INCLUSIVE DEVELOPMENT IN INDIA:

Agriculture, Hunger, Poverty, Inequalities and Human Development

 

S. Mahendra Dev
Editor EPW and former Director and Vice Chancellor, IGIDR, Mumbai

Presidential Address
nd
at the 22 annual conference of the Indian Society of Social Science Institutions,
November 2-4, 2023, Hyderabad

Organised by
Centre for Economic and Social Studies, Hyderabad

INCLUSIVE DEVELOPMENT IN INDIA:

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Agriculture, Hunger, Poverty, Inequalities and Human Development

S. Mahendra Dev

“In India, the prevailing inequitable socioeconomic structure, and the

influence exerted by the socio-economically privileged sections on
economic policy-making and implementation, and not globalisation per se,
are responsible for the rise in income inequalities. The political and
economic drivers of declining income inequality include deepening of
democracy, new social movements, expansion of education and social
safety nets, and an increase in government transfers to the poor. While
some of the most atrocious social inequalities have been reduced in India,
the idea of equality continues to encounter serious difficulties. Forging
unity between the like-minded political parties around the demands for
social justice and protection of environment is critical to achieving
inclusive development” (p.1, C.H. Hanumantha Rao, 2021)

It is a great honour and privilege to deliver the Presidential Address at the 22nd Annual
Conference of the Indian Association of Social Science Institutions. I am grateful to the
Association for conferring this honour on me. As you know IASSI is a federal formation of
universities and research institutes that aims to promote and strengthen teaching and research in
social sciences. It publishes a quarterly titled ‘contributions to Indian Social Sciences’. The
annual conferences of the Association provide opportunities for young scholars to present
research papers and interact with eminent social scientists.

Keeping in view the broader interests of the IASSI, I have chosen to speak on ‘Inclusive
Development: Agriculture, hunger, poverty, inequalities and human development. It is known
that the topic ‘inclusiveness’ is one of the most discussed development problem all over the
world.

1 INTRODUCTION

Before going to the components, we examine the concepts of inclusive growth and inclusive
development. According to one definition, the inclusive growth is in line with the absolute
definition of pro-poor growth, but not the relative definition (Ianchovichina and Lundstrom,
2009). If we consider absolute definition, growth is considered to be pro-poor as long as poor
people benefit in absolute terms, as reflected in some agreed measures of poverty (Ravallion and
Chen, 2003). On the other hand, under the relative definition, growth is pro-poor if and only if
the incomes of poor people grow faster than those of the population as a whole. In other words,
inequality has to decline under this definition of inclusive growth. Pernia and Kakwani (2009)
consider that growth is pro-poor when the benefits of growth that accrue to the poor are
proportionally more than those received by the non-poor. They also argue that a pro-poor
growth scenario would occur if growth reduces poverty, and inequality is decreased
simultaneously during the course of growth.

What is inclusive development? Kanbur and Rauniyar (2009) explain the differences among
pro-poor growth, inclusive growth and inclusive development. According to them, pro-poor
growth is identified as growth that also reduces income poverty. Inclusive growth is defined as
growth that is accompanied by lower income inequality, so that growth in incomes accrues
disproportionately to those with lower incomes. The concept of inclusive development differs
from inclusive growth. The focus of inclusive development is not confined to income alone as it
includes other dimensions of well-being, in particular education and health. Inclusive
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development, thus, refers to the improvement of the distribution of well-being in income and
non-income dimensions. Sustainable Development Goals (SDGs) identify a number of these
dimensions. They also provide a good framework for measuring and achieving inclusive
development.

Recently, Kakwani and Zakaria (2023) discussed four development goals: (i) pro-poor growth,
(ii) inclusive growth, (iii) pro-poor development, and (iv) inclusive development. According to
them, the literature has not distinguished these four concepts. This paper defines the four goals,
providing a methodology to operationalize them using real-world data. They provides a case
study of India using state-level data. This empirical analysis informs whether growth and
development in India have been pro-poor and inclusive over two decades.

Against this background, this lecture examines performance, challenges and policies in three
interrelated components of inclusive development: (a) Agriculture and hunger; (b) poverty and
inequalities; and (c) human development. They also cover most of the SDGs.

2. AGRICULTURAL DEVELOPMENT AND ACHIEVING ZERO HUNGER

2.1. Agriculture

Agriculture not only contributes to overall growth of the economy but also provides
employment and food security to majority of the population in the country. Thus, agriculture
plays a pivotal role in Indian economy and this sector’s better performance is vital for inclusive
development.

Fig 1. Growth rate in Gross value added (GVA

9   8.8  
7.7  
8  
7   6.2  
Growth  Rate  (%)  

6   5.4  
5  
4  
3.0   3.2  
3   2.5   2.5  
2.2  
2  
1  
0  
Crops   Livestock   Fishing  &  aquaculture  
1995-­‐2004   2005-­‐2014   2015-­‐2021  
Source: Sharma (2023)

India’s agricultural transformation from food deficit country in the 1960s to food self
sufficiency is well known with achievements like green revolution, white revolution, growth in
maize, poultry, cotton revolution, high growth in horticulture and live stock. India is the largest
producer of milk, cotton and pulses, second largest in rice, wheat, fruits and vegetables.
   3  

There has been significant diversification in agriculture in value terms towards fruits and
vegetables and livestock. Several studies have shown higher growth rates in high value crops
and allied activities. As shown in Fig 1, livestock and fisheries sectors showed growth rates of
7.7% and 8.8% per annum respectively as compared to the growth rate of 2.2% per annum in
crop sector during the period 2015-2021.

The state level data also shows that the growth rates in livestock and fisheries are much higher
than that of crop sector during the decade 2011-12 to 2020-21 (Tabl 1). Only 7 out of 20 states
showed less than 6% growth per annum for livestock while 10 out of 20 sates showed less than
8% growth per annum for fisheries. The irrigation ratio (gross irrigated area as per cent of gross
cropped area) is less than 25 per cent for states like Assam, Himachal Pradesh, Jharkhand,
Kerala, Maharashtra. It is 29 per cent for Odisha and less than 40 per cent for Chattisgarh and
Karnataka.

Table 1: Growth Rates of gross state Value Added by agriculture sub sector, and irrigation coverage
States Annual trend growth rate during 2011-12 to 2020-21 Gross
irrigated area
as% of gross
Crops Livestock Fisheries Agriculture & cropped area
allied 2019-20
Andhra Pradesh 4.81 8.26 19.57 8.33 52.3
Assam 5.40 20.98 6.62 5.79 13.7
Bihar -2.15 8.89 8.32 1.95 74.5
Chattisgarh 3.48 7.68 9.95 4.58 35.3
Gujarat 2.93 5.90 4.78 4.28 61.0
Haryana 0.53 7.51 9.09 3.08 94.9
Himachal Pradesh 1.54 8.83 8.46 2.26 22.8
Jharkhand 4.15 6.33 11.49 4.68 15.3
Karnataka 4.73 9.67 1.59 5.33 36.4
Kerala -4.80 0.87 0.9 -2.01 19.9
Madhya Pradesh 7.79 14.87 14.60 8.28 52.0
Maharashtra 4.10 6.35 0.71 4.58 20.3
Odisha 4.83 4.49 10.76 4.77 29.2
Punjab 0.51 5.44 6.51 2.11 98.6
Rajasthan 1.71 11.14 8.82 5.12 42.8
Tamil Nadu 1.38 11.58 3.65 4.99 57.4
Telangana 6.45 8.32 7.54 6.23 61.3
Uttarakhand -1.40 5.15 4.30 0.99 52.6
Uttar Pradesh 2.50 2.70 6.78 2.48 84.8
West Bengal 2.29 4.59 2.72 2.79 65.7
All India 2.0 5.8 8.9 3.5 53.1
Source: Chand and Singh (2023)
Structural transformation in agriculture led to increasing share of output for high value crops and
allied activities. The shares in value of output in total agriculture allied including forestry in
2019-20 are the following: Crop sector (58.1%): Cereals (15.7%), Horticulture (15.30%);
Livestock (28.8%); Forestry (7.9%).

However, there are several challenges for agriculture sector. The green revolution approach has
led to water logging, soil erosion and ground water depletion, indiscriminate use of chemical
fertilisers and pesticides leading to unsustainability of agriculture. Climate change is another
challenge for Indian agriculture. Inspite of increasing production and productivity, continuing
food and nutrition insecurity is a concern.
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The Economic Survey (GOI, 2023) calls for reorientation due to challenges like climate change,
rising input costs, fragmented land holdings, sub-optimal farm mechanization, low productivity,
and disguised unemployment. The RBI Report on Currency and Finance says that “the  
agriculture   sector   suffers   from   low   capital   formation,   declining   R&D,   low   crop   yields,  
inadequate  crop  diversity  and  intensity,  with  excessive  dependence  on  subsidies  and  price  
support  schemes”  (p.75,  RBI,  2022)

In the next 25 years, Amrit Kaal (2022-2047), there is a need to change narrative and policies.
We discuss here these policies on growth, inclusiveness and sustainability, the three goals of
agricultural development.

(1) Need for change in narrative in the new context: Basically, we have to change the narrative
on agriculture towards more diversified high value production, better remunerative prices and
farm incomes, marketing and trade reforms, high productivity with less inputs, cost effective,
less chemical and pesticide based, inclusive in terms of women and youth farmers, small farmers
and rain fed areas, nutrition sensitive, environmental friendly and sustainable agriculture.

(2) We have to walk on two legs (agriculture and non-agriculture) in the changing context:
Rural areas are changing. We have to invest in agriculture for raising the livelihoods but
simultaneously shift population from agriculture to non-agriculture over time. Thus, both
agriculture and non-agricultre are important for raising income of farm households. Some
economists like T N Srinivasan argued that the solution for problems in agriculture was in non-
agriculture. Therefore, labour-intensive manufacturing and services can reduce pressure on
agriculture. Income from agriculture is not sufficient for small holders and informal workers.
Strengthening rural MSMEs and food processing is part of the solution.

(3) Remunerative price is the most important factor for farmers: Price factor was important even
during green revolution time along with technology. Even after 75 years of independence, we
are not able to provide remunerative prices for farmers. Farmers have been getting low prices in
normal, drought and good years because of distortions in price and marketing policies. Few
years back, the government announced an umbrella scheme ‘Pradhan Mantri Annandata Aay
Sanrakshan Abhiyan’ (PM-AASHA). There are some issues to be sorted out in each scheme for
better implementation.

(4) Beyond harvest and Freedom for farmers: We have to go beyond farming and develop value
chain comprising farming, wholesaling, warehousing, logistics, processing, and retailing.
Farmers want freedom from restrictions on market and exports. It may be noted that in spite of
MSP and subsidies, Indian farmer is net taxed as compared to farmers of other countries. An
OECD and ICRIER study shows that PSE (producer support estimates) was negative to the tune
of 14% on average during the period 2000-01 to 2016-17 (Gulati and Cahill, 2018). In other
words, distorted policies are hurting the Indian farmers.

(5) Increase and Diversify Exports: India’s exports have increased significantly to US$ 50
billion in 2021-22 due to higher exports of rice and sugar (Table 2). Simultaneously imports also
increased over time. As a result, trade surplus in recent years has not reached to the levels of
2012-13 and 2013-14. The value of India’s exports is high when global prices are higher
(Damodran, 2023). There is no long-term policy on exports and futures markets. Export bans are
imposed frequently. Banning exports hurts the farmers most. There is a need for predictability
and stable export policies. Diversification of exports is also required.
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Table 2: Agricultural Exports and Imports in India (US$ billion)

Year Exports Imports Trade suprplus
2012-13 41.7 19.0 22.7
2013-14 43.3 15.5 27.7
2014-15 39.1 21.2 17.9
2015-16 32.8 22.6 10.2
2016-17 33.7 25.6 8.1
2017-18 38.9 24.9 14.0
2018-19 39.2 20.9 18.3
2019-20 35.6 21.9 13.7
2020-21 41.9 21.7 20.2
2021-22 50.2 32.4 17.8
Source: Damodaran (2023)

(6) Start-ups: The government has been promoting start-ups by giving incentives. There have
been new generation start-ups coming up in agriculture. The start-ups brought several
innovations in product, process, marketing and organisation. These startups relied mainly on
online and mobile platforms and rendered input and output services (Rao et al, 2017). These
start-ups have been altering the value chain and roles of different actors by cutting down the
length of value chain. The start-ups can complement digital public infrastructure for agriculture
announced in the budget.

(7) Do not forget basics like water and technology: Basics like seeds, fertilizers, credit, land and
water management and technology are important and they should not be forgotten. Basically it is
not investment alone but efficiency in water management in both canal and ground water is
important. Yields for several crops in India are lower than many countries of the world.
Similarly, growth in total factor productivity in India has been lower compared to countries like
Brazil, China and Indonesia (BIC)1. What policies, investment and institutions explain these
differences? There is no single bullet for lower productivity in India. Overall these three BIC
countries invested more in technology, extension, education, transport, energy and better
institutions (Lele et al, 2018). India is trailing and should invest more in each of these areas and
implement effectively.

