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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 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. Even at
2008. Scheme of the Study The present paper is arranged in three sections. India having over the years.. The section gives an understanding of the trend and structure of the economy in a broader level. statistics related to plan outlay during different plan periods etc. It is in this context we need to look at the growth trajectory. Simple techniques like tabulation. 2. 3. Section 2 deals with the analysis of the 2 .. were employed for the purpose of analysis. percentage distribution. 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. The data sources mainly include national account statistics.. Data Source and Methodology The study made use of secondary data sources to fulfil its objectives. WHO report etc. 2008). 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. To find out major shortcomings in the development experience of India. India stood upright among the mainstream economies of the world.. diagrams.al.the time of the recent global recession. Database related to Global Hunger Index available in The Challenge of Hunger (Grebmer et. available with Economic Survey. Sectoral distribution of GDP (constant prices) is also analysed over different Five Year Plan periods. UNDP Report. The first section addresses the issue of growth pattern of India since independence. 4. The study mainly analysed the trend and composition of Gross Domestic Product (GDP) of India (in constant prices) over the period of analysis. To evaluate the growth pattern of India over several Five Year Plan periods 2. Objectives of the Study The broad objectives of the study are the following: 1. growth rate etc.
49 0.45 11.54 9.08 1.52 3.84 8.65 3.84 7.49 2.28 2.33 4.41 -12.89 6.26 4. 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 10th Five Year Plan 2004-05 (2002 to 2007) 2005-06 2006-07 Source: Economic Survey.17 4.47 9.17 4.53 5.89 7. Except for few years the growth rate of agriculture is very low. 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.43 5.34 3. The dramatic performance of agriculture during 2003-04 was mainly due to the climatic advantage during the year.88 -5. India surged towards greater level of growth rate during almost all plan periods.52 7. This gives India a very practical lesson that.30 2.60 4.81 -4.35 3. The performance of agriculture was chiefly responsible for the historical growth rate of about 9 percent during that year.92 6.62 It is evident from the table that over the years.28 6.45 9.85 5.91 5.08 GDP 3.74 7. A look at the sector-wise growth indicates a bias of growth path towards secondary and tertiary sectors.63 10.69 -0.16 -3.45 6.70 10.91 5.59 5.37 5.06 5. Section 3 sums up and concludes major findings of the paper.70 3.67 7. India made a stunning performance with regard to overall GDP growth. 2007-08 Agriculture Industry Service 2.95 11.82 10.33 7.54 5.54 4.87 2. Table 1 shows the average growth rate of each of the sectors of the economy over Five Year Plans.economy in terms of the major lacunas and to visualise the growth trajectory of India since independence.91 5.49 4.67 3.14 5.65 6.16 3.59 4.80 8. Except for 1979-80 (Annual Plan).03 6.97 3.40 9.29 7.02 3.05 3.04 6. 3 .87 4. The growth performance of agriculture is not even comparable with the performance of industrial and service sectors.
15 10 5 Agriculture 0 2003-04 2004-05 2005-06 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 1992 to 1997 1997 to 2002 1989-1992 2006-07 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. 4 . Figure 1: Trend of Agriculture/Industry/Service sectors during Five Year Plan Periods.agriculture sector cannot be ignored in the march to attaining higher economic growth. On the whole. The Figure 2 gives the trend in GDP over several plan periods. contributing to a better economic growth. 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. the trend in the GDP shows a rather lopsided growth rate. Figure 1 is expressive of the trend the economy has experienced over the Plan periods.
97 1954-55 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.83 1953-54 57. 12 10 8 6 Growth Rate (%) 4 GDP 2 0 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 1992 to 1997 1997 to 2002 2003-04 2004-05 2005-06 1989-1992 2002-03 2006-07 -2 -4 -6 Plan Period/Year As the diagram (Figure 2) shows except for 1979-80 (Annual Plan Period).66 29. the trend in GDP is almost in affirmative and gives an impressive trend over the years.72 1952-53 56.59 13. 2007-08 5 .62 28. Structure of the Economy The structure of the Indian economy has changed tremendously over the years since independence.64 1951-52 56. 5.42 13.33 13.09 Source: Economic Survey.70 13. For instance.58 29.71 14.19 29. 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.Figure 2: Trend in GDP growth rate over different Five Year Plan periods.95 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.
