(co-authored with Ashish and valuable inputs given by dad)
India has witnessed a significant increase in its GDP at an average rate of 6% from 1991 to 2008 since the economic reforms. But India is still ranked at 134 among 182 nations in the Human Development Index and its Gini coefficient is 32.5 showing that the top 10% owned 33% of all the wealth in the nation. This large discrepancy between growth and social development indicators reinforces the point that India's growth did not improve the lives of marginalised sections instead it widened the chasm between the rich and the poor.
India's social sector spending at 6.72% of GDP is the lowest among the BRIC nations and way below the developed nations. Social sector spending has an inverse relationship with inequality. Indian government should increase its budgeted social sector spending but should be cautious about fiscal deficit. Excessive fiscal deficit leads to high inflation which impacts the lower income group. The government can achieve the additional budget by reducing its spending on subsidies. Subsidies have been criticized by the World Bank as responsible for economic inefficiency. The government should redirect funds from unproductive subsides towards social sector spending.
NREGA was implemented with an objective to provide wage employment in rural areas, create durable assets and ensure food security. NREGA has been instrumental in providing employment opportunities and setting higher minimum wages. The panchayat raj plays a major role by registering applicants and providing employment opportunities. But, panchayats have no financial strength of their own to meet the functional mandates. The central government and state government meet the costs of wages and unemployment allowances. This incomplete devolution of funds is perhaps the biggest challenge to the effective functioning of panchayats. The central government should provide the necessary funds to the panchayats and hold them accountable. Panchayats can then become the principal authority for planning and implementation at grassroots levels.
Even after 62 years of independence majority of the population still depends on agriculture. For achieving inclusive growth and to give much needed encouragement to agriculture, steps have to be taken. Support prices for agricultural produce should be fixed by following the costing method used in industry. Factors like cost of capital (land value), labour costs (labour put in by the farmer and his family members), cost of inputs (seeds, fertilizers, pesticides etc), risk premium and profit margin should be given due weightage. This step will put more income in the hands of farmers. They will be able to adopt capital intensive production methods, reduce dependence on money lenders and will not require subsidies. If additional incomes from allied agriculture and cottage/agri based industries are also generated more capital will be created in villages. Automatically infrastructure facilities and quality of life will improve in rural areas and migration from rural to urban will get reversed.
When the support prices of agriculture produce are fixed by proper costing methods it might lead to a rise in food inflation. To protect vulnerable sections like landless labour, daily wage earners, marginal farmers, unorganized sector employees and unemployed proper social security measures are required. Targeted subsidies aimed at these sections will help alleviate the impact on these sections and also contribute towards keeping the subsidy burden within acceptable limits. The government should revamp the delivery mechanism for subsidized food grains, minimum wages, health insurance and unemployment doles. The “unique identification number” project will prove to be immensely useful in this context and help in delivering targeted subsidies.
Microcredit is the extension of very small loans to those in poverty designed to spur entrepreneurship. Microcredit emphasizes building capacity of a micro entrepreneur, employment generation and help to micro-entrepreneur during difficult times. Microcredit firms have helped build women entrepreneurs in India. Indian urban markets have a wafer thin profit margin for fast-moving consumer goods and are near saturation. These women entrepreneurs, with the help of loans from microcredit firms, market FMCG goods in the villages for the multinational companies. Microcredit organizations will be in forefront for building countless self sustaining businesses in the coming years.
In recent past, Brazilian government has been making strides in the sphere of social development. Programs such as Bolsa FamÃlia, Fome Zero etc have made a decisive contribution to the unprecedented reduction in poverty and inequality that has occurred in recent years. These examples show that by targeting the sections which have been bypassed by the last wave of growth, India too can uplift millions of people still trapped in poverty and make them the engines of growth for the future.
References
1. http://www.indiadevelopmentblog.com/2009/10/hdi-towards-more-representative-index.html
2. http://www.indiadevelopmentblog.com/2009/02/inclusive-growth.html
3. http://en.wikipedia.org/wiki/Economic_disparities_in_India
4. http://www.expressindia.com/latest-news/Chidambaram-argues-for-faster-reforms-inclusive-growth/525767/
5. http://business.mapsofindia.com/india-gdp/growth-rate.html
6. http://www.nationsencyclopedia.com/Asia-and-Oceania/India-ECONOMY.html
7. http://www.indiainfoline.com/Markets/News/News.aspx?NewsId=6541
8. http://gulzar05.blogspot.com/2009/05/social-sector-spending-and-inequality.html
9. http://www.thaindian.com/newsportal/business/indias-social-sector-spending-lowest-among-bric-nations_10063021.html
10. http://timesofindia.indiatimes.com/india/On-social-sector-spending-India-still-way-behind-developed-world/articleshow/4846172.cms
11. http://www.business-standard.com/india/news/world-bank-asks-india-to-cut-%60unproductive%60-farm-subsidy/279646/
12. www.solutionexchange-un.net.in/decn/cr/res11120606.pdf
13. http://www.authorstream.com/presentation/Sigismondo-50022-Weather-Insurance-new-frontier-India-Opening-frontiers-Recapitulation-Rural-Non-Life-Importance-Ag-insuran-Education-ppt-powerpoint/
14. http://web.worldbank.org/
India has witnessed a significant increase in its GDP at an average rate of 6% from 1991 to 2008 since the economic reforms. But India is still ranked at 134 among 182 nations in the Human Development Index and its Gini coefficient is 32.5 showing that the top 10% owned 33% of all the wealth in the nation. This large discrepancy between growth and social development indicators reinforces the point that India's growth did not improve the lives of marginalised sections instead it widened the chasm between the rich and the poor.
