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The All Important Inclusion

Inclusive. Remember this word, you will be hearing it many times in coming months. From all sorts of folks, politicians to business leaders. Because suddenly realisation is drawing that the last couple of years of runaway growth and prosperity has not resulted in inclusive growth. Rather only in a few getting wealthier.

Even China gets worried about such things so presumably we should be too. That we not only do not have inclusive growth but we have runaway inflation from rising prices of goods and services. I now understand that finance minister P Chidambaram and his team have been furiously reworking their Union Budget 2007 proposals so as to ensure that there are more specific steps to fight inflation.

And yet I wonder why we did not see it coming. We all got caught in the great India Shining mirage three years ago and vowed that we would always watch out for such signals. And yet we've had a near encore. Forget wheat prices and onion prices. Real estate prices have doubled in many parts of India in the last 18 months. What's the general reaction ? Jubiliation, because somehow we think this is a reason to celebrate rather than worry.

Rising Prices, Time To Celebrate

So instead of figuring out how to step in and control prices, the government almost took pride in the fact that prices were rising and no one was affected. Because we are a growing economy. Turns out we are growing but not quite the manner in which we thought we were. So voters are already voting with their feet as they have done in the states of Punjab and Uttaranchal. And suddenly, whether or not rising prices are the reason, politicians are scurrying around trying to put together dossiers of anti-inflation measures.

Sure the Reserve Bank has been stepping in and hiking interest rates. But then, monetary tools can only do that much. A friend from Coimbatore told me that his company had to go out of the city to expand their factory. Because land prices were ridiculous. Which means thousands of jobs would go to some other place instead of Coimbatore. But prices in this smaller town in Tamil Nadu had shot up as well. The project was looking less viable now, he said.

What does all this mean ? Quite simply, we can grow only when the critical factors of production and supply are in our control. When demand overshoots supply then you have overheating. And things don't just cool off nicely, sometimes they just collapse. The Economist hinted at that in a cover story recently. And everyone pounced on The Economist saying they got it wrong. Well, well.

Are We Not Growing ?

So are we not a growing economy ? Of course we are. But as I never fail to point out, not all of us are growing. Industry is doing well, IT is doing better but to many hundreds of millions, it will be a long while before there is any change in their lives. So, inclusion is an important word to remember.


Arun Cavale said…
Hi Govind,

This post couldn't have been more timely. The results from Punjab, Uttarakhand only confirm the growing divide b/n those affected differently from the growth phenomenon.
The key to addressing "inclusive" growth lies in a comprehensive growth framework - something that seems to elude our planners at the highest level. An IT-park here, a few SEZs there, focus on stretching the limits of already burdened key urban centres are indicators of this myopic growth approach. Application of corporate-world growth ideas are needed in the societal growth case - and that includes evaluating the marginal utility of delivering a 1% growth in, say, Bangalore vs. a 1% growth delivered in a tier-2/3 town (or even better, in a cluster of villages). Needless to say, the latter would go a long way in growth that's not only inclusive, but also more permanent.
And a starting point for this is for the government to consider the real areas/sectors where it needs to involve (and can make a real difference), and getting out of "non-core" sectors. By that, i mean focusing on healthcare, education, infrastructure (inter-town, market access, logistics), and getting out of manufacturing, Banking and what not.
But would any polity of the day have the vision or the strength of conviction to follow through on that is the moot question.
Thanks Govind for an article that hits the proverbial nail on the head. I completely agree with you. In a room full of people who are rocking to the beat of "India shining", I often wondered what it is they are smoking, to think that things are so hunky dory.
In a group argument sometime back when ISRO launched their latest rocket into space and we had just read about it in Indian Express (I'm sure it was in all newspapers and TV channels), there was general thumping of chests by all and sundry and everyone was on a high about how the future of the World was India and all that! The saddest part of it was that the same Indian Express, on the same front page had a photo of a little girl in Bihar (or UP, I forget)sleeping in the cold, outside, using a gunny sack to cover herself and a few puppies (the canine kind) also huddled with her in this quilt keeping each other warm.
The saddest part is that this group of boisterous young Indians that were reasonable well to do, could only harp about how India was conquering the World...that not one of them had bothered to read the caption beneath the little girl in the photograph. I don't know what they are smoking there man but they seem delusional to me. This just shows how the little girl on the street with no roof over her head is not one of those "included" in India's quest to be a super power and this is where the problem is going to come from in future. You are right.
shikha said…
When the economy is growing the rich become the super rich and the upper middle class becomes the rich and so on....

and also when growth happens,inflation strikes.Inflation isnt a top down phenomenon but a bottom up...For eg prices in certain areas in pune rose since IT salaries were higher and hence disposabe incomes of the employees were higher...IT,Manufacturing(reflected in the IIP), services barring ariculture grew in the past one year or so...

and that had a spiralling effect on inflation!!!

having said that, we must remember that agriculture did not grow as much and we are still an agricultural economy.If the word is not inclusive then we will have riots and social discontent which has the ability of deralling growth.

We must however appreciate that the government has taken the role of a regulator and a facilitator and is more willing than ever to usher in the education reforms that have been pending for very long!!!
Dusty said…
Hi Govind, nice post. Well, now the budget has provided more for education and agriculture, sad to say most of it will not reach those it is meant to reach. What we need is a strong self regulated grass root mechanism. I don't have any answers do you? BTW, where have you disappeared - havent got a reply from you to my email.. LUbna
Anonymous said…
Right on Govind. A friend of mine who's been hunting for office space in Coimbatore, was recently shown a 600 sft space for 45.00 lacs! If that isnt obscene i dont know what is. And if one were to buy a small home on a 50x70 plot, it would be shelling out between 75 lacs - 1 crore ..and that too in an area without municipal drainage and where sewerage is thru septic tanks ! The reason behind the big bang there is the TIDEL park thats been announced.
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