67 2006-07 20.73 2003-04 23. 2007-08 Industry 22. Though the trend with respect to industrial sector in this regard is in affirmative. Figure 3: Trend in the Contribution of different sectors to GDP over the years 70.85 23.75 52.36 24. the share of service sector increased greatly in comparison with the other two productive sectors.00 50.71 6 Service 50. The trend was almost same during the Second Five Year Plan (1956-1961) period as well.00 10.00 60.73 53.00 Agriculture Industry Service 30.00 0.It is very evident from the table that. However.31 24. the change took place only in a slow pace.00 40.74 .02 54.96 52.55 Source: Economic Survey.90 2004-05 22.19 2002-03 23. Since 1981 onwards.00 20. The Plan gives more thrust to the industrial development. During the Plan period more than half of the GDP was contributed by the primary sector alone.04 24. the share of agriculture started declining since the Second Five Year Plan period (See Figure 3). agriculture contributed more to the GDP during the First Five Year Plan period. the service sector became the largest contributor to GDP.00 1950-51 1952-53 1954-55 1956-57 1958-59 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 As the diagram rightly explains.40 2005-06 21.52 23. 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 Agriculture 2001-02 26.56 54.
the World Health Organisation (WHO) reported that India as the leading nation in the number of women dying in childbirth (2008). It is in this context. growth has failed to be sufficiently inclusive in many respects. 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. that is. As per the most popular development index. the report of the United Nations’ Food & Agriculture Organisation says that we have the largest number of undernourished people in the globe (FAO. India’s rank is any way dismal. During 1995-97 and 2000-02 hunger grew in India at a time when it fell in Ethiopia! Not only these. Furthermore. The result is in tune with the result obtained at the beginning of the present section that of the gloomy growth trend of agriculture. Despite averaging over 8. India now registered 67th in the Global Hunger Index — behind even Nigeria or Kenya (Grebmer et. Human Development Index prepared by the United Nations Development Programme (UNDP). but many of the world development indicators are confirming this fact of India’s lopsided growth path. we tried to make a critical evaluation of the growth performance.The table clearly tells us that almost half of India’s GDP comes from the service sector alone.5 percent growth since 2000. India had over the several years. Adding more concern to this fact. 2008). According to the report. If we look at agriculture sector. 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. According to the 7 . we can see that the performance is very bleak. 2008). 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. The fact is largely ignored out of the joy (or desperation) over the stunning rise (or fall) of the media’s most loved index. A Critical Evaluation of India’s lopsided Growth Path Despite the impressive achievement of the Indian economy.al. which provides employment to around 60 per cent of the population.al. A large chunk of the population is not included or benefited out of the ‘remarkable achievement’ India realised.al. Section 2 6. every fifth woman died in child birth is an Indian. 2006). a report released by the Washington based International Food Policy Research Institute (IFPRI) (Grebmer et. 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.
7. As we have already stated. One such problem is increased rural-urban migration. which was 126 in the 2006 report (UNDP. India’s rank is only 128 (UNDP. four were Indians. in India a major chunk of population is based in rural side. Why inclusive growth? It is at this juncture. no developmental effort will ignite the momentum of inclusive economic growth. Saudi Arabia. There should be sufficient increase in demand for manufacturing and service sectors from the rural population. and other infrastructure. as a result of the increased growth pace. education. It is undoubtedly clear that we are ascending new heights of misery. There should also be significant effort to tackle the underdevelopment problems which exist in the urban side as well. According to Forbes magazine. Except Mexico. One of the major problems associated with the inability of absorbing this migrant population by the urban sector is lack of education and skill level of the population. average monthly per capita consumption expenditure in urban areas in India is almost double that of rural areas. population pressure in urban areas will be increased leading to an increase in the volume of urban poor (Ray. waste management. As a result of the rural-urban migration. and that’s why inclusive growth is now considered essential even to sustain the growth momentum. sanitation. no one from other less developed or developing economies are included in the world’s top 100 richest club. lighting and power. 1998). 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. There must be increased investment in housing. Without including this large segment of population. 2007). 2006). according to the trends in the capital market). Brazil and Egypt. There should be considerable effort to handle this problem. Hence. we need to rethink to shape our strategy for a more sustainable development. which ensures inclusive economic growth. water. As it is evident from many studies. This segment of population may not be able to afford such 8 . health facilities. 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. out of the 10 world's richest persons. Therefore the rural economy must flourish by rejuvenating agriculture and allied activities.2007 UNDP report. urban development policies have to focus on inclusive investment.