India's social sector spending at 6.72% of GDP is the lowest among the BRIC nations and way below the developed nations. Social sector spending has an inverse relationship with inequality. Indian government should increase its budgeted social sector spending but should be cautious about fiscal deficit. Excessive fiscal deficit leads to high inflation which impacts the lower income group. The government can achieve the additional budget by reducing its spending on subsidies. Subsidies have been criticized by the World Bank as responsible for economic inefficiency. The government should redirect funds from unproductive subsides towards social sector spending.
NREGA was implemented with an objective to provide wage employment in rural areas, create durable assets and ensure food security. NREGA has been instrumental in providing employment opportunities and setting higher minimum wages. The panchayat raj plays a major role by registering applicants and providing employment opportunities. But, panchayats have no financial strength of their own to meet the functional mandates. The central government and state government meet the costs of wages and unemployment allowances. This incomplete devolution of funds is perhaps the biggest challenge to the effective functioning of panchayats. The central government should provide the necessary funds to the panchayats and hold them accountable. Panchayats can then become the principal authority for planning and implementation at grassroots levels.
Even after 62 years of independence majority of the population still depends on agriculture. For achieving inclusive growth and to give much needed encouragement to agriculture, steps have to be taken. Support prices for agricultural produce should be fixed by following the costing method used in industry. Factors like cost of capital (land value), labour costs (labour put in by the farmer and his family members), cost of inputs (seeds, fertilizers, pesticides etc), risk premium and profit margin should be given due weightage. This step will put more income in the hands of farmers. They will be able to adopt capital intensive production methods, reduce dependence on money lenders and will not require subsidies. If additional incomes from allied agriculture and cottage/agri based industries are also generated more capital will be created in villages. Automatically infrastructure facilities and quality of life will improve in rural areas and migration from rural to urban will get reversed.
When the support prices of agriculture produce are fixed by proper costing methods it might lead to a rise in food inflation. To protect vulnerable sections like landless labour, daily wage earners, marginal farmers, unorganized sector employees and unemployed proper social security measures are required. Targeted subsidies aimed at these sections will help alleviate the impact on these sections and also contribute towards keeping the subsidy burden within acceptable limits. The government should revamp the delivery mechanism for subsidized food grains, minimum wages, health insurance and unemployment doles. The “unique identification number” project will prove to be immensely useful in this context and help in delivering targeted subsidies.
Microcredit is the extension of very small loans to those in poverty designed to spur entrepreneurship. Microcredit emphasizes building capacity of a micro entrepreneur, employment generation and help to micro-entrepreneur during difficult times. Microcredit firms have helped build women entrepreneurs in India. Indian urban markets have a wafer thin profit margin for fast-moving consumer goods and are near saturation. These women entrepreneurs, with the help of loans from microcredit firms, market FMCG goods in the villages for the multinational companies. Microcredit organizations will be in forefront for building countless self sustaining businesses in the coming years.
In recent past, Brazilian government has been making strides in the sphere of social development. Programs such as Bolsa FamÃlia, Fome Zero etc have made a decisive contribution to the unprecedented reduction in poverty and inequality that has occurred in recent years. These examples show that by targeting the sections which have been bypassed by the last wave of growth, India too can uplift millions of people still trapped in poverty and make them the engines of growth for the future.
References
1. http://www.indiadevelopmentblog.com/2009/10/hdi-towards-more-representative-index.html
2. http://www.indiadevelopmentblog.com/2009/02/inclusive-growth.html
3. http://en.wikipedia.org/wiki/Economic_disparities_in_India
4. http://www.expressindia.com/latest-news/Chidambaram-argues-for-faster-reforms-inclusive-growth/525767/
5. http://business.mapsofindia.com/india-gdp/growth-rate.html
6. http://www.nationsencyclopedia.com/Asia-and-Oceania/India-ECONOMY.html
7. http://www.indiainfoline.com/Markets/News/News.aspx?NewsId=6541
8. http://gulzar05.blogspot.com/2009/05/social-sector-spending-and-inequality.html
9. http://www.thaindian.com/newsportal/business/indias-social-sector-spending-lowest-among-bric-nations_10063021.html
10. http://timesofindia.indiatimes.com/india/On-social-sector-spending-India-still-way-behind-developed-world/articleshow/4846172.cms
11. http://www.business-standard.com/india/news/world-bank-asks-india-to-cut-%60unproductive%60-farm-subsidy/279646/
12. www.solutionexchange-un.net.in/decn/cr/res11120606.pdf
13. http://www.authorstream.com/presentation/Sigismondo-50022-Weather-Insurance-new-frontier-India-Opening-frontiers-Recapitulation-Rural-Non-Life-Importance-Ag-insuran-Education-ppt-powerpoint/
14. http://web.worldbank.org/
