MEASUREMENT OF GROWTH

NATIONAL INCOME

 National Income represents the accumulated monetary value of all final goods and services
produced within a country during a specific financial year. It serves as a crucial indicator of a
nation’s economic health and performance.
  Modern Definition:
 The modern definition encompasses two subparts:
o Gross Domestic Product (GDP): GDP represents the aggregate value of goods and
services produced within a country. It is calculated over regular time intervals (e.g.,
quarterly or annually).
 Goods are valued at their market prices.
 Components of GDP include wages, salaries, rent, interest, undistributed
profits, mixed income, direct taxes, dividends, and depreciation.
 The formula for calculating GDP is:

GDP=consumption+investment+government spending+exports−imports

o Gross National Product (GNP): GNP considers the income earned by a country’s
residents from both domestic and foreign production.
 It includes income generated abroad by citizens of the country.
 GNP = GDP + net income earned from abroad.
  Importance of National Income:
o National income data helps assess the overall economic performance of a nation.
o It provides a basis for government policies and programs aimed at maximizing
national welfare.
 The Central Statistical Organization calculates national income in India.
 GDP at Market price - total value of all final goods and services in a year
What are the primary sources of economic growth?

The primary sources of economic growth include human resources, natural resources, capital
formation, technological change and innovation lets delve in to the details of each;

Human resources

 Human resource include labour both skilled and unskilled.

 Improvement in the literacy, health, education, discipline, and other technological literacy all
contribute to better human resources.

Natural resources

 Play a vital role in the economic growth .

 Natural resources include forest , gas reserve , land ,oil water bodies , mineral
resources .
 There are countries which has resource driven growth like Canada , Norway .
 Resource independence – however just possessing natural resources is not essential
for economic success . Countries like Japan was able to develop because of its focus
on Human resources of the country .

Capital formation

 Involves the creation of tangible assets like rails , road , power plants , equipment,
infrastructure , transportation assets , machineries , investiong on innovation and
technological progress .
 Increasing the capital stock economy can produce more goods and services ,
increased production capacity leads to higher GDP ( gross domestic product ), job
creation and improved living standards .

Technological change and innovation also plays an important role in economic growth by
increasing the efficiency/enhancing productivity and production capacity , creation of new products
for the market , creating a competitive edge over the others .

Innovation also have spiller over effect that is innovation in one sector may has spill over benefit for
other sectors like advancements in information technology benefit other sectors like health ,
logistics, finance , education etc .

economic growth results from a combination of skilled labour, efficient utilization of natural
resources, capital accumulation, and continuous technological progress .

How does GDP correlate with the welfare of a society ?

GDP while commonly measure economic performance does not directly corelate with overall
welfare of a society .
GDP and Welfare has an imperfect connection

GDP represents the total value of goods and services produced within a country’s borders,
but not designed to assess welfare or well- being of a society.

GDP focus on production capacity and economic growth not the quality of life or happiness of the
citizen.

Limitations of GDP – GDP do not include /excludes non – market activities like domestic work ,
leisure ,non – monetary exchanges , environmental quality ,inequality of income .

How do economic agents operate within an economy to address scarcity?

Economic agents are individuals or institution which take economic decisions .

Economic agents with an economy are – Households, Firm, Govt and foreign sector.

Households – responsible for making decisions that drive consumption in the economy that
is undertakes consumption expenditure .

Basically households have 2 fundamental responsibility – that is one is to create demand for goods
and services from the production market thus there is a choice that household makes to meet their
needs from the scarce resource .

Second household also supply labour , capital , land and entrepreneurship required for the
production .

Firms combine the services of the four factors of production that is acquired from the household
sector for production of goods and services .

Firms produce goods and services that satisfy the needs and wants of the household sector and rest
of the world from the limited available resources .

Government has the following functions like producing the public goods , income
redistribution ,employement generation , price stability and economic growth etc .

Govt ensure that the needs of the people are met inclusively and limited resources are distributed
more equally .