7 Ninth Plan 1997-02 6. Agriculture lost its growth momentum from that point on and subsequently entered a near crisis situation.6 Annual Plan 1966-69 4. 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).5 Tenth Plan 2002-07 5.1 Source: Economic Survey. covering the vast majority of people.7 Annual Plan 1990-91 4. Both figures indicate India’s rank according to these statistics as one of the lowest among world countries.6 2.2 1. Jobs in the organised sector have not increased despite faster growth.4 Eighth Plan 1992-97 4. Amidst praising the glory of Indian economy with respect to its strong economic growth.5 1. but only at a modest pace. The percentage of our population below the poverty line is declining.1 Fourth Plan 1969-74 4. clean drinking water and sanitation facilities 9 . Table 4 gives the share of total outlay in education and health during different Plan periods in India. huge social sector investment is required.0 1.3 1.0 1.5 1. 2007-08 There must be heavy public investment in education and health in order to improve the quality of the population. Table 4: Percentage share of Education and Health in Total Outlay Five Year Plan Year Education Health Third Plan 1961-66 6. the approach paper rightly emphasised the economy’s failure to be more inclusive particularly after mid 1990s.8 Annual Plan 1991-92 4. Far too many people still lack access to basic services such as health.7 3. education.9 2.8 Sixth Plan 1980-85 2. Presently health expenditure as percentage of GDP is less than one percent. but the magnitude of the problem continues to be very high.9 2. and education expenditure is well below 4 percent (Economic Survey. 2008). The approach envisages the strategy for faster and more inclusive growth.9 Annual Plan 1979-80 2.1 Seventh Plan 1985-90 3.education and skill development. 8.5 2. Malnutrition levels also appear to be declining. In order to ensure their fitness.1 Fifth Plan 1974-79 4.2 2.
Another challenge is the changing employment patterns.without which they cannot claim their share in the benefits of growth (Economic Survey. To reverse this trend. 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.5 percent (Table 1). The plan trajectory as the approach paper says. has to be formulated to double the rate of agricultural growth. Therefore non-agricultural employment would need to increase at over 6 percent per annum during Eleventh Plan (Government of India.6 percent in comparison with 4. During the Ninth plan period. 2007-08). envisioned faster. a very realistic policy strategy. 10 .3 percent and 7. We have already pointed out the emergency in this regard at full length before. Growth in industrial sector during Tenth Plan has increased from 4. In the approach paper. to provide essential education and health services to those large parts of our population who are still excluded from these. Major thrust must also be on the importance of increasing manufacturing competitiveness. 2008). 10 million workers currently in agriculture must find remunerative. The Tenth plan witnessed a deceleration in the pace of agricultural growth to that of almost 2 percent. 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.3 percent to 9. One such challenge is nothing but overcoming the agricultural crisis. more broad-based and inclusive growth. A key element of Eleventh Plan strategy should be. 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.9 percent growth in industrial sector and service sector respectively (See Table 1). agriculture growth rate was 2. This deceleration is the root cause of the problem of rural distress. nonagricultural employment. One of the major problems associated with agricultural sector is the existence of underemployment or disguised unemployment. the planning commission has identified certain challenges to be overcome to ensure inclusive economic growth. 2006).
