India

Inclusive Growth Issues

Consultations
August 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 Indias 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
Indias 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 Indias 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, 2007
Underlying 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
0
25
50
75
100
125
150
175
200
225
250
275
300
325
p2 p7 p12 p17 p22 p27 p32 p37 p42 p47 p52 p57 p62 p67 p72 p77 p82 p87 p92 p97
Percentiles
R
e
a
l

d
a
i
l
y

w
a
g
e
,

9
3
-
9
4

R
s
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