(8) Investment and Subsidies in Agriculture: Investment as per cent of GVA in agriculture&
allied activities declined from 18 per cent in 2011-12 to 14.8 per cent in 2017-18 before rising to
16 per cent in 2020-21 (Table 3). Public investment as percent of GVA in agriculture& allied
activities has hovered between 2 and 3 per cent in the last one decade. In most of the years it
was 2.4 per cent or below (Table 3). The trends in private investment are similar to total
investment as 85 per cent of the investment in agriculture is by the private sector led by
household sector.

There seems to be some trade-off between subsidies and public investment in agriculture. The
subsidy in agriculture as per cent of GVA in agriculture & allied activities was more than 3
times of public investment in agriculture in 2019-20 (Table 3)2. As mentioned above, investment
of R&D in agriculture is much lower than that of other countries. There is only a marginal
increase in the funds for research in the recent budgets. The returns to investment on research

                                                                                                               
1
See Lele et al (2018)

2  The subsidy presented in Table 3 includes power subsidy.

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and extension will be much higher on agricultural growth as compared to other public
investments.

Table 3. Investment and Subsidies in Agriculture and Allied sector (at 2011-12 prices) as per cent of GDP
Year Total Private Public Subsidies as per
Investment as investment as investment cent of
Per cent of per cent of as per cent agriculture GVA
Agriculture agriculture GVA of agriculture
GVA GVA
1 2 3 4 5
2011-12 18.3 15.9 2.4 7.86
2012-13 16.5 14.1 2.4 7.88
2013-14 17.7 15.6 2.1 6.62
2014-15 17.0 14.7 2.3 6.62
2015-16 14.7 12.1 2.6 7.37
2016-17 15.5 12.7 2.8 6.31
2017-18 14.8 12.3 2.5 6.88
2018-19 15.8 12.9 2.9 6.82
2019-20 15.2 12.8 2.4 6.57
2020-21 16.0 13.7 2.3 6.93
Source: Cols 2 to 4 estimated by the author based on data from Agricultural Statistics at a Glance 2021,
Ministry of Agriculture, GOI; Col.5 on subsidies, Chand and Singh (2023).

The government has announced Rs. 1 lakh crore agricultural infrastructure fund in 2020. This
fund on agriculture infrastructure should be incentivsed to utilise on a fast track and also can be
used to promote farm producer organisations to help the small and marginal farmers.

(9) Inclusiveness for broad based growth and equity: Small farmers require special support:
public goods and links to input and output markets. Many technological and institutional
innovations can enable them to increase incomes through diversification, and benefit from value
chains. Farmer producer organisations help get better prices for inputs and outputs for small
holders. The ITC’s E-Choupal is an example of technology benefiting small farmers. Similarly,
women’s empowerment is important particularly for raising incomes and nutrition. Women’s
cooperatives and groups like Kudumbashree in Kerala would be helpful. One of the successful
examples of a value chain that helped small holders, women and consumers is Amul (Anand
Milk Union Ltd) created by Verghese Kurien. Inequalities in agriculture are high. There is a
need to focus on small and marginal farmers, women, youth, rainfed areas, Eastern and other
lagging regions, social groups like SC and ST farmers.

(10) Measures to take care of impacts of climate change and improving resilience in agriculture
and sustainability: One can achieve higher agricultural growth but it has to be sustainable in
terms of using lower resources and less input growth. Resilience in agriculture has to be
improved. Climate smart agriculture is being discussed throughout the world to reduce GHG
emissions and increase resilience. FAO (2010) says that there is a need for raising technical
capacity of farmers particularly small holders to enable them adopt climate-smart agricultural
practices. Conservation agriculture and zero budget natural farming are some of the methods
that have to be used as part of adaptation and mitigation measures for climate change3.

(11) Institutions and Governance: Strengthening institutions and governance is crucial for
achieving growth, equality and sustainability of agriculture. Institutions throughout the
                                                                                                               
3
 On  natural  farming,  see  Reddy  (2022)  
   7  

agricultural value chains and food systems are important for better governance and effective
implementation. They are also important for reducing inequality. There are several examples of
best practices in institutions relating to alternative markets, contract farming, self help groups,
farmer federations, farmer producer companies, women collectives, institutions relating to canal
and ground water irrigation and natural resource management. We have to scale up some of
these successful institutions for improving agricultural development. Similarly, institutions are
required to tackle the risk of climate change.

(12) Digital technology: There are significant opportunities for digitalization of Indian
agriculture. Government has launched National e-Governance Plan in Agriculture (NeGPA) to
provide timely information to farmers through the use of information & communication
technologies. The government is also promoting use of modern technologies such as Artificial
Intelligence, Machine Learning, Block Chain Technology, Internet of Things, Robotics, Drones,
and Sensors. The digital technology will help better crop planning, crop estimation, supply
planning, market intelligence and improved access to farm inputs and services.

To conclude, agriculture is a state subject according to the Indian constitution. States have to
play active role along with central government in achieving the three goals of growth,
inclusiveness and sustainability. Agriculture transformation has to be viewed more holistically
in terms of rural transformation and urban linkages. There is a need to give big push for Indian
agriculture for transformation and achieving farmers’ welfare.

2.2. Achieving Zero Hunger

Inspite of increase in per capita foodgrains and transformation of agriculture, hunger and
malnutrition are quite high in India. The SDG 2.1 deals with ending hunger and ensure access by
all people, in particular the poor and people in vulnerable situations, including infants, to safe,
nutritious and sufficient food all year round by 2030 while SDG 2.2 goal is to end all forms of
malnutrition, including achieving, by 2025, the internationally agreed targets on stunting and
wasting in children under 5 years of age, and address the nutritional needs of adolescent girls,
pregnant and lactating women and older persons. FAO (2023) says ‘Nutrition is mentioned
specifically in SDG 2 but is central to the achievement of all 17 SDGs’.

According to Swaminathan (2015), hunger has three major dimensions. First one is calories
deprivation. Second, protein hunger is another deprivation, due to inadequate consumption of
pulses, milk, eggs, fish and meat. Third is hidden hunger, caused by the deficiency of micro-
nutrients such as iron, iodine, zinc, vitamin A and vitamin B12. Food and agricultural
Organisation (FAO) defines food security as ensuring ‘that all people, at all times, have
physical, social, and economic access to sufficient, safe, and nutritious food that meets their
food preferences and dietary needs for an active and healthy life’ (FAO, 1996).

India achieved significant progress in achieving food and nutrition security. But, there are
several challenges. The National Family Health Survey (NFHS) data shows some reduction
child stunting from 48% in 2005-06 to 35.5% in 2019-21 and underweight from 42.5% to 32.1%
(Fig 2). But wasting has not declined over time. Women having body mass index (BMI) below
normal declined from 35.5% in 2005-06 to 18.7% in 2019-21.

However, according to FAO (2023), still 16.6% of population (234 million) suffer from
prevalence of undernourishment. All women age 15-49 years who are anaemic was 57% in
2091-21 –increased from 53.1% in 2015-16.
   8  

Fig 2. Undernutrition among children under 5 years: All India : 2005-06, 2015-16, 2019-21
60  

50  

40  

NFHS-­‐3  
30  
NFHS-­‐4  
20   NFHS-­‐5  

10  

0  
Stunted  (low  height-­‐for-­‐ Wasted  (low  weight-­‐for-­‐ Underweight  (low  weight-­‐
age)   height)   for-­‐age)  

Source: NFHS

There are significant variations in undernutrition across states. In 5 states (Gujarat, Himachal
Pradesh, Kerala, Telangana, West Bengal stunting has increased during the period 2015-16 to
2019-21 (Table 4). It marginally increased in Gujarat and Maharashtra. Stunting declined in 9
states. Kerala state has the lowest stunting level at 23.4% followed by Punjab, Tamil Nadu and
Uttarakhand. On the other hand, Bihar, Jharkhand, Uttar Pradesh and Gujarat have 39% or
higher levels of Stunting. Similar variations can be seen in wasting.

Table 4: Undernutrition among children under 5 years: 2015-16 and 2019-21

States Stunting (height for age) Wasting (weight for height)
2015-16 2019-21 2015-16 2019-21
Andhra Pradesh 31.4 31.2 17.2 16.1
Assam 36.4 35.3 17.0 21.7
Bihar 48.3 42.9 20.8 22.9
Chattisgarh 37.6 34.6 23.1 18.9
Gujarat 38.5 39.0 26.4 25.1
Haryana 34.0 27.5 21.2 11.5
Himachal Pradesh 26.3 30.8 13.7 17.4
Jharkhand 45.3 39.6 29.0 22.0
Karnataka 36.2 35.4 26.1 19.5
Kerala 19.7 23.4 15.7 15.8
Madhya Pradesh 42.0 35.7 25.8 19.0
Maharashtra 34.4 35.2 25.6 25.6
Odisha 34.1 31.0 20.4 18.1
Punjab 25.7 24.5 15.6 10.6
Rajasthan 39.1 31.8 23.0 16.8
Tamil Nadu 27.1 25.0 19.7 14.6
Telangana 28.0 33.1 18.1 21.7
Uttarakhand 33.5 27.0 19.5 13.2
   9  

Uttar Pradesh 46.3 39.7 17.9 17.3

West Bengal 32.5 33.8 20.3 20.3
All India 38.4 35.5 21.0 19.3
Source: NFHS 4 and NFHS 5
Healthy diets are required to avoid malnutrition, viz., under-nutrition, micronutrient deficiencies
and over-nutrition. According to Rome Declaration of Second International Conference on
Nutrition, “nutrition improvement requires healthy, balanced, diversified diets, including
traditional diets where appropriate, meeting nutrient requirements of all age groups and all
groups with special nutrition needs, while avoiding the excessive intake of saturated fat, sugars
and salt/sodium, and virtually eliminating trans fats, among others” (FAO/WHO, 2014). Thus,
the healthy diet varies with individuals' needs based on age, gender, level of physical activity,
and local availability of foods and dietary customs (WHO, 2015b).

But, healthy foods should be affordable particularly to the low income households. As shown in
Fig.3, price of egg as a percentage of daily income for low income consumer is 44% in Nigeria
and 16% in India. In other words, they are not affordable to many consumers.

Fig 3: Healthy Foods and Affordability

Many Healthy Foods are Unaffordable for Low-

Income Consumers (Gates FoundatIon)
Many low-income consumers are restricted in what they
can afford

Price of One Egg as a

Percentage of Daily Income

For 4th income Price of

quintile (low single egg
income) (PPP)

$.3
9

$.2
6

$.2
1

$.1
8

© Bill & Melinda Gates Foundation |

Source: World Bank consumption database (includes food away from home, USDA economic research service, (for U.S. includes food away from
46
home and SNAP benefits), World Bank income quintile data (reported as monthly), prices from ICP; in collaboration with Derek Headey

EAT-Lancet Commission (2019) recommends a healthy and sustainable diet given the
constraints on the planet, is not affordable for the majority of the population in India. A recent
study of the Tata-Cornell Institute For Agriculture and Nutrition (Gupta et al, 2021) shows that
the cost of the EAT-Lancet dietary recommendations for rural India ranges between $3 and $5
per person per day. In contrast, actual dietary intake at present is valued at around $1 per person
per day. The gap is much more for meat, fish, poultry, dairy and fruits. In fact, even in rural
areas, processed foods like potato chips and biscuits are cheaper and available as compared to
fruits and vegetables. Even if they are available, these items are expensive for common people.
Animal-sourced foods are still needed for countries like India. For instance, per capita
   10  

consumption of meat is still below 10 kg in India as compared to 60 to 70 kg in the US and

Europe.

FAO report (2023) indicates, around 74% of Indians can’t afford the healthy diet, which costs
$3.066 (in ppp) per person per day in 2021. In other words, around 104.3 crore population can’t
afford the cost of healthy diet. If the same trend continues on affordability and nutrition
indicators, it would be difficult for India to achieve SDG goals on hunger and nutrition.

2.2.1. Food Systems

In recent years food systems approach is being used as link between agriculture and nutrition
and raising the incomes of the farmers. Food systems are defined as activities involved in crop
production, livestock, harvesting, postproduction processing, packaging, transport and
consumption (Pingali and Sunder, 2017). It can also include intra-household distribution. In
addition to agriculture, intrahousehold equity, behavioural change, food safety, and access to
clean water and sanitation are integral components of food systems (Pingali and Sunder, 2017).
EAT-LANCET commissioned report says there are three components for sustainable food
systems. These are: (a) Dietary transitions to diets with fewer animal source foods; (b) Changes
in food production systems to increase efficiency(c) Reductions in food loss and waste across
the entire food supply chain.

2.2.2. Pathways for Safe and Healthy Diets for Sustainable Food Systems4

There is a need for sustainable food systems that caters to nutritional requirements by increasing
the production efficiency of agricultural systems that is faced with small landholdings,
fragmentation of farmland, climate change impacts, and degradation of natural resources. Dev
and Vijayalaxmi (2021) provide nine pathways for for safe and healthy diets for sustainable food
systems and nutritional security in India. These are: a) improving dietary diversity, b) reducing
postharvest losses, c) bio-fortification of staples, d) empowerment of women, e) enforcing
standards of foods safety, packaging, and labelling, f) improving WASH (g) Food safety
awareness and nutrition education (h) Implementation of food safety and nutrition programmes
i) Use of ICT. These are elaborated below.

