53 1956-57 1962-63 1964-65 1966-67 1968-69 1970-71 1974-75 1980-81 1982-83 1986-87 1988-89 1992-93 1994-95 1998-99 2004-05 2006-07 As the diagram rightly explains.67 Industry 22.75 52.It is very evident from the table that.36 24.73 23. the share of agriculture started declining since the Second Five Year Plan period (See Figure 3). Let us now look at the latest position with respect to the contribution of these sectors to GDP (See Table 3) Table 3: Contribution of each of the sectors to GDP (%) during 10th Five Year Plan Year 2001-02 2002-03 2003-04 2004-05 2005-06 Agriculture 26. Since 1981 onwards.56 54. Though the trend with respect to industrial sector in this regard is in affirmative. The trend was almost same during the Second Five Year Plan (1956-1961) period as well.73 53.
According to the report. It might be largely unnoticed by the common folks as well as the so called developmental enthusiasts that the time the Sensex crossed 15000 or 20000 mark and more. As per the 7 . 2008). Adding more concern to this fact. The 2006 edition of the report had shown that India had added more people to the “newly hungry” in the planet than the rest of the world together. which provides employment to around 60 per cent of the population. The fact is largely ignored out of the joy (or desperation) over the stunning rise (or fall) of the media’s most loved index. Despite averaging over 8.al.al.71 54. but many of the world development indicators are confirming this fact of India’s lopsided growth path.74 The table clearly tells us that almost half of India’s GDP comes from the service sector alone. we can see that the performance is very bleak. India had over the several years. 2008). 2008)! Moreover all the Indian states have only at least a “serious” level of hunger and there is not a single state with low or even moderate levels of hunger (Menon et. If we look at agriculture sector. 2006). A Critical Evaluation of India’s lopsided Growth Path Despite the impressive achievement of the Indian economy. we tried to make a critical evaluation of the growth performance. The result is in tune with the result obtained at the beginning of the present section that of the gloomy growth trend of agriculture. growth has failed to be sufficiently inclusive in many respects.2006-07 20. Furthermore. India has achieved less than half of the United Nations Millennium Development Goal targets in hunger and is 66th on the Global Hunger Index out of 88 countries.5 percent growth since 2000. India now registered 67th in the Global Hunger Index — behind even Nigeria or Kenya (Grebmer et. A large chunk of the population is not included or benefited out of the ‘remarkable achievement’ India realised. every fifth woman died in child birth is an Indian.al. the World Health Organisation (WHO) reported that India as the leading nation in the number of women dying in childbirth (2008).55 Source: Economic Survey. Section 2 6. a report released by the Washington based International Food Policy Research Institute (IFPRI) (Grebmer et. 2007-08 24. It is in this context. the report of the United Nations’ Food & Agriculture Organisation says that we have the largest number of undernourished people in the globe (FAO. During 1995-97 and 2000-02 hunger grew in India at a time when it fell in Ethiopia! Not only these.
According to Forbes magazine. and that’s why inclusive growth is now considered essential even to sustain the growth momentum. Human Development Index prepared by the United Nations Development Programme (UNDP). As a result of the rural-urban migration. Why inclusive growth? It is at this juncture. average monthly per capita consumption expenditure in urban areas in India is almost double that of rural areas. lighting and power. education. Without including this large segment of population. Juxtapose this fact with a recent report on India’s shining face of corporate world that India now has over 1 lakhs millionaires (the intensity of their richness may vary. There should also be significant effort to tackle the underdevelopment problems which exist in the urban side as well. water. sanitation. which ensures inclusive economic growth. As it is evident from many studies. There must be increased investment in housing. and other infrastructure. As we have already stated. There should be sufficient increase in demand for manufacturing and service sectors from the rural population. health facilities. no developmental effort will ignite the momentum of inclusive economic growth. out of the 10 world's richest persons. as a result of the increased growth pace. we need to rethink to shape our strategy for a more sustainable development. that is. no one from other less developed or developing economies are included in the world’s top 100 richest club. urban development policies have to focus on inclusive investment. One such problem is increased rural-urban migration. Therefore the rural economy must flourish by rejuvenating agriculture and allied activities. 2007).most popular development index. Except Mexico. population pressure in urban areas will be increased leading to an increase in the volume of urban poor (Ray. four were Indians. According to the 2007 UNDP report. Brazil and Egypt. A handsome number of rich people from a country which is the home of the largest number of poor people in the world! It is quite evident that inclusive growth is imperative for achieving the equity objective. 2006). waste management. Saudi Arabia. India’s rank is only 128 (UNDP. One of the major problems 8 . India’s rank is any way dismal. in India a major chunk of population is based in rural side. 7. It is undoubtedly clear that we are ascending new heights of misery. Hence. 1998). according to the trends in the capital market). which was 126 in the 2006 report (UNDP. There should be considerable effort to handle this problem.