Foreign sector buys exports produced by the domestic sector which is determined by the demand
generated by the household sector of the domestic sector.

Thus the economic agents operate in a way that wants and needs of the people are met with the
scarce /limited resources available .

Thus there is a choice taken by these economic agents to allocate the limited resources for
production , distribution and consumption of goods and services .
What is the distinction between ‘Economics’ and ‘Economy’ ?

Economics – refers to choices and decisions made by the individuals , business and govt to allocate
the limited resources for the production , distribution and consumption of goods and services .

Economy – is a system consisting of economic agents involved in production , distribution and

consumptions of goods and services .

Economy exists in a geographical area where the economic agents are present to make choices
regarding the production , distribution and consumption using the limited resources .
Economics – refers to the choices and decisions made by individuals , business and govt to allocate
the limited resources for the production , distribution and consumption of goods and services to
meet the growing demands with scarce resources .
Growth , welfare and development

 Sources of Economic Growth:

o Examines the origins of economic growth, including factors like capital

accumulation, technological innovation, and labor force expansion.

 GDP & Welfare:

o Discusses the relationship between GDP and societal welfare, and how GDP alone
may not fully capture the well-being of a population.

 Inclusive Growth:

o Defines the concept of inclusive growth, which aims to ensure that the benefits of
economic growth are distributed equitably among society.

 Limitations of GDP:

o Outlines the shortcomings of GDP as a measure of economic performance, such as

neglecting non-market transactions and income inequality.

 Development:

o Explores the broader concept of development, which encompasses improvements in

living standards, education, health, and freedom.

 Growth vs. Development:

o Differentiates between economic growth (quantitative increase in goods and

services) and development (qualitative improvements in quality of life).

GDP and welfare

Gross Domestic Product (GDP) is a financial metric that represents the market value of all final goods
and services produced within a specific time period, often annually or quarterly 12. It’s a common tool
used to gauge a country or region’s economic performance and make international comparisons 1.
However, nominal GDP per capita doesn’t account for differences in living costs and inflation rates
among countries. Therefore, comparing GDP per capita at purchasing power parity (PPP) might be
more useful when assessing living standards across countries1.

The term ‘welfare’ in economics was introduced by Alfred Marshall, a neoclassical economist. He
proposed that economics should study not just wealth, but also human well-being 1. According to
Marshall, people earn money to improve their material welfare1. If a person earns more, they can
buy more goods and services, thereby enhancing their material well-being 1.

While it might seem logical to equate a person’s income level with their level of well-being, GDP,
which is the sum of the value of goods and services produced within a country’s borders in a given
year, doesn’t necessarily reflect the well-being of a country’s citizens 1. For instance, a higher GDP
might result in increased income inequalities2. Moreover, GDP doesn’t account for non-monetary
exchanges, such as household chores, that contribute to economic welfare 2. Changes in prices and
externalities, both positive and negative, are also not considered in GDP calculations 2.
In conclusion, while GDP is a useful measure of economic performance, it doesn’t fully capture the
welfare or well-being of a country’s citizens

Growth, though fundamental for reducing the level of poverty and improving living standards of our
people, is not enough by itself. It needs to be more inclusive, more pervasive & accompanied by
moderate inflation.

 What is Inclusive Growth?

o Inclusive growth is about ensuring that everyone has fair chances during economic
growth. It’s about making sure that the benefits of growth reach all parts of society.

 How is it Different from Other Concepts?

o It’s different from equity, social justice, or redistribution, which are usually
addressed through policies after the growth process. Inclusive growth is about
fairness during the growth process itself.

 What Does Inclusive Growth Involve?

o It involves improving public services and maintaining fast growth while making sure
its benefits are spread widely.

 How to Encourage Inclusive Growth?

o To encourage inclusive growth, we need to update labor laws, improve farming

technology and infrastructure, help underdeveloped areas and groups catch up, and
empower the poor with policies that allow them to participate in the market on fair
terms.