(a) Improving dietary diversity

Availability and access to adequate amounts of diverse food groups are required to address
undernutrition and micronutrient deficiency. The household dietary diversity can be improved
by increasing crop diversity and having access to kitchen gardens, including diverse food groups
in the safety net programmes such as PDS, MDM (mid-day meals), and THR (take-home
ration). The studies show that home production of diverse food increases affordability and
accessibility of nutritious diet. Improving access to kitchen garden (own or community) have
shown to have a strong association with household dietary diversity and child nutrition (Dev et
al., 2020; Pandey, 2020). The Government of India has initiated a scheme of School Nutrition
(Kitchen) Garden (SNG) that aims to address the malnutrition and micronutrient deficiencies
and enhance the knowledge of children for nutritional traits of vegetables. It has been reported
that after the introduction of SNG, consumption of fresh vegetables in the daily diet among the
children increased in fourteen selected schools of Raichur and Bagalkot districts of Karnataka

                                                                                                               
4
 Drawn  from  Dev  and  Pandey  (2021)  
   11  

(Kammar et al. 2017). Many state governments have also taken the initiative to promote the
kitchen gardens..

(b) Reducing postharvest losses

Another important pathway for ensuring sustainable food systems is to reduce PHL (post-
harvest losses). India is the second-largest producer of food next to China. However, in India,
only 2.2 percent of the farm produce is processed against around 23 percent in China. A high
level of PHL in India is unacceptable when a large section of the population is undernourished.
More than half of women suffer from anaemia, which is one reason for the high rate of low-
birth-weight babies (CNNS, 2019). These high levels of losses are mostly due to improper
handling, inadequate transportation and packaging, low storage, and poor postharvest
management.

New and innovative methods are required to reduce the PHL. At Tamil Nadu Agricultural
University, researchers have developed a method to control losses in package houses,
transportation, and retail shops by spraying Enhanced Freshness Formulation (EFF) on trees
before the harvest. The method slows down ripening and controls losses at the farm level (ToI,
2018). Such technologies should be encouraged after assessment of environmental and health
impacts. Strong farm-firm linkages might also facilitate in reducing PHL by providing assured
markets. These institutional services and reducing PHL can also help smallholders raise their
productivity and income and mitigate the risks involved in participating in the markets for high-
value crops, livestock, and fishery products.

(c) Bio-fortification of staples and improving awareness

Bio-fortification may be one of the more cost-effective solutions to provide the desired levels of
nutrients. Indian diets are shifting towards high-value foods, therefore, require more emphasis to
bio-fortifying vegetables and fruits along with staples in India. The initiative of distributing bio-
fortified staples through PDS will help in reducing hidden hunger. There is a need to develop the
supply chain for bio-fortified crops. ICT initiatives of both public and private sectors can
improve awareness among the farmers to adopt bio-fortified crops and among consumers for
safe and natural nutrient-rich primary and processed produce. The involvement of food business
firms is required along the supply chain for broader adoption by the consumers. However, food
businesses require guidance for food product development and marketing of bio-fortified food
products (Walton, 2019).

(d) Empowerment of women

Empowering women has been shown to positively impact dietary diversity (Malapit et al., 2015;
Pandey et al., 2016). Women's education has a significant role in improving children's dietary
diversity and nutritional status. Hence, there is a need for targeted policies to increase women's
education and empower them for a healthy diet. The role of women in Indian agriculture is
increasing. Nearly 77% of the total rural women workforce is employed in this sector (Labour
Bureau, 2011) however, around 83 percent of agricultural land in India is inherited by male
members of the family (Mehta, 2018). Land ownership rights to women are critical for their
empowerment. Easy access to maternity entitlements (JSY, THR), optimum quality day-care
facilities for children within the community and at the place of work is vital to strengthen caring
capacity and translate to higher incomes.

A greater emphasis on women's collectives  has shown some positive results.  Based on primary
surveys, Agarwal (2018) examines the impact of group farming by women on productivity and
   12  

profitability in Kerala and Telangana. The study demonstrates that group farming can provide an
effective alternative, subject to specified conditions, and adapt the model to the local context.

(e) Enforcing Standards of Foods Safety, Packaging, and Labelling

Food safety has become a serious issue with its public health implications. In response to the
increasing number of FBD (Food based diseases) , Government of India (GoI) has intensified
the efforts to improve food safety by supply and demand-side interventions. FSSAI is in the
process of revising Food Safety and Standards (Packaging and Labelling). Indian food
regulation lays more emphasis on food adulteration due to its being an important issue.
However, there is a need to focus on other food safety issues, together with food adulteration. It
is being reported that the effectiveness of the FSSAI is not very satisfactory, and there are
several shortcomings in its functioning (Siruguri, 2018). Thus, it is required to enforce the
standards and regulations more effectively by removing the deficiencies and considering people
and industries' concerns. FASSI is in the process of fixing some of its shortcomings for a safe
and sustainable diet.

(f) Improving WASH

Access to adequate WASH and clean cooking fuel is crucial for nutritional security, GoI has
taken many initiatives towards improving WASH, such as Jal Jeevan Mission (JJM) and Swacch
Bharat Mission (SBM) (Clean India Mission). JJM aims to provide Functional Household Tap
Connection to every rural household by 2024. Under SBM, around 10.28 crores of toilets were
built, and the coverage of rural sanitation increased from 34 percent in 2014 to 100 percent in
2019. The usage of these toilets is reported to be around 95percent (GoI, 2019). SBM is now
moving towards Phase II of SBM-Grameen to ensure that the open defecation free behaviours
are sustained, no one is left behind, and that solid and liquid waste management facilities are
accessible. These programmes will help in reducing food based diseases.

(g) Implementation of food safety and nutrition programmes

Pathways for a sustainable diet that is safe and healthy need sustainable food systems and
require better implementation and synergy between different policies and programmes. To
achieve SDG 2 of reducing hunger and malnutrition by 2030, effective implementation of
programmes can contribute significantly in attaining the targets. The MGNREGA positively
impacted child and woman well-being. The Public Distribution System (PDS) is a critical
instrument towards improving food security at the household level in India. The impact of ICDS
on child nutrition and protecting children's rights is quite limited. There is a need to increase its
coverage to ensure rapid universalization, change the design, and restructure it with higher
allocations of funds and effective implementation.

(h) Nutrition education and food safety awareness

It has been recognized that education, especially for women, is associated with a reduction in the
mortality rate, dietary diversity, and improved nutrition. There is a need to make nutrition
education and nutrition information part of the education system and be integrated with other
community programmes for behavioural change and to improve the intake of nutritious food in a
safe and hygienic manner. It is shown that when nutrition information is provided, consumer
acceptance and willingness to pay increases for healthy food (Banerji et al. 2016).
   13  

(i) Use of ICT

ICT can play a vital role in providing useful information such as nutrition-sensitive messages,
healthy meal menus, recipes, etc. and educating people about lifestyle recommendations. ICT
can also be used for real-time monitoring, data management, and convergence of schemes.
Radio broadcasting can be a medium for comprehensive coverage in a less expensive manner
related to food safety measures, labelling, etc. Penetration of mobile phones has rapidly
increased in India. It can be used to disseminate different information related to food safety,
food handling, processing, etc. The information can be sent in the local language and can also
engage symbols and digital pictures, as smartphone users have increased.

Thus, for achieving food and nutrition security and increasing farm incomes, sustainable food
systems are required through multi-pronged strategies with better targeting and coordination
between different policies and programmes. However, it is necessary to have recent data on food
consumption for making meaningful suggestions. In India, these strategies need to focus on
improving the above policies as nutrition is determined by several factors and needs multi-
sectoral approach as shown in Fig. 4.

Fig. 4: Addressing Nutritional Challenges requires a multi-sectoral approach

Food  
System   Education  

Water  &   Economic  

Sanitation   Growth  

Social  
Health   Nutrition   Protection  

Source: Gates Foundation.

3. POVERTY AND INEQUALITY

3.1. Poverty

Poverty alleviation has been on the national policy agenda even before independence. As early
as 1938, the Indian National Congress constituted a National Panning Committee (NPC) headed
by Jawaharlal Nehru, which had declared that the social objective should be to ensure an
adequate standard of living for the masses, in other words, to get rid of the appalling poverty of
the people’. The importance of reduction in poverty and provision of other basic needs have
been emphasized in all the five-year plans since independence.

There are two conclusions on the trends in poverty since 1951. First one is that a World Bank
study by Datt et al (2016) shows that poverty declined by 1.36 percentage points per annum in
   14  

post-1991 compared to that of 0.44 percentage points per annum prior to 1991. Their study
shows that among other things, urban growth is the most important contributor to the rapid
reduction in poverty even in rural areas in post-1991 period.

Second one is that within the post-reform period, poverty declined faster during 2004-2012 as
compared to 1993-2005 period. Poverty declined only 0.74 percentage points per annum during
the period 1993-94 to 2004-05. But, poverty declined by 2.2 percentage points per annum during
the period 2004-05 to 2011-12. It is the fastest decline of poverty compared to earlier periods5.

We do not have official data on consumer expenditure after 2011-12. In the last two years, there
have been several studies on poverty using indirect methods and using CMIE (Centre for
Monitoring Indian Economy), and PLFS (Periodic Labour Force Surveys) data sources. There
have been extreme views on poverty trends in the post 2011-12 period. Using the ‘leaked’ data
for 2017-18. Subramaniam (2019) shows poverty increased during 2011-12 and 2017-18. Bhalla
et al (2022) present estimates of poverty and inequality for the period 2004-05 to 2020-21.
According to them, the extreme poverty (ppp $ 1.9) was as low as 0.8 per cent in the pre-
pandemic year 2019.6 Panagariya and More (2023) estimated poverty and inequality before and
after Covid-19. They show that rural poverty continued to fall except in the strict lockdown
quarter of April-June quarter of 2020. The rural poverty increased to 36.4 per cent in April-June
quarter 2020 from 33.50 per cent in January-March quarter 2020. However, rural poverty
continuously declined and it was 26.10 per cent in April-June 2020-21. Urban poverty rose from
16.3 per cent in January-March 2020 quarter to 20.20 per cent in April-June 2020 but declined
to 19.70 per cent in April-June quarter of 2020-21.

The Multidimensional Poverty Index 2023 report of the United Nations Development
Programme (UNDP) and Oxford Poverty and Human Development initiative (OPHI) show that
415 million Indians were lifted out of poverty in 15 years during the period 2005-06 to 2019-21.
The incidence of multidimensional poverty index declined from 55.1 per cent in 2005-06 to 27.5
per cent in 2015-16 and to 16.2 per cent in 2019-21. But, the report says that India still has 230.1
poor population in 2019-21.

A recent report of NITI Ayog on multidimensional poverty shows that the percentage of poor
has gone down from 25 per cent in 2015-16 to 15 per cent in 2019-21 and around 135 million
people were lifted out of poverty during this period.

The state level poverty ratios show that Kerala has the lowest ratio at 0.6% followed by Tamil
Nadu (2.20%), Pubjab (4.75%), Himachal Pradesh (4.93%) and Telangana (5.88%) (Table 5).
Bihar has the highest poverty ratio (33.76%) followed by Jharkhand (28.81), Uttar Pradesh
(22.93), Assam (19.35%) and Madhya Pradesh (20.63). But, Bihar has the highest rate of
poverty reduction from 57.9% in 20015-16 to 33.76% in 2019-21 – a reduction of 18.3
percentage points.

Another indicator for levels of living is real wages in rural areas. The growth rate of real wages
between 2014-15 and 2021-22 was below 1 per cent per year across the board. The rate of
growth was 0.9 per cent, 0.2 per cent and 0.3 per cent for agricultural labour, construction

                                                                                                               
5
 On  urban  poverty,  see  Hashim  (2017)    
6
 Also  see  Roy  et  al  (2022),  Dreze  and  Somanchi  (2023)  on  poverty  estimates.    
   15  

workers and non-agricultural labour respectively (Dreze, 2023). Growth of real rural wages was
4 per cent to 5 per cent per annum when poverty declined faster during 2004-05 to 2011-12.

Table 5. Multi Dimensional Poverty Ratio at State level

States Multidimensional Rank States Multidimensional Rank
Poverty ratio Poverty ratio
2019-21 (%) 2019-21 (%)
Kerala 0.55 1 West Bengal 11.89 12
Tamil Nadu 2.20 2 Rajasthan 15.31 13
Punjab 4.75 3 Odisha 15.68 14
Himachal Pradesh 4.93 4 Chattisgarh 16.37 15
Telangana 5.88 5 Madhya Pradesh 20.63 16
Andhra Pradesh 6.06 6 Assam 19.35 17
Haryana 7.07 7 Uttar Pradesh 22.93 18
Karnataka 7.58 8 Jharkhand 28.81 19
Maharashtra 7.82 9 Bihar 33.76 20
Uttarakhand 9.67 10
Gujarat 11.66 11 All India 14.96 --
Source: Niti Ayog (2023)

The report of the State of Working India (2023) shows that earnings from self employment have
declined in real terms over this period while those for regular wage or salaried workers have
been stagnant (Table 6). Earnings of casual wage workers showed a small rise in real monthly
earnings.

