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The post 2000 period for India has been quite eventful for Indian economy. The Book examines the implications of growth for inequality and some of the major drivers of growth like infrastructure, health and credit. The book discusses the key challenges as well the game changer initiatives that will shape India's growth in the medium term.

Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract
India’s economy at present is characterized by subdued growth performance. Economic growth1 was only 6.5 per cent in fiscal year 2011–12, the lowest in nine years, and projected to be a still lower 5 per cent in 2012–13. This low economic growth has created a sense of gloom about the Indian economy. While the recent past has not been encouraging, growth performance has been more assuring from a medium-term perspective. If we take a medium-term view, after economic reforms were introduced in July 1991, a growth rate of 5.7 per cent per annum was recorded during the first decade (1991–2001). The growth rate accelerated to 7.6 per cent per annum during 2002–11, the subsequent decade. If we take a long-term view, the acceleration in economic growth was sharper after economic reforms were introduced in 1991. Economic growth of 4.1 per cent per annum during the first four decades of planned development (1951–52 to 1990–91) increased to 6.7 per cent per annum between 1991–92 and 2011–12.
Biswa Swarup Misra

2. Key Challenges

Abstract
As alluded to in the Introduction, this chapter has three broad themes. India’s GDP growth dropped to 6.9 per cent in 2008–9 because of the negative externalities arising out of the global financial crisis. India made a strong comeback in the subsequent two fiscal years, viz, 2009–10 and 2010–11, when growth could be maintained at around 8.5 per cent, but growth again dipped to 6.5 per cent in 2011–12. The policy responses to tackling the after-effects of the global financial crisis were quite successful at protecting growth in the first two years but have not been able to protect growth subsequently. As the drop in growth was quite dramatic in 2011–12 and 2012–13, the macroeconomic management since the onset of the global financial crisis and the key macroeconomic challenges to reviving growth in the medium term is the first theme.
Biswa Swarup Misra

3. Growth Performance

Abstract
India achieved higher growth rates after embracing economic reforms in the early 1990s. In the initial years after economic reforms, the growth rate of the Indian economy averaged 6.5 per cent between 1993–94 and 1996–97. This growth rate was a stark contrast to the negative growth witnessed in the crisis year of 1991–92. Beginning with the year 2003–4, it was widely believed that the Indian economy had entered a new growth trajectory. The average growth rate during 2000–3, at 4.7 per cent, had significantly increased to 9 per cent during 2004–8. The surge in investment rate from 25 per cent in 2002–3 to 33.8 per cent in 2006–7 provided credence to the new growth trajectory (GoI, 2008).
Biswa Swarup Misra

4. Income Inequality

Abstract
Higher growth is desirable as it expands the scope of opportunities for people at one end and on the other, serves as a necessary condition for higher public spending to bridge the divide between the haves and have nots. However, if benefits of growth are confined to few pockets in the society or are shared by a narrow stretch in the vast geography it can create dissension and pose a danger to the moral and social fabric of the country. As promoting inclusive growth has been the guiding principle of the Indian government’s policy initiatives, the benefits of growth need to be broad based, not only for humanistic concerns but also for the necessary popular support for sustenance of the growth process. The high growth witnessed in the post-reform phase emphasises the role of markets in improving the efficiency of the system. The critiques of a market-driven approach often resort to anecdotal evidence to point out the inability of the poor to participate effectively in the market process. Whether such criticisms hold water can be ascertained by analysing the distributional dimensions of growth.
Biswa Swarup Misra

5. Infrastructure and Growth

Abstract
Apart from natural resources, demographic characteristics and the political environment, the availability of infrastructure, both social and physical, plays a crucial role in influencing India’s growth trajectory. The 12th five-year plan accords infrastructure development — especially road connectivity, schools, health facilities and the availability of electricity — as a key component of the regionally inclusive development strategy. The objective of the 12th five-year plan is to secure faster, more inclusive and sustainable growth. Apart from developing human and institutional capabilities; the plan lays stress on development of infrastructure which will act as a general capability enhancer to realize the plan’s objectives. Notwithstanding the importance attached to infrastructure, there has been very little attempt to empirically decipher the impact of infrastructure on growth. The prime reason for the absence of serious empirical work is the ‘data hurdle’. Obtaining reliable and consistent data on the availability of infrastructure at the state level continues to be a daunting task.
Biswa Swarup Misra

6. Health and Growth

Abstract
The health status of the population can make a difference to the growth prospects of a nation. This can be seen from a number of dimensions. First, a healthy workforce ensures less absenteeism and thus higher productivity. Second, as life expectancy increases there are increased incentives to invest in human and physical capital. Third, better health status has the potential to augment the savings rates in the economy as workers have an inventive to save for retirement. Fourth, better health status improves labour force participation rate (serious illness forces people to drop out of the labour market). Health is also important from the perspective of ‘demographic transformation’. As health awareness improves, the infant mortality rate (IMR) drops, motivating people to have smaller families. Seen from another angle, to the extent health expenditure can be treated as an investment in human capital, it has the scope to act as an engine of growth (Lucas, 1988).
Biswa Swarup Misra

7. Credit and Growth

Abstract
India has a bank-dominated financial system. The banking system comprises commercial banks, cooperative banks, regional rural banks (RRBs) and local area banks. As alluded to in Chapter 2, the drive for financial inclusion was a game-changer initiative in the post-2000 period. While expansion of the banking footprint was the general policy focus, concerted attempts were made to improve the financial health of credit cooperatives and RRBs. Given their poor financial health, credit cooperatives were recapitalized and RRBs of a particular sponsor bank within a state were merged. The idea was that by improving their financial viability, these grass-roots level financial institutions can play a more meaningful role in financial inclusion. In addition, some of the initiatives to expand the reach of banking included the introduction of no-frill accounts in 2005; permission for BC and BF models by leveraging technology; and setting targets for banks for embracing villages with a population threshold. The government has also decided to introduce new players in the banking space to give a further push to financial inclusion. Another dimension of policy concerning banks was the thrust to increase the volume of agricultural credit. Towards this end, government set targets for disbursal of agricultural credits to the banks. As such, credit flow to agriculture increased from Rs. 229,401 crore in 2006–7 to Rs. 511,029 crore in 2011–12.
Biswa Swarup Misra

Backmatter

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