 What Does Inclusive Growth Imply?

o Inclusive growth implies that changes in the economy, both at the macro (large-
scale) and micro (small-scale) levels, lead to changes in overall economic figures as
well as changes in the structure of the economy.

Human development and inclusive growth

Connection Between Human Development and Inclusive Growth:

Human development and inclusive growth are closely linked. Without inclusive growth, we can’t
achieve the necessary levels of literacy and life expectancy for satisfactory human development.

GDP and Inclusivity:

A high GDP rate, even when adjusted for purchasing power parity (PPP), doesn’t necessarily mean
inclusivity or human development. If the benefits of GDP don’t reach all economic classes, it’s
neither inclusive nor beneficial to human development.

Achieving Higher Human Development Index (HDI):

To achieve a higher HDI, we need to ensure literacy and good health for all. This also requires an
effective public distribution system.
Human Development and Shared Resources:

Human development, which is about giving people more choices, relies on shared natural resources.

Promoting Human Development:

To promote human development, we need to address sustainability at local, national, and global
levels. This should be done in a way that’s fair and empowering.

Gross Domestic Product (GDP) adjusted for Purchasing Power Parity (PPP) is a way to compare the
economic output of different countries. Here’s a simple explanation:

 GDP: This is the total value of all goods and services produced within a country in a specific
time period1. It’s a common measure of a country’s economic performance1.

 Purchasing Power Parity (PPP): This is a method used to adjust the GDP for the cost of living
and inflation differences between countries2. The idea is that a given amount of money
should buy roughly the same amount of goods and services in any country2.

 GDP adjusted for PPP: This is the GDP of a country adjusted for the cost of living. It’s
calculated by dividing the GDP by the PPP3. This gives a more accurate picture of the living
standards in a country4.

So, a high GDP (even when adjusted for PPP) doesn’t necessarily mean inclusivity or human
development because it doesn’t account for how wealth is distributed within a country 1. It also
doesn’t consider other factors that contribute to human development, such as education and health

broader implications of economic growth and the shortcomings of GDP as a measure of economic
performance. Here’s a simplified explanation:

 Inclusive Growth:

o It refers to economic growth that expands opportunities and benefits for all aspects
of society. This growth should enhance the scale and scope of health, happiness,
security, and material comfort for individuals and nations.

 Quality of Life:

o GDP does not reflect the well-being of people, which includes their health,
happiness, and comfort. A high GDP doesn’t necessarily mean a better quality of life
for citizens.

 Non-market Transactions:

o These are economic activities that occur outside formal markets, like informal jobs
or illegal trade, which GDP does not capture because they are not officially recorded
or taxed.

 Income Inequality:

o GDP fails to show how income is distributed among the population. High GDP can
exist alongside significant income inequality, where a small percentage of people
hold most of the wealth.

 Sustainability:
 o GDP growth is sustainable only if it doesn’t rapidly deplete resources or harm the
environment, which could reduce the quality of life over time.

 Economic Bads:

o Negative outcomes from economic activities, such as pollution, are not deducted
from GDP. Thus, GDP might indicate growth while the environment and human
health deteriorate.

 Depreciation of Capital:

o GDP accounts for new investments but doesn’t subtract the loss in value of existing
capital. This can lead to an overestimation of actual economic activity, especially in
places with quickly depreciating assets.

Amartya Sen's perspective on development is deeply rooted in the idea of freedom. He argues that
development should not be narrowly understood as mere economic growth, but rather as the
expansion of freedom and the removal of unfreedoms that constrain people's choices and
opportunities to live a fulfilling life. According to Sen, these unfreedoms can take various forms,
including poverty, tyranny, lack of economic opportunities, social deprivation, neglect of public
facilities, and repression by the state.

Poverty: Poverty is not just about lacking material wealth but also about being deprived of essential
capabilities and opportunities. Poverty limits people's ability to access basic necessities such as food,
shelter, healthcare, and education. It restricts their freedom to lead a dignified life and pursue their
aspirations.