Table 6. Trend in Real monthly earnings of workers by category of work

Category of work 2017-18 2018-19 2019-20 2020-21 2021-22
Self employment 12,318 12,988 11,560 11,411 120,89
Casual wage 6,959 7,209 7,324 7,431 7,856
Regular wage 19,450 19,690 18,907 19,074 19,456
Source: State of working India (2023)

3.2. Inequality

The approach of growth with equity has been followed since independence. However, focus has
been more on absolute poverty than inequality. The inequalities are high in India particularly in
wealth and income. According to Oxfam (2023), the top 10% of the Indian population holds
77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%,
while 670 million Indians who comprise the poorest half of the population saw only a 1%
increase in their wealth.

Using long time series since 1951, a study by Datt et al (2016) show that inequality in rural
areas declined while it increased in urban areas in the post-reform period particularly in the high
growth period. The overall inequality for longer period shows fluctuations without any trend. It
declined significantly in the late 1950s to mid-1970s when growth was low. The Gini
Coefficient rose in the post-reformed period.

Many other studies have also shown that inequality in consumption increased in the post-reform
period7. Most of the studies show that it increased marginally in rural areas while it rose
significantly for urban areas. Table 7 provides trends in inequality in consumption, income and
                                                                                                               
7
 For  example,  see    Radhakrishna  (2015)    
   16  

wealth. It shows consumption and income Gini increased marginally between 2004-05 and
2011-12. However, wealth inequality increased significantly from 0.66 to 0.74 - by 8 points
during the same period.
Table 7 : Trends in Inequality (Rural+Urban)
Sector 1993-94 2004-05 2011-12
Consumption Gini 0.300 0.347 0.359
Income Gini -- 0.548 0.553
Wealth Gini * 0.650 0.660 0.740
*Wealth Gini refers to 1991, 2002, 2012
Source: Himanshu (2015) for Consumption Gini; Income gini coefficients are Estimated from the data
of Indian Human Development Survey (IHDS); Anand and Thampi (2016) for wealth gini coefficients

During Covid-19 period, agriculture, migrant and other informal workers were the hardest-hit
during the lockdown period. The recovery from the pandemic looks k-shaped. There has been
recovery for both formal and informal sectors. But, informal sector and employment is yet to
recover fully. The big companies and large part of the corporate sector could manage the
pandemic. On the other hand, it is well known that the informal workers including migrants,
MSMEs etc. have suffered a lot with loss of incomes and employment during Covid-19 period.
Demand for programmes like MGNREGA (Mahatma Gandhi National Rural Employment
Guarantee Act) is still higher than that of pre Covid-19 period.

Using state level data, Kakwani and Zakaria (2023) examine whether growth and development
in India have been pro-poor and inclusive over two decades. Two major conclusions of the study
are the following:

(a) Using per capita real state net domestic product across states, the study concludes that the
growth patterns indicate India's economic growth has not been pro-poor or inclusive. India
has achieved high and sustained growth in the two decades, generating total prosperity, but
this prosperity is not shared equally by all states.

(b) In the second exercise, the study uses state level well being indicators like infant survival
rate, literacy rate, percentage of children not stunted, percentage of children not wasted and
life expectancy at birth. The results show that development has been generally pro-poor,
implying that the poorer states have achieved relatively and absolutely higher performance
in well-being.

However, second conclusion based on well being indicators has limitations. As Kakwani and
Zakaria (2023) say that unlike income indicators, well-being indicators have asymptotic limits,
reflecting physical and biological maxima. For example, the average life expectancy at birth has
a maximum limit of not more than 85 years because people cannot live forever. As the standard
of living or well-being reaches progressively higher levels, it becomes increasingly difficult to
achieve the same degree of improvement further. For instance, it is easier to the life expectancy
at birth from 60 to 65 years than from 80-85 years. Thus, at a higher level of well-being.
Therefore, income measure may be much better for examining inequalities or poor growth.

3.3. Policies for Reducing Inequalities

Policies that reduce inequalities are discussed below. Many of these policies can also raise
growth and reduce poverty.
   17  

Expanding productive employment is central for reducing inequalities and. It is also known that
a high output elasticity of employment generally ensures that growth is egalitarian. However,
inspite of its importance, the concern for employment in development thinking has been pushed
aside particularly in the last few decades. It is important to place the employment issue at the
centre of the national and international agenda. This is also crucial for the success of Sustain
Development Goals (SDGs).

3.3.1. Need for structural transformation

The historical experience of different countries shows that structural transformation from low-
productive to high-productive sectors led to higher economic growth and the creation of greater
productive employment. Economists like Lewis (1954), Kaldor (1966) and Kuznets (1966,
1971) emphasised the relationship between structural transformation and economic growth. This
is reflected in the economy transforming from agriculture to industry and services in terms of
changes in the composition of output and employment. The literature on structural
transformation is derived mostly from stylized facts than from economic theorising (Nayyar,
2019).

The pattern of structural change observed by the advanced countries in the second half of the
nineteenthth Century and the first half of the twentiethth Century has been that initially, the
shares of agriculture in output and employment declined while that of manufacturing increased8.
At the next stage, the share of output and employment in manufacturing declines while that of
services rises. Nayyar (2019) examines the experience of structural transformation for 14
countries in Asia over 50 years from 1970-20169. He concludes that there were significant
differences in the paths of structural transformation among these 14 Asian countries: some
countries followed classification patters of agriculture-manufacturing and some others shifted
from agriculture to services although the changes were not uniform.

Indian Experience

There have been significant changes in the structure of output and employment in India in the
last five decades.

Structural change in output

(a) The share of agriculture and allied activities in output declined from 41per cent in 1972-73 to
15per cent in 2022-23 – Around 26 percentage points over 50 years (Table 8)

(b) The share of industry (consisting of mining, construction, manufacturing and utilities) rose from
24per cent in 1972-73 to 28per cent in 2004-05 and to 30 per cent in 2022-23. Similarly, the
manufacturing share has increased from 13.3per cent in 1970 to 15.7per cent in 2011-12. It
increased to 17.7% in 2022-23. In other words, there is only a marginal rise in the share of
manufacturing in output over five decades.

                                                                                                               
8
 This  pattern  is  observed  by  Fisher  (1935),  Clark  (1940)  and  Kuznets  (1966,  1971)  
9
 Also  see  Nayyar  (2017)  
   18  

(c) In contrast to the share in manufacturing, the share of services in output rose significantly from
34.5% in 1972-73 to 54.2% in 2022-23 - an increase of 20 percentage points over 50 years. In
other words, India ‘leap frogged’ from agriculture to services bypassing the manufacturing stage
of development.

Table 8. Structural Change: Share in GDP (per cent) in constant prices

1972-73 1993-94 2004-05 2011-12 2019-20 2022-23
Agruclture and allied activities 41.1 28.4 19.0 14.1 15.0 15.1
Manufacturing 13.3 14.6 15.3 15.7 17.1 17.7
Construction 7.6 6.6 7.7 7.9 7.9 8.4
Industry (Secondary sector) 24.4 26.8 27.9 27.5 29.7 30.7
Trade, hotels, transport, 14.5 18.1 24.5 27.5 20.3 19.0
communications.
Financing real estate and business 7.9 13.3 14.7 18.1 21.9 22.5
services
Community, social and personal 12.1 13.5 13.8 12.8 13.1 12.7
services
Services (Tertiary sector) 34.5 44.8 53.0 58.4 55.3 54.2
Non-agriculture 58.9 71.6 81.0 85.9 85.0 84.9
Total 100.0 100.0 100.0 100.0 100.0 100.0
Note: Shares of GDP for 2018-19 and 2019-20 are not strictly comparable with earlier data because of
a change in methodology.
Source: IHD (2014) for the period 1972-73 to 2011-12 at 2004-05 constant prices; National Accounts
Statistics for 2018-19 and 2019-20 at 2011-12 constant prices.

Within services the share of trade, hotels, transport and communications rose from 14.5% in
1972-73 to 19% in 2022-23 - about a 5.5 percentage points rise over 50 years. But the highest
rise in the share of GDP was noted in the high-value financing, real estate and business services.
Their share increased from 8% in 1972-73 to 22.5%- an increase of 15 percentage points (Table
8).

Structural change in Employment

(a) The share of agriculture in employment declined from 73.9% in 1972-73 to 45.8% in 2022-23–
a decline of 28 percentage points over five decades (Table 9). This is a substantial decline
although it is still high. Fig 5 also shows that the share of agriculture decelerated to 41.4per cent
in 2018-19 from 61.9per cent in 1993-94 before rising slightly to 44.8per cent in 2020-21.
Table 9. Structural Change: Share in Employment (per cent)
1972- 1993- 2004- 2011- 2019- 2022-
73 94 05 12 20 23
Agriculture and allied activities 73.9 64.8 58.5 48.9 45.6 45.8
Manufacturing 8.9 10.5 11.7 12.8 11.2 11.4
Construction 1.8 3.1 5.6 10.6 11.6 13.0
Industry (Secondary sector) 11.3 14.7 18.1 24.4 23.7 25.2
Trade, hotels and restaurants 5.1 7.4 10.2 11.4 13.2 12.1
Transport, storage and 1.8 2.8 3.8 4.4 5.6 5.4
communications
Financing, real estate, business 0.5 0.9 1.5 2.6 3.1 2.7
services
Community, social and personal 7.4 9.4 7.7 8.2 8.9 8.8
services
Services (Tertiary sector) 14.8 20.5 23.4 26.7 30.7 29.0
Non-agriculture 26.1 35.2 41.5 51.1 54.4 54.2
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: IHD (2014) for the period 1972-73 to 2011-12; PLFS for 2018-19 and 2019-20
   19  

Fig 5. Percentage share of the workforce in agriculture

80  

61.9   59.7  
56  
60  

47   44.8  
44.3  
41.4  
40  
20  
0  

1993-­‐94   1999-­‐2k   2004-­‐05   2011-­‐12   2018-­‐19   2019-­‐20   2020-­‐21  

Source: Damodaran (2022)

(b) The share of the industry rose from 11per cent to 24per cent in five decades. This increase was
mainly due to an increase in the share of construction. The share of manufacturing increased
initially from 8.9per cent in 1972-73 to 10.5per cent in 1993-94. Subsequently, it was between
11.2per cent to 12.8per cent during 1993-94 to 2022-23. It shows that there was hardly any
increase in the share of manufacturing in employment in the last three decades. The share of
construction in employment was 2 percentage points higher than that of manufacturing in 2022-
23 (Table 9).

(c) In contrast to the share of manufacturing, the share of services in employment increased
significantly from 14.8per cent in 1972-73 to 29.0 per cent in 2022-23 – an increase of 14
percentage points over 50 years. Within services, the share of trade, hotels and restaurants rose
faster than other services. Their share increased from 5per cent in 1972-73 to 12per cent in
2022-23 – an increase of 7 percentage points. These jobs are mostly in the informal sector.
Similarly, the share of transport and communications rose from 1.8per cent to 5.4per cent during
the same period. The high-value financing, real estate and business services absorbed only
around 2.7per cent of the workforce in 2022-23.

(d) Structural transformation in terms of employment shows that the decline in agriculture is
absorbed by construction and services in the informal sector like trade, hotels, and restaurants.
The share of the non-farm sector in rural areas has increased over time.

Basole (2022) shows that India pulled workers out of agriculture but not from informal sector.
The structural change is from agriculture to construction and informal services.

Labour productivity across sectors: India and China

Ghose (2020) examines the labour productivity in the Indian economy and compares it with
China as given in Table 10. The levels of labour productivity in China are higher than those in
India for all sectors except services. The output per worker in China was higher than in India by
   20  

72per cent, 50per cent, 41per cent, 132per cent and 77.2per cent for the economy, agriculture,
non-agriculture, manufacturing and construction respectively in 2010 (Table 10).

Table 10. Output per worker in 2011 International (in US$): India and China
India China
1978 1994 2010 1978 1994 2010
Agriculture 1720 2083 3192 2036 2728 4795
Non-agriculture 6828 9336 19676 6374 10615 27770
Manufacturing 4384 6467 15807 4922 12255 36763
Construction 14173 9843 9514 8239 8148 16862
Mining and Utilities 17579 22788 38007 9982 15309 86245
Services 7081 10042 24027 7011 9635 22202
Economy 3185 4698 11228 3315 6332 19342
Source: Ghose (2020)

The growth rates of labour productivity are also higher for China as compared to those of India.
One of the reasons is the much higher within-sector productivity growth in China. The
contribution of structural change to the overall growth of labour productivity in the economy
was positive and significant in both countries. However, the structural change in India was from
agriculture to construction and services while in China it was from agriculture to manufacturing
and services.