4 Eighth Plan 1992-97 4. Both figures indicate India’s rank according to these statistics as one of the lowest among world countries. Presently health expenditure as percentage of GDP is less than one percent. covering the vast majority of people. Jobs in the organised sector have not increased despite faster growth.9 2. In order to ensure their fitness.7 Annual Plan 1990-91 4.8 Annual Plan 1991-92 4. Table 4: Percentage share of Education and Health in Total Outlay Five Year Plan Year Education Health Third Plan 1961-66 6.2 2.1 Seventh Plan 1985-90 3.1 Source: Economic Survey.8 Sixth Plan 1980-85 2. 2008). The approach envisages the strategy for faster and more inclusive growth.6 Annual Plan 1966-69 4.7 3.7 Ninth Plan 1997-02 6. 2007-08 There must be heavy public investment in education and health in order to improve the quality of the population. Agriculture lost its growth momentum from that point on and subsequently entered a near crisis situation.associated with the inability of absorbing this migrant population by the urban sector is lack of education and skill level of the population. the approach paper rightly emphasised the economy’s failure to be more inclusive particularly after mid 1990s.5 2. Malnutrition levels also appear to be declining.0 1. This segment of population may not be able to afford such education and skill development. The percentage of our population below the poverty line is declining.9 Annual Plan 1979-80 2.5 Tenth Plan 2002-07 5.2 1. Approach towards Inclusive Economic Growth Planning Commission has announced its approach to Eleventh Five Year Plan (2007-2012) on the eve of the present plan period (2008).6 2. Amidst praising the glory of Indian economy with respect to its strong economic growth. 8.1 Fifth Plan 1974-79 4.0 1. and education expenditure is well below 4 percent (Economic Survey.5 1.1 Fourth Plan 1969-74 4.3 1. but 9 . Table 4 gives the share of total outlay in education and health during different Plan periods in India.5 1. huge social sector investment is required. but only at a modest pace.9 2.
Growth in industrial sector during Tenth Plan has increased from 4. agriculture growth rate was 2.5 percent 10 . clean drinking water and sanitation facilities without which they cannot claim their share in the benefits of growth (Economic Survey. The Tenth plan witnessed a deceleration in the pace of agricultural growth to that of almost 2 percent.3 percent and 7. to provide essential education and health services to those large parts of our population who are still excluded from these. has to be formulated to double the rate of agricultural growth. The plan trajectory as the approach paper says.3 percent to 9. In the approach paper. We have already pointed out the emergency in this regard at full length before. more broad-based and inclusive growth. One of the major problems associated with agricultural sector is the existence of underemployment or disguised unemployment. Therefore non-agricultural employment would need to increase at over 6 percent per annum during Eleventh Plan (Government of India. Another challenge is the changing employment patterns. During the Ninth plan period. It aimed at 10 percent growth by the end of the plan period by reducing poverty to a significant level and bridging several divides existed in the economy across regions and communities by ensuring access to basic physical infrastructure as well as health and education services to all. education. Major thrust must also be on the importance of increasing manufacturing competitiveness. 2006).6 percent in comparison with 4.the magnitude of the problem continues to be very high. a very realistic policy strategy.9 percent growth in industrial sector and service sector respectively (See Table 1). One such challenge is nothing but overcoming the agricultural crisis. nonagricultural employment. the planning commission has identified certain challenges to be overcome to ensure inclusive economic growth. 10 million workers currently in agriculture must find remunerative. 2007-08). Far too many people still lack access to basic services such as health. This deceleration is the root cause of the problem of rural distress. A key element of Eleventh Plan strategy should be. caused by low farm incomes as a result of inadequate productivity growth combined with low prices of agricultural output and lack of credit at reasonable rates. To reverse this trend. envisioned faster.
