IndiaInclusive Growth Issues

ConsultationsAugust 29, 2007

New Delhi

Context Growth has been stellar: 6% p.a since the

mid-1980s, and over 8% per annum in the past four years

But poverty impact of growth has been muted: poverty declined from 36% in 1993/94 to 28% in 2004/05, a 0.8% point reduction p.a. compared to 1.6% poverty reduction p.a. in Bangladesh and Nepal

This has raised concerns that India’s growth is not inclusive or its benefits are not widely shared.

Close to 300 million still live in deep poverty at less than a dollar a day.

Four reasons that help to explain India’s growth is not adequately inclusive.

Growth has diverged across regions, leaving behind the large populous states of North Central and North East India.

Growth has not been creating enough good jobs, that provide stable earnings for households to climb and stay out of poverty.

Growth in the agriculture sector, which employs more than half of India’s workers, has been an anemic 2%.

Growth has left behind key sections of the population -- females, the 90 million tribal population, some SC groups religious minorities, -- lagging behind in job opportunities, earnings, and human development.

Financial Times, August 14, 2007Underlying all this is Public services fail the poor and are weakest in the poorer states

Growth Rates have been lower in the poorer states

Employment is dominated by informal sector jobs

52.3 50.0 48.3 52.4

31.6 34.3 35.5 31.1

16.1 15.7 16.2 16.5

0%

20%

40%

60%

80%

100%

1983 1993-94 1999-00 2004-05

Self Employed ( percent) Casual Workers ( percent)

Regular Workers ( percent)

Wage Growth is heavily concentrated at the top end

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100125150175200225250275300325

p2 p7 p12 p17 p22 p27 p32 p37 p42 p47 p52 p57 p62 p67 p72 p77 p82 p87 p92 p97

Percentiles

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1983 1993-94 2004-05 mean 1983 mean 1993/94 mean 2004/05

Public Services Weak in the poorer regions: e.g. Immunization Coverage

Exclusion

Female labor force participation rates have remained stubbornly low despite rising education levels among women due to absence of opportunities.

Significant wage discrimination – Among casual laborers, women get about half the wages of men. Less than one third of this gap can be explained by conventional factors such as skills, location, industry, etc.

Access to Finance - Rural Finance Access survey, 87 percent of the poorest households surveyed (marginal farmers) do not have access to credit, the rich pay a relatively low rate (33 percent), the poor pay rates of 104 percent and get only 8 percent of the credit.

A special Issue is the Tribal Population concentrated in some of poorest but mineral and forest rich areas – but cannot take advantage of those assets

Although SC groups have made progress, large sections of SC and ST groups are agricultural workers, the poorest earners

What is the Bank doing? The CAS lays a strategic emphasis on the

poorer regions Projects – Rural Livelihoods projects, Rural

Roads, VET program, Rural Credit Cooperatives, Decentralization, support for state level reforms for development efforts

Major focus on inclusion in economic work: DPR, Social Protection, On-going Work Poverty Analysis, Employment Study, Lagging Regions, North Eastern area