Manufacturing and Services

India does not have the luxury of following China’s development experience in manufacturing.
In this context, the ‘Make in India’ campaign is in the right direction. As shown by Ghose,
(2016) labour-intensive manufacturing is important for quality job creation particularly increase
in the organised sector. It is important to examine the prospects of manufacturing, particularly in
job creation in light of the East Asian experience and in the present context of global protection.
A study by Ramaswamy and Agarwal (2013) strongly suggests that the services sector would be
an unlikely destination for the millions of low-skilled job seekers. The study argues that India
needs to focus on the manufacturing sector to provide large-scale employment.

Another view is that we should invest more in services sector as the scope in manufacturing
sector is limited for employment creation (Rajan and Lamba, 2023). There are a lot of
opportunities for India in the service sector. Growing startups including unicorns in
manufacturing and services can also be part of this effort. A study by Chanda (2017) deals with
the interdependence between services and manufacturing and argues that a vibrant service sector
should be seen as an enabler for the manufacturing sector and not as a competitor to
manufacturing. The three-year action plan (NITI Ayog, 2017) also indicates that India has an
advantage of walking on two legs: manufacturing and services10.

3.1.2. Other issues and policies for creating productive employment

Some positive trends in employment

Before going to challenges, we discuss here few positive trends in Indian labour market.

First, the share of regular wage/salaried employees has increased by 5 percentage points from 18
per cent in 2011-12 to 23 per cent in 2017-18 although it declined to 20.9% in 2022-23 (Table
                                                                                                               
10
 On  services  also  see  Nayyar  (2012),  Eichengreen  and  Gupta  (2011)  
   21  

11). The share of casual workers declined from 29% in 2011-12 to 22% in 2022-23 while the
share of self employed increased from 52% to 57% during the same period.

Table 11: Share of Workers by Activity Status

Years Self Employed (%) Regular wage/salaried (%) Casual workers (%)

2011-12 51.9 18.7 29.4

2017-18 51.4 24.3 24.3
2019-20 53.5 22.9 23.6
2020-21 55.6 21.1 23.3
2021-22 55.8 21.5 22.7
2022-23 57.3 20.9 21.8
Source: PLFS data

Second, workers participation rates (WPR) increased significantly while unemployment

declined over the period 2017-18 to 2022-23. The WPR for the population above 15 years
increased steadily from 46.8% in 2017-18 to 52.6% in 2022-23 – an increase of nearly 6
percentage points over 5 years (Table 12). This is true for the WPR of all ages and youth
population. For youth, it increased almost 9 percentage points.

Table 12 : Work Participation Rates: 2017-18 to 2022-23

Years All Ages Above 15 years Youth 15-29 years
2017-18 34.7 46.8 31.4
2018-19 35.3 47.3 31.5
2019-20 38.2 50.9 34.7
2020-21 39.8 52.6 36.1
2021-22 39.6 52.9 36.8
2022-23 41.1 52.6 40.1
Source: PLFS

The unemployment rate for the population above 15 years declined steadily from 6.1% in 2017-
18 to 3.2% in 2022-23 (Table 13). This decline is true for unemployment rate for current weekly
status, educated (secondary&above) and youth population. The unemployment rate for the youth
declined from 17.8% to 10% during the same period.

Table 13: Unemployment Rates: 2017-18 to 2022-23

Years Usual Status (Ps+SS) Current weekly Educated Youth 15-29 years
Above 15 years Status (Secondary&above)
Above 15 years Above 15 years
2017-18 6.1 8.9 11.4 17.8
2018-19 5.8 8.8 11.0 17.3
2019-20 4.8 8.8 10.1 15.0
2020-21 4.2 7.5 9.1 12.9
2021-22 4.1 6.6 8.6 12.4
2022-23 3.2 5.1 7.3 10.0
Source: PLFS

Third, there seems to be structural transformation in rural areas particularly for males from
agriculture to industry and services. As shown in table 14, the share of non-farm employment in
total for males increased from 19 per cent in 1977-78 to 51 per cent in 2022-23. For females it
significantly increased from 12% in 1977-78 to 29% in 2018-19 but declined to 24% in 2022-23.
It is interesting to see that the shares of industry is more than services in rural areas for both
males and females in 2022-23.
   22  

Table 14 : Structural transformation in rural Areas: Workers

Male Female
Agricu Industry Services Non-farm Agricu Industry Services Non-farm
Lture (industry Lture (industry
+services +services
1977-78 80.6 8.8 10.5 19.3 88.1 6.7 5.1 11.8
1993-94 74.1 11.2 14.7 25.9 86.2 8.3 5.6 13.9
2004-05 66.5 15.5 18.0 33.5 83.3 10.2 6.6 16.8
2011-12 59.4 21.9 18.6 40.5 74.9 16.8 8.4 25.2
2017-18 55.0 23.2 22.0 45.2 73.2 13.6 13.2 26.8
2018-19 53.2 23.5 23.2 46.7 71.1 13.4 13.6 29.0
2019-20 55.4 23.1 21.6 44.7 75.7 13.0 11.2 24.2
2021-22 51.0 25.4 23.7 49.0 75.9 13.4 10.8 24.2
2022-23 49.1 28.1 22.8 50.9 76.2 12.7 11.2 23.9
Source: Periodic Labour Force Survey 2017-18, National Statistical Office.

Challenges of employment in India’s labour market

The most important challenge is how to increase the quality of employment and skill
development. The challenges of employment are the following.

1. Employment of Women
The participation rates of women are low and declined in India before rising in recent years
(Table 15). Work participation rate (WPR) for women declined from 41.6 per cent in 2004-05 to
22per cent in 2017-18 before rising significantly to 35.9 per cent in 2022-23. The difference in
the WPR between men and women increased from 41 percentage points in 2004-05 to 49
percentage points in 2017-18 before declining to 40 percentage points in 2022-23. In fact in
urban areas, only 22 per cent of women participated in work compared to 70.4 per cent of men
in 2022-23 – a difference of 48 percentage points. It is true that the participation rates for
women increased from 22% in 2017-18 to 36% in 2022-23. The increase in WPR for women
since 2019-20 should be interpreted with caution as low quality employment can increase during
periods of distress. Before Covid, 51% of women were self-employed in 2017-18. After Covid
this rose to 65% 2022-23. As a result earnings from self-employment declined in real terms over
this period. Even two years after the 2020 lockdown, self-employment earnings were only 85%
of what they were in the April-June 2019 quarter (State of working India, 2023)

Table 15: Work participation rates (15 years and above), Usual Status (ps+ss):
Female and male.
Years Male Female
Rural Urban Total Rural Urban Total
2004-05 84.6 76.3 82.2 48.5 22.7 41.6
2009-10 81.2 74.0 79.1 37.2 18.3 31.8
2011-12 80.0 74.1 78.1 35.2 19.5 30.5
2017-18 72.0 69.3 71.2 23.7 18.2 22.0
2018-19 72.2 68.6 71.0 25.5 18.4 23.3
2019-20 74.4 69.9 73.0 32.2 21.3 28.7
2020-21 75.1 70.0 73.5 35.8 21.2 31.4
2021-22 75.3 70.4 73.8 35.8 21.9 31.7
2022-23 78.0 71.0 76.0 40.7 23.5 35.9
Source: Periodic Labour Force Surveys, National Statistical Office, Delhi.
ps: principal status; ss: subsidiary status
   23  

The former International Monetary Fund (IMF) Chief Christine Lagarde said an increase in
women’s participation rates would increase GDP by 40per cent in India. According to a study by
Ghani etal (2016), the gender balance in India in labour force participation, entrepreneurship,
and growth remains among the lowest in the world. This study says that improving this balance
is an important first step for India’s development and its achievement of greater economic
growth and gender equality.

The Nobel Prize for Economics in 2022-23 was awarded to Claudia Goldin, American
Economist and Professor, Harvard University. The award is given for having advanced our
understanding of women’s labour market outcomes. Goldin collected over 200 years of data,
allowing her to demonstrate how and why gender differences in earnings and employment rates
have changed. It is not growth alone but there are many social and economic factors for the
trends in the participation rates of women. She finds gender gap in earnings even for the same
job.

But, women’s ‘work’ and ‘non-work’ may be misleading. Time use surveys indicate women’s
unpaid work as homemakers and care givers is quite high. Some estimates show that if we
monetize unpaid work of women, it amounts to around 16 lakh crores per annum (Nandi and
Hensman, 2015)11.

(2) Challenge of generating employment: According to some estimates, India has to generate
around 13 million productive jobs per annum if Arthur Lewis turning point is to be reached by
2035 (Ghose, 2019). If the number of agriculture workers is to remain the same as in 2018 and if
unemployment and surplus labour are to fall to zero by 2035, employment in non-agriculture
excluding construction will have to increase from 209 million in 2018 to 419 million in 2035
(Ghose, 2019). High economic growth creates employment. However, the elasticity of non-
agricultural employment growth to non-agricultural GDP growth declined from 0.6 in the period
1983-1993 to 0.5% in 1993-2004 to 0.4%% in 2004-2011 and to 0.2% in 2011-2017 before
rising to 1.0 in 2017-2021. the last period witnessed stagnant wages for self employed and
regular workers along with increase in elasticity of employment.

(3).Youth Unemployment: The unemployment among youth is generally three times higher than
that of total unemployment. The State of Working India (2023) shows that the unemployment is
concentrated among the educated youth. It is it above 15 percent for all graduates. But, the
unemployment is 42 percent for young graduates (Table 16). There is large variation in the rate
of unemployment even within the higher educated group across age. The unemployment rate
falls from over 40 percent for educated youth under 25 years of age to less than 5 percent for
graduates who are 35 years and above.
Table 16: Unemployment is concentrated among educated youth (%)
Less 25-29 years 30-34 years 35-39 years 40 years
than 25 and above
years
Graduate &above 42.3 22.8 9.8 4.5 1.6
Higher Secondary 21.4 10.6 5.0 3.1 2.1
Secondary 18.1 7.5 4.6 2.4 1.7
Primary or middle 15.0 5.4 3.0 2.4 2.2
Literate but below primary 10.6 3.3 1.5 2.4 2.2
Illiterate 13.5 4.3 4.0 3.4 2.4
Source: State of Working India, 2023
                                                                                                               
11
 On  unpaid  work,  see  Hirway  (2017)  
   24  

Sharma (2022) showed that youth work participation rates (WPR) and level of education shows
the ‘U’ shaped relationship. Illiterates and technical graduates have high WPRs compared to that
of youth with secondary/higher secondary education. The youth with education and skills will
have higher unemployment as they can remain unemployed and search for suitable jobs. One of
the main problems for the agitations on reservations by the people like the Marathas in
Maharashtra, Patidars in Gujarat, Jats in Haryana and Kapus in Andhra Pradesh relates to youth
unemployment and aspirations of these castes to move to quality employment. Central and State
governments have to be sensitive to youth employment problem.

(4) High share of informal sector: India has one of the highest number and proportion of
informal workers in the world. Around 91 per cent (422 million) of the total were informal
workers in 2017-18. In other words, only 9% of the total workers in India are formally employed
and enjoy regular jobs. It is interesting to note that out of 80 million organized sector workers,
51% were informal workers in 2017-18. It shows that even in organized sector, the contractual
employment has been increasing faster.

The percentage of workers in proprietary and partnership enterprises among workers in non-
agricultural sectors show an increase from 68.2% in 2017-18 to 74.3% in 2022-23. In order to
reduce inequalities in income and wage gaps, policies have to focus on improving productivity
of informal sector and providing decent jobs.

Table 16 a Informal enterpises: Percentage of workers engaged in proprietary and partnership enterprises among
workers in non-agricultural sector
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Persons 68.2 68.4 69.5 71.4 71.8 74.3
(Male+Female)

(5) Social protection for Gig-workers: A new type of informal workers is a platform worker.
With an estimated eight million people employed in the industry ‘gig work’ has become a
major source of jobs in India and other countries. There are issues on their incomes, work
conditions, work status, social security, and health insurance, among other things.

NCAER (National Council of applied Economic Research) has recently released a report on
platform workers (NCAER,2023). The study says that 61.9 per cent of the workers received
rations. Only 12.2% had Ayushman Bharat card and 11.1% had State health insurance. Around
7.1% have registered e-Sharam portal and 4% had Atal Pension Yojna. Rajasthan government is
probably the first state to introduce the Rajasthan Platform -Based Gig Workers (Registration
and Welfare) Bill, 2023 with the aim of ensuring social security for gig workers. The
specificities of the policies and how they might benefit the workers are still unclear. Providing
social security for gig workers needs attention. Similarly, internal migrants also face several
problems in Indian cities as shown by the experience of these workers during the lockdown
period of Covid-19.

(6) MSMEs : Micro, small and medium enterprises as a whole form a major chunk of
manufacturing in India and play an important role in providing large employment and exports.
The policies have to give a positive bias towards MSMEs so that they can be a driver for
employment generation. Short and long-term initiatives are required specifically for the
development of MSMEs.
   25  

(7) Automation and technology: India has to be ready to approach a fourth industrial revolution.
It may lead to some disruption in the established sectors and may lead to some pressures on
employment. Although presently robotics and other technological problems are more in
developed countries, India should be ready for facing the impact of robotics, artificial
intelligence (AI) and machine learning on employment. Optimists say that net employment may
rise with fourth industrial revolution including robotics. For example, Microsoft CEO Satya
Nadella says that artificial intelligence can be made more inclusive and inequalities can be
reduced.