In order to aim 9 percent overall growth rate we must target at least 12 percent growth rate for this sector alone (Government of India.. It has been advocated that. Reflections from higher education sector are not that promising. the present paper largely addressed the changing structure of the Indian economy. The approach towards this marginalised population. 2008). However our competitive edge on the tracking of pure science has been loosened to a greater extent. Approach towards the development of human resources has also assumed significance. including social science education has been aggravated to a significant extent. Conclusion To sum up. their due rights. it is necessary to frame a transparent set of policy rules that address compensation. To continue our competitive advantage and ensure a continuous supply of quality manpower. The paper arranged in two sections. which is at the cost of displacement of certain amount of population from their land. Higher education scenario. This should be accompanied by fundamental reform of the curriculum as well as service conditions to attract a dedicated and qualified faculty. To give displaced people especially women. we need large investments in public sector institutions of higher learning. From a very modest growth path i. our development strategy has to be sensitive to environmental related issues and climatic changes.e. well below five percent annual growth rate. 9.(Table 1). In the long run. the relationship between environmental sustainability and economic growth must assume a complementary one that will ensure the well-being of the human beings. With this background. who were forcefully excluded. The first section gives a thorough understanding of the trend and the changing structure of the Indian economy over different Five Year Plan periods. Setting up of premier educational institutions like IITs (Indian Institute of Technology) and IIMs (Indian Institute of Management) has paid us rich dividends. must be in affirmative. the Indian economy has soared at an average rate of over seven percent every year in the last 11 . proper resettlement. Implementation of new projects is always there in the process of economic growth. how well it is ‘inclusive’ in the growth path of the present scenario. the paper tried to envisage the development experience of India in the context of. and rehabilitation and also gives project affected persons a permanent stake in project benefits.
This has always slackened the confidence of the public on any government initiative towards economic development. we tried to look at the changing structure of the economy over different Plan periods. What needs to be done by the government is to lessen its discretionary power. Despite the impressive achievement of the Indian economy. 12 . The agriculture lost its growth momentum from that point on and subsequently entered a near crisis situation. The growth trajectory of India tells us its bias towards the tertiary sector. We substantiated our argument by highlighting India’s 66th position in Global Hunger Index according to International Food Policy Research Institute (IFPRI). References Business Line (2008): Inclusive growth: An unfinished story. In this context we emphasised the economy’s failure to be more inclusive particularly after mid 1990s. 07/02/2008. and that’s why inclusive growth is now considered essential even to sustain the growth momentum.2006. FAO (2006): The State of Food Insecurity in the World. ensure greater transparency and accountability. we indicated our poor performance of social sector in our sixty years long development history. Amongst all. Invariably we argued that a handsome number of rich people from a country which is the home of the largest number of poor people in the world! Therefore it is quite evident that inclusive growth is imperative for achieving the equity objective. growth has failed to be sufficiently inclusive in many respects. even at the time of a very high overall economic growth. Rome. Furthermore. Food and Agriculture Organization (FAO) of the United Nations. the most important one is good governance and transparency in the implementation of public programmes.decade and at around nine percent in the past three years. The second section primarily dealt with a critical evaluation of the growth momentum India recently experienced. and create awareness among citizens. even at the time of strong economic growth. Corruption exists in every sphere of public life. Supplementing to this argument.
New York. Princeton. New York. Ministry of Finance (2008). World Health Organisation (2008): Annual Report-2007. Ray. New York United Nations Development Programme (2007): Human Development Report .al (2008): The Challenge of Hunger 2008. New Delhi.2007/08. Planning Commission. World Health Organisation. Anil Deolalikar. Purnima. International Food Policy Research Institute (IFPRI). New Delhi. Government of India (2008): Approach Paper to the Eleventh Five Year Plan (2007 to 2012). Geneva. Planning Commission.Government of India (2006): Approach Paper to the Eleventh Five Year Plan. International Food Policy Research Institute (IFPRI). United Nations (2008). Grebmer. 13 . Government of India. Washington. Menon. United Nations Development Programme (2006): Human Development Report . and Anjor Bhaskar (2008): Comparison of Hunger Across States India: State Hunger Index. New Delhi. Heidi Fritschel et. Department of Making Pregnancy Safer. Debraj (1998): Development Economics. United Nations. Palgrave Macmillan. Washington.2006. Palgrave Macmillan. The Millennium Development Goals Report 2008. Economic Survey 2007-08. Princeton University Press. Oxford University Press. Klaus von.
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