• UGI USER
  • Aug 17, 2023
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Q. Rather than focusing solely on quantity, inclusive growth concerns itself with the quality of growth. Discuss.

Approach:

  • Brief highlight the various quantitative measures of growth.
  • Discuss why growth solely on quantity has been criticized.
  • Mention the advantages of inclusive growth, which focuses not just on quantity but also the quality of growth.
  • Conclude on the basis of above points.

Answer:

Usually growth is measured in quantitative terms using various indicators such as Gross Domestic Product, National Income, Per Capita Income etc.

However, focusing solely on quantitative growth has been criticized due to following reasons:

  • Short-term growth strategies aimed at maximizing GDP growth has created a “vicious cycle” – growth driven by the exploitation of human and natural capital.
  • India has witnessed jobless growth with high levels of unemployment. Since 2000, India’s GDP growth was second only to China, but the labour force participation rate shrank from 55% in 2012 to 49.7% in 2018.
  • India also needs considerable improvement in several social indicators as it was still ranked 129 among 189 countries in the 2019 Human Development Index.
  • Lack of focus on distribution of growth creates Inequality which poses a threat to economic expansion and social cohesion around the world.
  • For instance, the Oxfam report highlights that since 2000, the poorest half of the world population has received just 1% of the total increase in global wealth, while the 50% increase has gone to the top 1% only.

In this context, the concept of inclusive growth holds prominence. OECD defines inclusive growth as the economic growth that is distributed fairly across society and creates opportunities for all.

This expands the focus from quantitative growth (GDP) to the qualitative aspect as well. Following are the advantages of inclusive growth focused on the quality of growth:

  • The inclusive growth approach takes a longer-term perspective and addresses the structural and fundamental problems in society and the economy.
  • When growth is ‘inclusive’ and “pro-poor”, the incomes of poor people grow faster than those of the population as a whole, i.e., inequality declines.
  • It leads to a wider distribution of wealth which creates a demand in a country and hence leads to domestic demand-driven growth. It creates a strength in the economy to withstand shocks and growth becomes sustainable in the longer run.
  • With better wealth distribution, the overall standard of living increases. For example- people move away from polluting sources of energy such as wood, cow dung etc. and adopt more environment-friendly sources such as LPG which further improves environmental sustainability.

The inclusiveness and sustainability are interwoven in the concept of inclusive growth. As detailed in the World Bank’s Poverty and Shared Prosperity 2016, the growth strategy should be geared towards creating opportunities for the least well-off people and preparing them for participating in their country’s growth process and achieving sustainable development.