3.1.3.Some other issues and policies for reducing inequality

(a) Social Protection: India has long experience in social protection programmes like
MGNREGA, National Rural Livelihoods Mission (NRLM), public distribution system (PDS),
nutrition programmes like mid-day meal schemes, ICDS, etc. In the last few years, the
government has done well in providing universal access to cooking gas or liquified petroleum
gas (LPG) connections under the Pradhan Mantri Ujjwala Yojana), and electricity through the
Pradhan Mantri Sahaj Bijli Har Ghar Yojana, and/or universal cleanliness programmes like the
Swachh Bharat Abhiyan, and inclusive financial programmes like the Pradhan Mantri Jan Dhan
Yojana and the MUDRA.

There are some gaps in the social protection programmes. Some of the poor are excluded due to
Adhaar enabled services. This problem has to be tackled. The social protection programmes
have to be strengthened with more allocations. In India there has been a lot of discussion on
Universal basic income (UBI). There is a consensus for cash transfers directly giving to farmers,
women, old age population etc, a kind of Quasi UBI. It is true that a universal scheme is easy to
implement. The issue with targeted programmes is the problem of identification and exclusion.

In order to avoid the identification problem (Rangarajan and Dev, 2021) suggested three
proposals to meet the objective of providing minimum basic income to poor and vulnerable
groups in both rural and urban areas. These are:
(a) first, give cash transfer to all women in both rural and urban areas above the age of 20
years;
(b) second, expand the number of days provided under National Rural Employment
Programme from 100 to 150 in rural areas.
(c) third launch National Employment Guarantee Scheme in urban areas including skill
improvement.
In all these proposals, there is no problem of identification. A combination of cash transfer and
an expanded employment guarantee scheme can provide minimum basic income.

(b) More investment in less developed states: Inequalities in income across states is quite high.
Investments in physical and human capital in less developed states are needed. Apart from other
factors, bifurcation of large states into smaller states may also lead to better development (Rao,
2010; Dholakia, 2023).

(c) Democracy and Efficient delivery systems: Strengthening of democracy can lead efficient
public delivery systems. It has been recognized that better governance is very important for
inclusive development. Social mobilization, community participation and decentralized
approach are needed. It may, however, to be noted that governance has to be contextualized in
relation to socio-economic environment. Appropriate institutions are needed for better
implementation of policies and programmes. Many people are of the opinion that the
   26  

Government can’t deliver services to the poor because of lack of accountability and resources.
However, this should not be made an excuse by the Government in undertaking investments in
agriculture, health and education and other services. Also, government responsibility is not
limited to allocation of resources. It is the duty of Governments to implement the programmes
effectively. Political will is crucial for improving the effective implementation of policies. Many
lessons can be learnt from within in India on best practices in several states. All over the world it
is recognized that decentralization in terms of transferring power to local bodies is important for
development. The performance of PRIs (Panchayati Raj Institutions) and urban local bodies in
many states has not been satisfactory. The PRIs have to be strengthened for achieving growth
with equity.

According to Rao (2022), the major areas of concern for inclusive development are the
following: (a) Interstate (regional) disparities in development; (b) Rural–urban disparities in
income; (c) Inadequate public expenditure on education and healthcare; (d) Slow pace of social
inclusion of marginalised sections; (e) Slow pace of empowerment of women; (f) Inadequate
access to institutional credit for weaker sections; (g) Slow rise in tax revenues; (h) Slow pace of
decentralising development.

4. HUMAN DEVELOPMENT

It is by now well recognised that the term “human development” has been perceived as an
expansion of human capabilities, a widening of choices, an enhancement of freedoms and a
fulfillment of human rights. This is also useful for the sustainable development goals (SDGs).
This section is a continuation of the discussion in the previous section as human development is
important for reduction in inequalities.

It is well-known that human development has both intrinsic (for its own sake) and instrumental
(achieving human capital and sustainability of growth) values. In general, the instrumental value
is highlighted and the intrinsic value is often not recognised in concepts and policies. Regarding
the measurement, the Human Development Index (HDI) of the United Nations Development
Programme (UNDP) is widely used for ranking the countries. Rodrik et al (2017) have discussed
two challenges. The first one is the “structural change challenge,” which is focused on moving
resources from traditional low productivity activities into modern, more productive industries or
activities. The second one is the “fundamentals challenge” that relates to the development of
broad capabilities such as human capital and infrastructure. According to them, the
“fundamental challenge” of achieving capabilities is crucial for development.

Human development concept is not a new one. Evolution of Human development concept can
be traced from the writings of renowned thinkers and philosophers of ancient times. Aristotle,
argued that ‘wealth is evidently not the good we are seeking, for it is merely useful and for the
sake of something else”. Another great philosopher, Immanuel Kant argues that human beings
are ends in themselves, rather than the means to other ends. Adam Smith , Malthus, Karl Marx,
J. S. Mill and many other modern economists have also come forward with the similar idea of
treating human beings as the real end of all activities.

The term ‘human development’ has been seen as expansion of human capabilities, a widening of
choices, an enhancement of freedoms and a fulfillment of human rights. Such a perspective
shifts policy attention from mechanically expanding incomes to fruitfully ensuring that higher
incomes translate into greater freedoms to people –women, children and men. The most critical
of these wide-ranging choices are to live a long and healthy life, to be educated and to have
   27  

resource access for a decent standard of living. These three basic choices reflected in Human
Development Index. But, people value many additional choices. They range from political,
social, economic and cultural freedoms to opportunities for being productive and creative, self-
respect and human rights. Human freedom is vital for human development.

The difference between economic growth and the human development is that the first focuses
exclusively on the expansion of only one choice i.e. income. Human Development (HD)
approach embraces the enlargement of all human choices – whether economic, social, cultural or
political. HD approach differ from other approaches in three important ways: (a) definition of
ends and means; (b) concern with human freedoms and dignity and, (c) concern with human
agency i.e. the role of people in development. There are several implications in adopting HD
approach and framework as compared to other approaches.

Articulating development as a widening of choices, an expansion of freedoms and a fulfillment

of human rights gives HD approach a distinct edge over the approaches of economic growth,
basic needs, human capital or human resource development and social development. Human
development, human capabilities and human rights approaches are complementary to each other.
By bringing into sharp focus issues of deprivation and inequality, human development puts
people – and among them, the most deprived –at the centre of development interventions.

We have discussed earlier structural changes from low productive sector to high productive
sectors. But, this is not enough. Fundamental change in terms of growth in human development
is equally or more important for reduction in inequalities. We should also ensure universal basic
services.

There has been significant progress in human development in India since independence. India
moved to medium human development category. But, its rank of human development index is
still low at 132 across countries (Table 17). This rank is lower than those of other BRICS
countries (Brazil, Russia, China and South Africa) and Indonesia.

Table 17: India’s position and trends in the Global HDI 2021
HDI 2021 HDI Life Expected Mean Gross
Rank Value Rank Expe Years of Years National
2020 ctancy Schooling Of Income
at birth (years) schooling Per
(years) capita
(2017
ppp
$)
Switzerland 1 0.962 3 84.0 16.5 13.9 66,933
Norway 2 0.961 1 83.2 18.2 13.0 64,660
United Kingdom 18 0.921 17 80.7 17.3 13.4 45,225
Japan 19 0.925 19 84.8 15.2 13.4 42,274
United States 21 0.921 21 77.2 16.3 13.7 64,765
China 79 0.768 82 78.2 14.2 7.6 17,504
Brazil 87 0.754 86 72.8 15.6 8.1 14,370
South Africa 109 0.713 102 62.3 13.6 11.4 12,948
Indonesia 114 0.705 116 67.6 13.7 8.6 11,466
India 132 0.633 130 67.2 11.9 6.7 6,590
South Asia 0.632 -- 67.9 11.6 6.7 6,481
Region
World Average 0.732 -- 71.4 12.8 8.6 16,752
Source: Economic Survey, 2022-23, GOI
   28  

Equality of opportunity is important for reducing many other forms of inequalities.3 The primary
factor that adversely affects India’s human development is its poor attainments in health and
education. The progress has been slow compared to many other developing countries. These
attainments are critical for reducing inequalities and achieving the well-being for all.

Table 18 : Trends in Social Service Expenditure by Government (Centre+States)

Items 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
(RE) (BE)
Rs. In Lakh Crores
Total Expenditure 45.2 50.4 54.1 63.5 74.5 80.1
Expenditure on 11.4 12.8 13.6 14.8 19.4 21.3
Social Servics
Of which
Education 4.8 5.3 5.9 5.8 6.8 7.6
Health 2.4 2.7 2.7 3.2 5.2 5.5
Others 4.1 4.9 5.1 5.9 7.5 8.3
As per cent of GDP
Expenditure on 6.7 6.8 6.8 7.5 8.2 8.3
Social Servics
Of which
Education 2.8 2.8 2.9 2.9 2.9 2.9
Health 1.4 1.4 1.4 1.6 2.2 2.1
Others 2.4 2.6 2.6 3.0 3.2 3.2
Source: Economic Survey, 2022-23, GOI

In the last few years, the share of the expenditures on social services rose from 6.7% of the GDP
in 2017-18 to 8.3% in 2022-23 (Table, 18). During the same period, the share of expenditure on
education was, however, stagnant at around 2.8% to 2.9% of the GDP. The health sector
expenditure, however, increased from 1.4% of GDP to 2.1% of GDP. The pandemic could be
the reason for the recent increases in health expenditures.

The expenditures are inadequate in comparison to the problems in the sector. India’s social
sector in general, and the health and education in particular, encounter the problems of low
levels and slow progress of human development indicators, significant regional, social and
gender disparities, slow growth in public expenditures and the poor quality of delivery systems,
and above all the issues in the privatisation of health and education services. There is a need to
focus on these issues over time.

4.1. Health: The progress of the health indicators in this country has not been trivial. Life
expectancy has improved from 32 years in 1951 to 69 years in 2014-18. But there are significant
regional disparities. For instance, life expectancy varies from 75 years in Kerala to 65 years in
Uttar Pradesh, while infant mortality rates (IMR) vary from 4.4 in Kerala to 50.4 in Uttar
Pradesh. India lags behind in health indicators in comparison to its BRICS (Brazil, Russia, India,
China and South Africa) partners.

It is true that health insurance is an important component of healthcare coverage. But there is no
alternative to the universal health coverage, including the primary health centres, if one needs to
accomplish the goals of the health sector. There are supply-side problems in the health
infrastructure of India. Significant increase in public health expenditure and revamping of public
health infrastructure are needed for moving towards universal health coverage. It is thus
essential to increase public expenditure and provide accessible, affordable and quality health
coverage to all.
   29  

Another important issue for promoting human development is that of reducing undernutrition
which we already discussed. The determinants of nutrition are agriculture, health, women’s
empowerment, including maternal and child practices, social protection, nutrition education,
sanitation and drinking water. Poshan Abhiyaan is a good programme, but has to cover all these
determinants, as a multipronged approach to reduce malnutrition.

4.2. Education: Quality education is the key for raising human development. The goal on
education under the SDGs requires ensuring inclusive and quality education for all. Improving
learning outcomes in education is an important part of this goal.

Quality education is significant for raising human development and reducing the inequalities of
opportunities in the labour market. Few years back in 2016, the Deputy Prime Minister of
Singapore, Tharman Shanmugaratnam (Now President of Singapore), cautioned that India has
the biggest gap in talent due to “schools (which) are the biggest crisis in India today and have
been for a long time. Schools are the biggest gap between India and East Asia. And it is a crisis
that cannot be justified”.6 Similarly, quality of higher education is equally important. The new
educational policy should focus both on the supply-side (including infrastructure, shortfall of
teachers) as well as the learning outcomes. The report also mentions the need for higher public
expenditure at about 6% of the GDP on education. A lack of focus on quality of education and
health will create further exclusion of disadvantaged sections like SCs, STs, minorities and
women.

Small changes can have big effects. Several research studies on education have shown strong
impact of remedial instruction programs on learning outcomes. Banerjee et al (2007) did
experimental evaluation of a program run by PRATHAM targeted at the lower end of the class
in public schools in cities of Mumbai and vadodara. The programme provided an informal
teacher (Balasakhi) for teaching basic learning in reading arithmetic. For about 2 hours remedial
instruction was given out of the regular classroom. The program improved student test scores.
The gains were more for the lowest performing children12. Thus, small changes can make big
difference in the lives of the poor.

4.3. Empowerment of women: One of the main drivers of growth and equality is the increased
role of women. Inequality between men and women is an important issue in India. There are
many examples of non-economic factors that discriminate women. Rapes and violence against
women have been increasing In India. Gender inequality is a major social disparity in Indian
society.