e. who were forcefully excluded. including social science education has been aggravated to a significant extent. proper resettlement. Higher education scenario. It has been advocated that. Furthermore.. This should be accompanied by fundamental reform of the curriculum as well as service conditions to attract a dedicated and qualified faculty. To continue our competitive advantage and ensure a continuous supply of quality manpower. However our competitive edge on the tracking of pure science has been loosened to a greater extent. Setting up of premier educational institutions like IITs (Indian Institute of Technology) and IIMs (Indian Institute of Management) has paid us rich dividends.Approach towards the development of human resources has also assumed significance. we need large investments in public sector institutions of higher learning. The approach towards this marginalised population. the present paper largely addressed the changing structure of the Indian economy. we tried to look at the changing structure of the economy over different Plan periods. which is at the cost of displacement of certain amount of population from their land. the paper tried to envisage the development experience of India in the context of. must be in affirmative. 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. Conclusion To sum up. our development strategy has to be sensitive to environmental related issues and climatic changes. To give displaced people especially women. and rehabilitation and also gives project affected persons a permanent stake in project benefits. well below five percent annual growth rate. how well it is ‘inclusive’ in the growth path of the present scenario. The first section gives a thorough understanding of the trend and the changing structure of the Indian economy over different Five Year Plan periods. Reflections from higher education sector are not that promising. it is necessary to frame a transparent set of policy rules that address compensation. The paper arranged in two sections. In the long run. With this background. Implementation of new projects is always there in the process of economic growth. The growth trajectory of India 11 . their due rights. the relationship between environmental sustainability and economic growth must assume a complementary one that will ensure the well-being of the human beings. From a very modest growth path i. 9.
and create awareness among citizens. Government of India (2006): Approach Paper to the Eleventh Five Year Plan. Food and Agriculture Organization (FAO) of the United Nations. Supplementing to this argument.2006. Despite the impressive achievement of the Indian economy. we indicated our poor performance of social sector in our sixty years long development history. and that’s why inclusive growth is now considered essential even to sustain the growth momentum.tells us its bias towards the tertiary sector. ensure greater transparency and accountability. References Business Line (2008): Inclusive growth: An unfinished story. The second section primarily dealt with a critical evaluation of the growth momentum India recently experienced. We substantiated our argument by highlighting India’s 66th position in Global Hunger Index according to International Food Policy Research Institute (IFPRI). even at the time of a very high overall economic growth. Planning Commission. In this context we emphasised the economy’s failure to be more inclusive particularly after mid 1990s. 12 . What needs to be done by the government is to lessen its discretionary power. This has always slackened the confidence of the public on any government initiative towards economic development. even at the time of strong economic growth. growth has failed to be sufficiently inclusive in many respects. New Delhi. Rome. 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. The agriculture lost its growth momentum from that point on and subsequently entered a near crisis situation. the most important one is good governance and transparency in the implementation of public programmes. 07/02/2008. Corruption exists in every sphere of public life. Amongst all. FAO (2006): The State of Food Insecurity in the World.
Debraj (1998): Development Economics. United Nations. World Health Organisation. and Anjor Bhaskar (2008): Comparison of Hunger Across States India: State Hunger Index. Palgrave Macmillan. United Nations (2008). New Delhi. Economic Survey 2007-08. Klaus von. Palgrave Macmillan. International Food Policy Research Institute (IFPRI). United Nations Development Programme (2006): Human Development Report . Ministry of Finance (2008). Geneva. Department of Making Pregnancy Safer. Menon. Planning Commission. New York. Washington. Purnima. World Health Organisation (2008): Annual Report-2007. Grebmer.2006. Washington. New Delhi.al (2008): The Challenge of Hunger 2008. New York United Nations Development Programme (2007): Human Development Report . 13 . New York. Government of India. International Food Policy Research Institute (IFPRI).2007/08.Government of India (2008): Approach Paper to the Eleventh Five Year Plan (2007 to 2012). Princeton University Press. Anil Deolalikar. Ray. Oxford University Press. The Millennium Development Goals Report 2008. Princeton. Heidi Fritschel et.