Inclusive growth is economic growth that is distributed fairly across society and creates opportunities for all. 



The growth is inclusive growth when it is socially inclusive, regionally balanced, enables every state to do better than in the past, narrows the gap between different communities, brings in our concern for gender equality, upliftment of women, improving their educational condition and social status.


Elements of Inclusive Growth

Skill Development - For reaping benefits of demographic dividend skill development is necessary. India is facing a dual challenge in skill development: First, there is a paucity of a highly trained workforce. Second, there is non-employment of conventionally trained youths. According to the Economic Survey 2017, over 30% of youth in India are not in education, employment, or training.

Financial Inclusion - Financial inclusion is necessary for inclusive growth as it leads to the culture of saving, which initiates a virtuous cycle of economic development.

Technological Advancement - These technological advancements have capabilities to both decrease or increase inequality depending on the way these are being used. Technology can help to combat other challenges too, eg: Agriculture, Manufacturing, Education, Health, Governance.

But Technology has also polarized inequalities by reducing demand for low-skilled jobs while rewarding highly skilled jobs disproportionately (highly screwed return on labour vis a vis return on capital). Exacerbating this has been the role of so-called “superstar” firms. These have high profits and a low share of labour, and as models of great productivity, have come to increasingly dominate markets.

The outlook remains mixed in the realm of technology. Analysis of the social mobility index in most countries, low social mobility is related to economic development issues that go beyond income. With this in mind, “digital leapfrogging” will not happen unless these issues are systematically addressed. More positively, technology has the potential to equalize the barriers to entry to knowledge, but only if the conditions are conducive.

Economic Growth - India is among the fastest-growing major economies in the world. The target of becoming a $ 5 trillion economy by 2024-25 can allow India to reduce inequality, increase social expenditure and provide employment to all.

Social Development - It means the empowerment of all marginalized sections of the population like SC/ST/OBC/Minorities, women, and transgenders. Empowerment can be done by improving institutions of the social structure.

Challenges in Achieving Inclusive Growth

Poverty - As per the Multidimensional Poverty Index (MPI) 2018, India lifted 271 million people between 2005-06 and 2015-16. India demonstrates the clearest pro-poor pattern at the sub-national level. Still, 373 million Indians continue to experience acute deprivations.

Unemployment - As per the Periodic Labour Force Survey (PLFS) of NSSO, total unemployment rate lies at 6.1%. The quality and quantity of employment in India are low due to illiteracy and due to over-dependence on agriculture. The quality of employment is a problem as more than 80% of people work in the informal sector without any social security.

vicious cycle of Poverty

Agriculture Backwardness - Around 44% of people in India have agriculture-related employment but its contribution to the Indian GDP is only 16.5% which leads to widespread poverty.

Issues with Social Development - Social development is one of the key concerns for inclusive growth. But it is facing some problems such as: 

  • Significant regional, social and gender disparities.
  • Low level and slow growth in public expenditure particularly in health and education.
  • The poor quality delivery system.
  • Social indicators paint a dismal picture for OBC, SC, ST, and Muslims.
  • Malnutrition among the children - India ranks 102nd in Global Hunger Index

Regional Disparities - Regional disparities are a major concern for India. Factors such as the caste system,  rich-poor divide, etc. contribute to the regional disparities which create a system where some specific groups hold more privileges over others.

Measuring Inclusive Growth

Inclusive Development Index (IDI) - In the Inclusive Development Index (IDI) 2018 compiled by the World Economic Forum (WEF), India ranked 62nd out of 74 emerging countries and was among the least inclusive countries in Group of 20 (G-20) countries. The IDI is based on the idea that most people base their country’s growth not on GDP but by their own standard of living.

It gives a measure of inequality based on three parameters: :

  • Growth and development
  • Inclusion
  • Inter-generational equity and sustainability.

Social Progress Index (SPI) - It is an aggregate index of social and environmental indicators which includes the following:

  • Basic human need
  • Foundation of well being
  • Opportunity

Global Social Mobility Index - Focuses on drivers of relative social mobility instead of outcomes. It looks at policies, practices, and institutions. This allows it to enable effective comparisons throughout regions and generations. 

NITI Aayog's Strategy for New India @75 has the following objectives for inclusive growth

  • To have a rapid growth, which reaches 9-10% by 2022-23, which is inclusive, clean, sustained and formalized.
  • To Leverage technology for inclusive, sustainable and participatory development by 2022-23.
  • To have an inclusive development in the cities to ensure that urban poor and slum dwellers including recent migrants can avail city services.
  • To make schools more inclusive by addressing the barriers related to the physical environment (e.g. accessible toilets), admission procedures as well as curriculum design.
  • To make higher education more inclusive for the most vulnerable groups.
  • To provide quality ambulatory services for an inclusive package of diagnostic, curative, rehabilitative and palliative care, close to the people.
  • To prepare an inclusive policy framework with citizens at the center

World Economic Forum 

WEF has suggested 3 practical ways by which countries can boost social inclusion as well as economic growth:

  • First, countries should increase public and private investment in their citizens’ capabilities,in order to lift their rate of productivity growth.
  • Second, governments, together with employers’ and workers’ organizations, should upgrade national rules and institutions relating to work.(These influence the quantity and distribution of job opportunities and compensation.)
  • Third, increase public and private investment in labor-intensive economic sectors that generate wider benefits for society. These include sustainable water, energy, digital, and transport infrastructure, rural economy, and education and training.

Social mobility index -

For Inclusive growth the report suggests we need to work towards:

  • Creating a new financing model for social mobility: improving tax progressivity on personal income, policies that address wealth concentration, and broadly re-balancing the sources of taxation. 
  • More support for education(better distribution, affordability, and availability) and lifelong learning(skill development): This includes a new approach to jointly financing such efforts between the public and private sector.y
  • Developing a new holistic social protection contract particularly in the context of technological change and industry transitions.
Specifically, the report suggests that business:
  • Takes the lead: primarily by promoting a culture of meritocracy in hiring, providing vocational education, reskilling and upskilling as well as by paying fair wages. This includes industry and sector-specific plans to address historic inequalities within and between sectors.
  • Creates action plans specific to each industry: these are required to address shifts in inequality taking into account each industry's differing circumstances.