One of the important disparities in gender relates to education. “A Dalit girl from a poor family
who dreams of becoming a doctor or engineer may have to struggle not only with a lack of
adequate schooling facilities in the neighbourhood and economic penury at home, but also, quite
possibly, with indifferent social attitudes towards her education as well as with gender
discrimination in the family and society” (p.281, Dreze and Sen, 2013).

Discrimination against females is practiced throughout the life cycle. Legal route is important to
address the problems faced by women. However, Economic and social empowerment of women
is important. Similarly, change in society attitudes and mind set of men is also essential to stop
gender discrimination.

                                                                                                               
12
 See  Muralidharan  (2013)  
   30  

4.4: Skill development: India has demographic dividend advantage as many young people enter
the labour force. The young people is an asset only if it is (a) educated (b) skilled and (c) finds
productive employment. This “demographic dividend” comes at a time when the rest of the
world is ageing. Some estimates show that only 2.3% of India’s workforce has undergone
formal skill training compared to United Kingdom’s (UK) 68%, Germany’s 75%, USA’s 52%,
Japan’s 80% and South Korea’s 96% (Niti Ayog, 2017). According to the Periodic Labour Force
Survey (PLFS) 2022-23, only 19.5% of workforce in the productive age group of 15-59 years
has received training (3.4 % formal vocational training and 16.4% informal training). Under the
Skill India Mission, the Government of India implements the Pradhan Mantri Kaushal Vikas
Yojana (PMKVY).

For having structural change from agriculture to non-agriculture and from unorganised to
organised, education and skill improvement are needed. Government initiatives on skill
development have so far yielded in slow progress. The approach seems to be more in the form of
increasing skills from supply side. It must be noted that many successful East and South east
countries also focused on general higher education including science. If the focus is on general
quality education, skill development can increase from the demand side. More innovative
methods may be required to improve skills faster. In order to promote quality employment and
skills, among other things, the country needs to invest more in physical infrastructure and human
capital.

The continuing challenges of unsustainable growth, climate change and rising inequalities need
reorientation of present development doctrine towards human development paradigm. It is true
that the human development perspective has evolved in the last three decades but its use has not
been widespread. In a recent study, Prabhu and Iyer (2019) provide an integrated exposition of
the human development and capabilities approach and examine human development in the
context of unequal world. The authors argue that the broader perspective of human development
is most suited for tackling the challenges of the 21st Century and in reorienting development
towards a more equitable, sustainable and empowering world. The study rightly argues for a
paradigmatic shift in analysis, policy, and methodology towards a people-centered approach
rooted in human flourishing and freedoms. The HD approach is discussed in a comprehensive
and integrated manner.

We have great dichotomy in accessing affordable quality of both health and education. For
instance, in the education sector, there are islands of excellence that can compete internationally
in education while the vast majority churn masses of children with weak learning achievements
as well as unemployable graduates. One has to fix this dichotomy in education, health and skills.

Some of the policies discussed for reducing inequalities in the previous section apply for
improving human development too.

5. INDIA AT 2047

5.1. Growth

Economic growth is equally important in order to raise resources for achieving employment
generation and human development. India is now aspiring to achieve the status of a developed
nation by 2047, at the 100th anniversary of its independence. A report of the Confederation of
Indian Industry (CII) says that India’s GDP can grow from the current $3 trillion to $5 trillion
   31  

by 2026-27, to $9 trillion by 2030 and to $40 trillion by 2047 if its population is productively
employed. India’s fast growing young workforce is another advantage, which few countries
enjoy in today’s world. This alone can help India leapfrog to a high growth trajectory provided
of course there are adequate and good quality education and skilling opportunities as well as
meaningful employment options to absorb the youth.

Rangarajan (2023) estimates the required growth rates for India to achieve the status of a
developed country by 204713. The estimates given in Table 19 reveal the following.
(a) The current criterion to achieve the status of a developed country is reaching a per capita income
level of US$13,205.
(b) In one scenario, it is assumed that the criterion would be the same even in 2047. In the alternate
scenario the cut-off is raised to US$15,000.
(c) A depreciation of Rs.2 per year in the dollar-rupee exchange rate is assumed.
(d) The estimates show that with no change in the cut-off, the required annual nominal growth rate
for the next twenty- five years is 10.18 per cent and with an inflation assumption of 4 per cent,
the real rate of growth will be 6.1 per cent.
(e) In the alternative assumption of a rise in the cutoff, the required nominal growth is 10.74 per
cent a real rate of growth of 6.74 per cent in the second case.
(f) If the depreciation of the rupee is higher than what is assumed the required growth rate will be
higher in all cases. Assuming higher depreciation, the required real rate of growth has to be
around 7 per cent per annum over this entire period in order to achieve the status of a developed
country by 2047.

According to Rangarajan (2023), in order to achieve 7 per cent rate of growth continuously in
the next two and half decades, the gross fixed capital formation has to be raised from the current
level of 28 per cent of GDP to 33 per cent of GDP and at the same time Incremental Capital
Output Ratio (ICOR) of 4 has to be maintained. Private investment is important for enhancing
the investment. Technology adoption including digital and a strong export sector are also
required for higher growth.

Table 19. To Achieve the Status of a Developed Country by 2047: Required Growth Rates Under
Different Scenarios
A. With Unchanged Criterion
FY47 GNI target with exchange rate depreciation of ₹2 per year ₹2630.68 trillion
with the criterion of US$13205 GNI per capita
FY22 GNI FY 22 ₹232.96 trillion
FY22 to FY47 Required nominal growth in rupee terms 10.18 per cent per year

FY22 to FY47 Required real growth rate at 4 per cent inflation 6.18 per cent per year
B. With Change in the Criterion
FY47 GNI target with exchange rate depreciation of ₹2 per year ₹2988 trillion
with the criteria of US$15000 GNI per capita
FY22 GNI FY 22 ₹232.96 trillion
FY22 to FY47 Required nominal growth in rupee terms 10.74 per cent per year
FY22 to FY47 Required real growth rate at 4 per cent inflation 6.74 per cent per year
Source: Rangarajan (2023)

India is now fifth largest economy and by 2030 it may become the third largest economy. A
report of Goldman Sachs predicts that India would be the second largest economy after

                                                                                                               
13
 Also  see  Debroy  (2023)  for  a  discussion  on  India  at  20147.  
   32  

surpassing USA by 2075. The projections show India’s GDP would be $52.5 trillion as
compared to $51.5 for the USA (Table 20). The report says the significance of innovation,
increased worker productivity, and capital investment for higher GDP growth in India. It also
notes that India's favourable demographics, low dependency ratio rising savings rates, and a
conducive environment for private sector capital expenditure will contribute to its growth
potential.
Table 20. Levels of GDP in Constant Prices by 2075
Country GDP Level by 2075 (in USD Trillion)
China 57.0
India 52.5
USA 51.5
Euro Area 30.3
Japan 7.5
Source: Goldman Sachs https://www.goldmansachs.com/intelligence/pages/the-global-economy-in-
2075-growth-slows-as-asia-rises.html

However, in relation to per capita income, India’s rank is only 139 out of 192 countries. This
only shows the distance the country has to travel. There is no choice except to grow more to
improve its per capita income.

5.1.1. The Engines of Growth

The two engines of growth are investment particularly private investment and exports.

Investment

In India, the investment rate is declining in recent years. The investment rate as per cent of GDP
declined from 39% in 2011-12 to 31.4% in 2021-22. The gross fixed capital to GDP ratio
declined from 34.3% to 28.9% during the same period. For growth to increase it is imperative
that investment ratio goes up. The government has given a much needed capex push in its Union
Budgets of 2022-23 and 2023-24, yet the translation of this into private investment is still not
visible. Investment continues to be sluggish despite a sharp cut in corporate taxes introduced by
the government in 2019. The tightening of monetary policy may also have some impact on
investment. What is required perhaps to unleash the animal spirits of the private sector is policy
certainty, and creation of a level-playing field through government actions. Also attracting
foreign companies to produce in India must be given a high priority now given that many of
these companies are looking for alternatives to China and Russia. India needs to take full
advantage of this opportunity.

India has undertaken several structural reforms such as the announcement of privatisation and
asset monetisation; tax reforms (Goods and Service Tax (GST) and corporate tax
rationalisation); the Production-Linked Incentive (PLI) scheme; Insolvency And Bankruptcy
Code (IBC) to improve the credit culture and resource allocation mechanism; labour reforms
(four codes); and a fiscal policy focus on Capital expenditures (CapEx) and infrastructure (RBI,
2022).

As the Reserve Bank of India (RBI 2022) noted, along with these reforms, other measures are
needed to reverse the sustained decline in private investment and low productivity in the
economy. These measures given in RBI (2022) are: (a) access to litigation free low-cost land;
(b) raising the quality of labour through large-scale expansion of public expenditure on
education and health and the skill India mission; (c) reducing the cost of capital for industry and
   33  

improve resource allocation in the economy by promoting competition; (d) encouraging

industries and corporates to scale up R&D activities with an emphasis on innovation and
technology; (e) creating an enabling environment for startups and unicorns; (f) encouraging
corporate investment in agriculture; (g) addressing the challenges faced by the debt-ridden
telecom industry and Distribution Companies (DISCOMs); (h) rationalisation of subsidies that
promote inefficiencies; (i) encouraging urban agglomerations by improving the housing and
physical infrastructure. “The next wave of global structural transformation is likely to be
powered by both technology and environmentally sustainable production processes” (p.75, RBI,
2022).

Exports
It is well known that exports are one of the main engines of growth and employment creation.
When India had high growth, during 2000-2011, exports grew at an annual rate of 21 per cent
and 24 per cent, respectively, for goods and services. However, exports of goods completely
stagnated with an annual growth rate of nearly 0 per cent during 2012-19. More recently, the
Covid-19 pandemic has impacted world trade negatively. The government has announced a
performance-linked incentive scheme for 10 sectors. These are more capital-intensive. But
private investment depends on many other factors such as ease of doing business, honouring
contracts, availability of land and other infrastructure. However, one problem is that in recent
years India’s trade policy has become more protectionist. There are several opportunities for
India to occupy the space vacated by China to boost exports.

A study by RBI examines empirical constraints to exports (RBI,2022). The findings are : (a)
Past Free Trade Agreements (FTAs) have not been trade creating; (b) Without higher import and
technology –intensity of exports, raising India’s participation in the global value chain may be
difficult; (c) Exchange rate stability helps promote exports; (d) Green export opportunities for
exports; (e)Greater opportunities to imports at lower tariff and non-tariff restrictions; (f) Foreign
direct investment (FDI) can boost exports and enhance the capacity to absorb foreign capital.

5.1.2. Global headwinds

The recent IMF forecast (October, 2023) indicates that global growth will slow down from 3.5
percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024, well below the historical (2000–
19) average of 3.8 percent. Advanced economies are expected to slow from 2.6 percent in 2022
to 1.5 percent in 2023 and 1.4 percent in 2024 because of policy tightening. Global inflation is
forecast to decline steadily, from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in
2024, due to tighter monetary policy aided by lower international commodity prices. Core
inflation is generally projected to decline more gradually, and inflation is not expected to return
to target until 2025 in most cases. The Ukraine/Russia war and Israel/Palestine war would also
affect the Indian economy.

5.1.3. Digital transformation

One new source of growth for the Indian economy would be digital transformation. The digital
economy will continue to expand in all sectors of the economy. Digitalisation could potentially
exert powerful positive externalities in the economic and social spheres to improve agriculture,
industry, services, the financial sector, education, the environment, and health services.
   34  

5.1.4. Urbanisation

Urbanisation would be another source of growth. By 2035, the percentage of population in India
residing in urban area will be 43.2%, according to a UN report. India’s urban population is
estimated to stand at 675 million in 2035, the second highest behind China’s one billion.The
report said that urban poverty and inequality remain one of the most intractable and highly
complex problems confronting cities. Noting the challenge of climate change, the report said
that cities, especially those in warm climates or low-lying coastal areas, face existential threats
due to the risks and impacts of climate change. Inclusive and sustainable urbanisation is
needed.

5.1.5. Climate change

Climate change is now a serious challenge for India’s long term growth. Reducing carbon
emissions and accelerating energy transition is a challenge as well as an opportunity. In the
COP26 meeting at Glasgow, Prime Minister Narendra Modi announced that India will aim to
attain net zero emissions by 2070. Net zero, or becoming carbon neutral, means not adding to
the amount of greenhouse gases in the atmosphere.

China has announced plans for carbon neutrality by 2060, while the US and EU aim to hit net
zero by 2050. PM also announced that India will draw 50% of its consumed energy from
renewable sources by 2030, and cut its carbon emissions by a billion tonnes by the same year.
India wants commitments of developed countries on providing finance, transfer of technology
and emission reductions due to historically high consumption patterns. Climate justice is another
issue. Developed countries are historically responsible but rich in developing countries also have
to pay for their consumption patterns.

