Inclusive Growth An Indian Perspective

Development economics has witnessed several paradigm shifts. The current shift from pro poor growth to inclusive growth is attracting the attention of researchers and policy makers across the world. Different strategies and models have evolved over a period of time. There is no universal definition of inclusive growth. From the existing literature, inclusive growth may be defined as broad based growth which not only creates new economic opportunities but also ensures the participation of the poor in the growth process and facilitates equal access to these opportunities by all particularly the poor. However, there is lack of theory building in the conceptual framework of inclusive growth which can give scope for detailed investigation. There are a few international cross country studies and there is lack of literature for specific country studies. This study aims at bridging some of these very important gaps.

The present study develops a composite index for inclusive growth in the Indian context with the help of a well-defined analytical framework. 15 major Indian states are considered for this study. These states together constitute 77% of India's geographical area, 89% of total population and 82% of India's Gross Domestic Product (GDP). This study considered 20 socio economic variables which were grouped into six different dimensions economic, amenities, gender equity and financial inclusion, human development, sustainability and governance with cross sectional data for the year 2001 and 2011 the decade in which many Indian states initiated major policy. changes in fostering inclusive growth. The data sources are from the Census, Central Statistical Organization (CSO), Economic Surveys, Planning Commission and NSSO studies (several Rounds). This study used the tool of principal component analysis (PCA) for weightage scheme. The raw data obtained for different socio-economic variables are normalised through standard score (commonly referred as Z score in statistics). The component index is prepared by multiplying the Z score with the weight of the concerned indicator. The composite score for inclusive growth is the simple linear aggregation of the component score of all the six dimensions of inclusive growth. An empirical verification of growth inclusiveness has also been tudied using multiple regression analysis. The study also conducted a econometric analysis of growth inclusiveness. An in-depth analysis of an performance of major Indian states in inclusive growth outcome has also been carried out. The study also explored the outcome of India's leading employment programme - Mahatma Gandhi National Rural Employment Guarantee Act, 2006 (MGNREGA) in fostering inclusive growth with field study in the states of Tamil Nadu and Gujarat. Finally, the study proposed a set of policy recommendations for fostering inclusive growth and specific policy interventions needed for better implementation of Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

The results of this study show that the state of Kerala continues to be number one state in the composite index for inclusive growth both for 2001 and 2011. This is primarily because of Kerala's first mover advantage in the human development dimension of inclusive growth. The state of Tamil Nadu had improved tremendously from 07th rank in the 2001 composite index to 02 rank in the 2011 composite index. The state of Maharashtra improved from 08h rank in 2001 to 04 rank in 2011. The state of Haryana has moved back from 03 position for the year 2001 to 08h position for the year 2011 and the state of Punjab has moved back from 02nd position for the year 2001 to 03 position for the year 2011. However, in absolute value of the composite index for inclusive growth the state of Bihar has made significant improvement (1.57 more index score) followed by UP (1.28 more index score), Odisha (1.13 more index score). These states ranked poorly in 2011 because they inherited a very poor inclusive growth index score in 2001. The robustness of the composite index for inclusive growth was checked with three different ways: (1) by resorting to equal weightage system instead of principal component analysis (PCA) (2) by resorting to alternate aggregation i.e. average of average instead of simple linear aggregation and (3) by resorting to correlation with the findings of underdevelopment/need index of Government of India. In all the three cases the results of this study show the robustness of the composite index for inclusive growth. The study also conducted an econometric analysis of growth inclusiveness. The results of econometric analysis show empirical significance of the socio economic variables - poverty, employment, per capita electricity consumption, expected life, infant mortality rate, access to banking, air-quality and the share of own tax to gross state domestic product in explaining whether the growth episode for 2001 and 2011 are inclusive or not. The findings of the composite index for inclusive growth has been validated with the findings of some of the important studies of Government of India and other research agencies. The result was also validated with the macro-economic profile of India. The outcome of the field study reaffirms that Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) served to achieve the objective of social inclusion. This is clear from the findings of the field study that people from the vulnerable sections of the society such as scheduled caste, scheduled tribe and women have participated and benefited from the programme.

Thus, the study contributes to the literature of inclusive growth particularly with reference to measurement of inclusive growth in the Indian context for diagnosis of state progress. There was no evidence of cross section data for inclusive growth measurement in the Indian context earlier. This study bridges this important gap. This study has developed an exclusive composite index for inclusive growth which is a major contribution for inclusive growth diagnosis and monitoring exercise in the Indian context. The econometric analysis has authenticated the empirical significance of the variables and indicators of inclusive growth which will add new dimensions to the existing state of knowledge. The comparative study of inclusive growth outcome of various Indian states through the findings of this research with that of various NSSO studies can help the policy makers in framing an appropriate policy mix for achieving and sustaining the inclusive growth in respective states.

However, there are still a few issues which remain unresolved. The relationship between inclusive growth and fiscal policy is a potential area for future research. The impact of technological advancement on inclusive growth is another promising area for future research. Future research on inclusive growth can also trace the impact of informal employment in the unorganised sector on inclusive growth and vice versa.

When Prof. Vellala approached me to write a few words for his study of A Composite Index of Development, incorporating distributional characteristics, I was hesitant. The techniques of econometric analysis for the problem are well known. They have a used available secondary data. But interestingly they have also used a field study to validate their findings. They find that development schemes of a targeted nature work. So far so good. The book is a case for more of a good thing in the social domain.

A closer look at their results show other details. Gujarat, Haryana and Karnataka show a deterioration in the Inclusive Growth Rank (Composite Index). These are rich states and they perform badly. Why? This needs comment, perhaps greater scrutiny of data and results but it meets major, then Myrdal's Theory of Backwash or Raul Prebisch's work on dualism needs an emphasis at the theoretical level. Similar results are there in the sectoral findings. Gujarat's performance lies deteriorated in gender equity and financial inclusions and governance. In addition to these, Haryana is doing badly in the economic dimension and human development. Karnataka is doing worse in the economic and amenities dimension, gender equity and financial inclusions and Punjab in the Human Development and Governance Dimension.

All in all, a fascinating book. Buy a copy and enjoy.

**Contents and Sample Pages**