GS Paper 3
Syllabus: Economy: Inclusive Growth
Source: TH
Context: The article warns against the obsessive pursuit of economic growth in India, emphasizing that despite ambitious projections, the associated rising inequality poses significant challenges.
Current Status of India’s Growth:
India’s recent economic growth has been robust, with an estimated 6.9% expansion in FY 2022/23, driven by strong domestic demand, increased infrastructure investment, and robust private consumption. For FY 2023/24, a growth of 7.3% is projected, maintaining India’s 5th position in the global GDP rankings. The economy has surged to $3.7 trillion. Future prospects indicate an ambitious target of reaching a $10 trillion economy by 2035, aligning with the government’s vision to transform India into a ‘developed country’ by 2047.
Status of Inequality in India:
| Inequality Aspect | Statistics |
| Recent SBI Research | According to a recent SBI Research report, income inequality in India has decreased, indicating a positive trend of upward mobility and the growth of the middle class. |
| Ginni Coefficient decreased from 0.472 in AY 2014-15 to 0.402 in AY 2022-23 | |
| Income Inequality | The top 10% holds 57% of total income. The top 1% holds 22% of total income. Bottom 50% share reduced to 13% |
| Tax Burden on Poor | The bottom 50% contributes 64% to GST. The top 10% contributes only 4% |
| Healthcare Accessibility | 63 million pushed into poverty annually due to healthcare costs |
| Food Security and Nutrition | 74% of the population can’t afford a healthy diet. 39% lack a nutrient-adequate diet |
| Global Hunger Index 2023 | The 2023 Global Hunger Index gives India a rank of 111 out of 125 countries. Highest child-wasting rate |
| Gender Inequality | India ranked 127 out of 146 countries in the Global Gender Gap Report, 2023. Faces issues of “missing women” |
Causes of Increasing Inequality in India:
| Causes | Factors Contributing to Inequality |
| Concentration of wealth | The top 10% holds 77% of national wealth. The richest 1% owns 53%, while the poorer half has only 4.1% |
| Inadequate land reforms leading to landlessness and economic vulnerability | |
| Crony capitalism fosters wealth accumulation in a select group, contributing to inequality | |
| Policy issues | Skewed distribution of economic gains, favouring specific sectors or income groups |
| Regressive taxation policies that benefit the wealthy, contribute to income inequality | |
| Wage gaps between skilled and unskilled workers, and informal labour markets widening income disparities | |
| The absence of minimum wage regulations and limited collective bargaining rights lead to income disparities | |
| Social Exclusion | Caste discrimination marginalizing groups and limiting their access to opportunities, resources, and benefits |
| Gender inequality results in unequal access to employment opportunities and wage disparities | |
| Unequal access to quality education, limiting upward mobility and reinforcing existing disparities | |
| Technological advancements lead to job displacement and wage stagnation, exacerbating income inequality |
- Explore the use of Green GDP to account for environmental factors.
- Explore alternatives to GDP such as OECD’s “GDP alternatives” that adjust for leisure and other factors.
- Consider the “Index of Sustainable Economic Welfare” that accounts for pollution costs and income distribution.
- Explore the “Genuine Progress Indicator” that adjusts for income distribution, household work, and more.
- Explore well-being measures like the Happy Planet Index, Gross National Happiness, and National Well-Being Accounts.
Way forward:
| Ways | Description |
| Focus on Labor-Intensive Manufacturing | Prioritize labour-intensive manufacturing, even for domestic consumption, to boost job creation. |
| Diversify Growth Strategies | Develop diversified growth strategies that emphasize not just GDP growth but also the creation of high-quality jobs and addressing employment elasticity. |
| National Employment Policy | Implement a National Employment Policy to address both labour supply and demand, enhancing the quantity and quality of employment opportunities. |
| Explore Green Manufacturing | Explore opportunities in green manufacturing to reshape India’s industrial development in a sustainable manner. |
| Address Structural Issues | Tackle structural issues in the economy related to caste, gender, and religion to ensure equitable distribution of growth benefits. |
| Universal Access to Public Services | Ensuring universal access to quality public services, including healthcare, education, social security, and employment guarantee schemes, significantly reduces inequality. |
Insta Links:
Mains Links:
What is Gross Domestic Product (GDP)? Examine the limitations pertaining to GDP as an economic performance measurement framework of the country. (250 words)
Prelims Links:
Consider the following statements:
- Nominal GDP is calculated in a way such that the goods and services are evaluated at some constant set of prices.
- If the Real GDP changes, it implies that the volume of production is undergoing changes.
- The ratio of nominal GDP to real GDP gives us an idea of how the prices have moved from the base year to the current year.
Which of the above statements is/are correct?
- a) 1, 2
- b) 1, 3
- c) 2, 3
- d) 1, 2, 3
Solution: c)