5.1.6. Fiscal Policy

One of the important policy levers for boosting growth is to use the fiscal space to encourage
demand. Fiscal space in India is likely to remain limited in the foreseeable future unless
tax/GDP ratio and non-tax revenue improve. And if growth starts to slow down, this will make
the task of fiscal consolidation even more challenging. Lowering the deficit and debt to more
sustainable levels is imperative for ensuring macroeconomic stability which in turn is an
important precondition for growth especially amidst growing global uncertainty.

As Table 21 shows the general government outstanding liabilities were less than 70% during the
period from FY11 to FY18. But it accelerated to 89.4% in FY21. This is significantly higher
than FRBM target of 60% and it is a risk for medium-term macroeconomic stability.

Table 21: Fiscal Deficit and outstanding liabilities (% of GDP): Centre and States
Year Gross Fiscal Deficit Outstanding Liabilities
Centre States Centre States
2011-12 5.9 2.0 51.7 23.2
2012-13 4.9 2.0 51.0 22.6
2013-14 4.5 2.2 50.5 22.3
2014-15 4.1 2.6 50.1 22.0
2015-16 3.9 3.0 50.1 23.7
2016-17 3.5 3.5 48.4 25.1
2017-18 3.5 2.4 48.3 25.1
   35  

2018-19 3.4 2.4 48.5 25.3

2019-20 4.7 2.6 51.6 26.7
2020-21 9.2 4.1 61.7 31.1
2021-22 6.8 2.7 60.1 28.7 (RE)
2022-23 6.5 (RE) 3.5 (RE) 58.0 (RE) 29.5 (BE)
2023-24 5.9 (BE) 3.2 (BE) -- --
PA: Provisional Accounts; RE: Revised Estimates; BE (Budget estimates)
Source: RBI (2023), Annual Report 2022-23

At least for the next few years, fiscal policy has to follow the path of consolidation which
implies that there is not much room to use this level for stimulating growth, even if aggregate
demand starts to slow down. This will be a serious short to medium term challenge for Indian
economy, especially given that monetary policy, the other important policy level, will need to
remain focused on bringing the CPI inflation down to the RBI’s target level of 4%.

The government has rightly been focusing on capital expenditure in the last three budgets. In
August 2020 they also outlined an infrastructure project pipeline to be implemented over the
next five years, which will serve as one of the key drivers of faster economic growth.

State Finances
Consolidation in state finances is equally important as they spend more than the centre. The
state governments allocate, significant amount of funds to agriculture in their budgets. They
spend 60% of the total government expenditure, 70% of education and health spending, and a
larger share in public capital expenditure. Capital expenditure by States/UTs in India is more
than two thirds of the total capital expenditure incurred by the general government.

Table 22: State-wise Gross Fiscal Deficit and Revenue Deficit

States 2020-21 2021-22 (RE) 2022-23 (BE)
Revenue Gross Fiscal Revenue Gross Fiscal Revenue Gross Fiscal
Deficit Deficit Deficit Deficit Deficit Deficit
Andhra Pradesh 3.5 5.4 1.6 3.2 1.3 3.6
Assam -0.4 3.3 1.0 9.5 -0.7 3.5
Bihar 1.9 5.1 5.5 11.4 -0.6 3.5
Chattisgarh 2.0 4.5 0.3 3.8 -0.2 3.3
Gujarat 1.4 2.5 0.0 1.5 0.0 1.7
Haryana 3.0 3.8 1.4 3.0 1.0 3.0
Himachal Pradesh 0.1 3.6 -0.2 4.0 2.0 5.0
Jharkhand 1.0 5.0 -0.1 3.2 -1.8 3.0
Karnataka 1.1 3.9 0.3 2.4 0.6 2.7
Kerala 3.2 5.1 3.5 5.1 2.3 3.9
Madhya Pradesh 1.9 5.1 0.5 3.7 0.3 4.0
Maharashtra 1.5 2.6 1.0 2.8 0.7 2.5
Odisha -1.7 1.8 -3.3 0.4 -2.5 3.0
Punjab 3.2 4.2 3.6 5.6 2.0 3.7
Rajasthan 4.3 5.9 3.0 5.2 1.8 4.4
Tamil Nadu 3.4 5.2 2.7 4.4 2.2 4.1
Telangana 2.3 5.1 -0.4 3.9 -0.3 4.0
Uttar Pradesh 0.1 3.3 -1.2 4.0 -2.0 3.7
West Bengal 2.3 3.4 -2.1 3.5 1.7 3.6
All States/UTs 1.9 4.1 0.9 3.7 0.3 3.4
Source: RBI (2023)
   36  

In 2021-22 (RE), the gross fiscal deficit was more than 4% of GSDP for 6 states: Bihar (11.4%),
Assam (9.5%), Punjab (5.6%), Rajasthan (5.2%), Kerala (5.1%), Tamil Nadu (4.4%) (Table 22).
Revenue deficit is also high in some of these states.

Freebies

Recently, there has been a lot of discussion on freebies given by the states. To derive an estimate
of freebies, RBI (2022f) collated data on major financial assistance/ cash transfers, utility
subsidies, loan or fee waivers and interest free loans announced by the states in their latest
budget speeches (i.e., for FY23). These estimates show that the expenditure on freebies range
from 0.1-2.7% of the GSDP for different states (Table 15). The freebies as per cent of GSDP
were more than 2 per cent for some of the highly indebted states such as Punjab and Andhra
Pradesh (Table 23).

Table 23: Freebies Announced by the States in 2022-23

(As a per cent of (As a per cent (As a per cent
GSDP) of Revenue of Own Tax
Receipts) Revenue)

Andhra Pradesh 2.1 14.1 30.3

Bihar 0.1 0.6 2.7
Haryana 0.1 0.6 0.9
Jharkhand 1.7 8.0 26.7
Kerala 0.1
Madhya Pradesh 1.6 10.8 28.8
Punjab* 2.7 17.8 45.4
Rajasthan 0.6 3.9 8.6
West Bengal 1.1 9.5 23.8

Note: Dhasmana, I. (2022). “Not all states are so financially weak that they can’t announce freebies”.
Business Standard. April 2022.
Source: RBI (2022d) based on budget documents of the state governments.

The budgets may not give the entire picture of freebies as some of them happen off budget,
beyond the pale of FRBM tracking (Subbarao, 2022). The amount of freebies could be even
higher if we take into account these extra-budgetary subsidies. Some kind of social protection
measures for the poor and vulnerable groups, and informal workers are needed in any country.
However, it should not be financed by increasing debt. Rangarajan (2022), suggests that overall
fiscal support to such schemes should be limited to less than 10% of the total expenditure of the
central government and state governments until their revenue to GDP or GSDP ratios are
increased in a sustainable manner.

5.2. G20, Global South and Inclusive Development

At the G20 Summit in India in 2023, the leaders of G20, resolved to act in concrete ways
through partnerships. Achieving inclusive development and helping the Global South were the
main objectives of the G20 deliberations. The leaders made commitments to the actions on the
following:

a. Accelerate strong, sustainable, balanced and inclusive growth.

   37  

b. Accelerate the full and effective implementation of the 2030 Agenda for Sustainable
Development.

c. Pursue low-GHG/low-carbon emissions, climate-resilient and environmentally sustainable

development pathways by championing an integrated and inclusive approach. We will urgently
accelerate our actions to address development and climate challenges, promote Lifestyles for
Sustainable Development (LiFE), and conserve biodiversity, forests and oceans.

d. Improve access to medical countermeasures and facilitate more supplies and production
capacities in developing countries to prepare better for future health emergencies.

e. Promote resilient growth by urgently and effectively addressing debt vulnerabilities in

developing countries.

f. Scale up financing from all sources for accelerating progress on SDGs.

g. Accelerate efforts and enhance resources towards achieving the Paris Agreement, including
its temperature goal.

h. Pursue reforms for better, bigger and more effective Multilateral Development Banks (MDBs)
to address global challenges to maximise developmental impact.

i. Improve access to digital services and digital public infrastructure, and leverage digital
transformation opportunities to boost sustainable and inclusive growth.

j. Promote sustainable, quality, healthy, safe and gainful employment.

k. Close gender gaps and promote the full, equal, effective and meaningful participation of
women in the economy as decision-makers.

l. Better integrate the perspectives of developing countries, including LDCs, LLDCs, and SIDS,
into future G20 agenda and strengthen the voice of developing countries in global decision
making.

However, implementation is the key. G20 particularly developed countries have to commit to
technology and finance for issues like climate change and achieving the Paris agreement,
progress in SDGs, debt vulnerability of less developed countries. It will help all countries
particularly global south significantly. Reforms in multilateral development banks will also help
India and global south14.

5.3. Inclusive Development through Monetary and Fiscal Policy

Monetary policy can control inflation, which helps the poor. It can also channel credit to
productive sectors including MSMEs and informal sector, which can increase growth and jobs.
Similarly, credit can be raised to agricultural sector.

                                                                                                               
14
 On  G20  summit  recommendations,  also  see  Chaturvedi,  2023.    
   38  

Fiscal Policy: Growth and redistribution in favour of poor can be made through fiscal policies.
Taxes, expenditures and subsidies are the major instruments of fiscal policy. Some advocate
measures such as redistribution of assets and wealth in favour of the poor via higher tax rates for
the rich. In order to reduce inequalities, richer sections have to pay much more taxes. The
tax/GDP ratio has to be raised with a wider tax base and removing exemptions for corporates.
One of the distortions in India is that the share of direct taxes is much lower than that of indirect
taxes. It is known that indirect taxation is regressive in nature. Fiscal instruments like public
investment in physical and social infrastructure can be used to reduce inequality. Generally
developed countries use counter-cyclical and developing countries follow pro-cyclical measures.
Using the data for the period 1950-51 to 2007-08 Krishnan and Vaidya (2013) examined
whether Indian fiscal policy is pro-cyclical or counter-cyclical. The results show that fiscal
policy has been generally a-cyclical over the period of study. Graduating from an a-cyclical
fiscal stance to a counter-cyclical stance is an important challenge that the Indian economy will
have to face in the coming decades.

Are we too conservative in monetary and fiscal policies in India? Goyal (2017) divides
macroeconomic policy into two types. Type 1 takes supply side approach where all available
factors of production determine potential growth, while demand affects only inflation, not
output. This is the usual monetarist view. Type II takes demand side approach where output and
aggregate demand. The demand need not be inflationary. This is closer to Keynesian theories or
the labour view that values the creation of employment. But, this approach differs in bringing in
structural emerging market features, which are not normally included in Keynesian theories.
India’s recent macroeconomic policy has tended towards that of Type 1. According to Goyal
(2017), a comparison of Type I and Type II policies shows that the latter would lead to better
growth and inflation outcomes in the Indian context.

Macro policies, in general, should enhance strong aggregate demand, raise productive
investment and improve access to finance in order to raise growth, employment and reduce
inequalities.

6. CONCLUDING OBSERVATIONS

Inclusive development is a boarder concept than inclusive growth as poor and vulnerable
sections not only participate in growth process but also try to achieve well-being. We examined
performance, challenges and policies in three inter-related components of inclusive development
in India: (a) agriculture development and achieving zero hunger; (b) reduction in poverty and
inequalities and ; (c) human development.

India is now aspiring to achieve the status of a developed nation by 2047, at the 100th
anniversary of independence. We need per annum 7 per cent real growth and 11 per cent
nominal growth to achieve this objective. However, India’s rank is still very low in per capita
income and it has to grow much more. The two main engines of growth are investment (
particularly private) and exports. Demographic dividend, digital transformation will help raising
growth.

GDP growth is important but it has to be inclusive and sustainable to benefit all sections of the
society. Agricultural transformation need for change in narrative in the new context of food
systems approach, climate change and nutrition. There are significant challenges for achieving
zero hunger. Nutrition is determined by several factors and need multi-sectoral approach.
Inequalities in income, wealth, across social groups and regions should reduce considerably in
   39  

the next 25 years. Employment creation with quality should be at the heart of the strategy for
reducing inequalities. More investments in education and health are required to achieve higher
human development.

One sector that can transform India is education. We have great quality dichotomy in education
sector. There are islands of excellence that can compete internationally in education while vast
majority of them churn masses of children with weak learning achievements and unemployable
graduates. One has to fix this dichotomy in education and skills. But, human development goes
beyond health and education and should enhance freedom of choice for people. Tax/GDP ratio
has to be improved in order to raise resources for physical infrastructure and social sector
development.

Non-economic factors like norms, culture and beliefs can also influence the level of
inclusion/exclusion. Constitution and democratic values have to be followed. Judicial, police
and civil service reforms are important for both growth and inclusion. Role of states in this
journey is equally crucial if India wants to be a developed country and achieve inclusive
development by 2047. Women empowerment including increase in the work participation rates
of women will contribute immensely to growth and equity and make India a developed country.

Politically, for having a stable and democratic society, one needs to have equitable approach.
Large sections of the society can’t be ignored. We have both ‘State failure and ‘market failure’
in the case of equality and justice. Both these failures have to be corrected. The cost of neglect
of inequalities is quite high. The agenda of inclusiveness and equality has to be given highest
priority for broad based social and economic development. India has progressed on many fronts.
The task is to build on the achievements so far and strengthen democracy and move towards a
society that is not only prosperous but also equitable and pro-nature.

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