Tyranny: Tyranny refers to authoritarian rule or the abuse of power by the state or other
institutions. It involves the suppression of civil liberties, political freedoms, and human rights.
Tyranny can manifest in various forms, including censorship, arbitrary detention, torture, and
restrictions on freedom of expression and association. It undermines people's ability to participate in
decision-making processes and exercise their rights as citizens.

Poor Economic Opportunities: Limited economic opportunities result in unemployment,

underemployment, and precarious work conditions. They hinder people's ability to earn a decent
income, improve their standard of living, and build a secure future for themselves and their families.
Lack of economic opportunities perpetuates cycles of poverty and inequality, trapping individuals in
disadvantaged socio-economic positions.

Systematic Social Deprivation: Social deprivation refers to the systematic exclusion or

marginalization of certain groups based on factors such as gender, ethnicity, caste, religion, or
disability. Discriminatory practices and social norms restrict access to education, healthcare,
employment, and other essential services for these marginalized populations. Social deprivation
undermines social cohesion, perpetuates inequality, and denies individuals the opportunity to fully
participate in society.
Neglect of Public Facilities: Inadequate provision of public goods and services, such as healthcare,
education, sanitation, and infrastructure, undermines people's well-being and hampers their
development opportunities. Neglect of public facilities disproportionately affects the most
vulnerable and marginalized communities, exacerbating inequalities and perpetuating poverty traps.

Intolerance or Overactivity of Repressive States: Repressive states employ authoritarian tactics to

suppress dissent, stifle political opposition, and control society. They use censorship, surveillance,
harassment, and violence to intimidate and silence individuals and groups advocating for social
justice, human rights, and democratic freedoms. Repressive states curtail freedom of speech,
assembly, and association, impeding civil society's ability to hold power to account and promote
positive social change.

In summary, Amartya Sen's understanding of development emphasizes the importance of addressing

these various forms of unfreedoms to create an enabling environment where individuals can
exercise their reasoned agency, make meaningful choices, and lead lives they value. Development
efforts should aim to expand opportunities, enhance capabilities, and promote social justice and
human rights to ensure that all individuals can fully participate and flourish in society.
Question 1: What is the potential Gross Domestic Product (GDP). Discuss its determinants. Also
mention the factors which constrained India in achieving its potential GDP. (250 words)

Approach

 Give a brief introduction about Potential Gross Domestic Product.

 Highlight the determinant factors on which Potential Gross Domestic Product depends.

 Mention the factors which are acting like a constraint on achieving potential GDP in India.

 Write a holistic and effective conclusion.

Introduction

 The potential Gross Domestic Product (GDP) refers to the highest level of output (goods
and services) that an economy can produce without generating inflation.

 It is a theoretical concept that represents the maximum level of output that an economy
can achieve in the long run, given its available resources, technology, and potential for
growth.

 The potential GDP is often used as a benchmark to gauge the actual level of output in an
economy, and to measure the extent to which an economy is operating at or above its
potential.

Body

 The potential Gross Domestic Product (GDP) is determined by several key factors,
including:

o Labor force: The size and quality of the labor force is one of the most important
determinants of potential GDP. A growing and well-educated labor force can
increase the economy's potential for growth and productivity, while a declining
labor force can limit the economy's potential for growth.

o Capital stock: The amount of physical capital, such as buildings, machines, and
equipment, in an economy affects the economy's potential for growth. The
accumulation of capital can increase the potential for productivity and output, while
a lack of investment in capital can limit the economy's potential for growth.

o Technological progress: Technological advancements can increase the potential for

growth and productivity by improving the efficiency of production processes,
increasing the quality of goods and services, and reducing the cost of production.

o Natural Resources: The availability of natural resources, such as land, minerals, and
energy, can impact the economy's potential for growth. If these resources are
abundant and easily accessible, the economy's potential for growth can increase,
while a lack of resources can limit the potential for growth.

o Economic Structure: The composition of an economy's industries and the

distribution of economic activity can impact the economy's potential for growth. For
 example, if an economy has a strong manufacturing sector, it may have a higher
potential for growth than an economy that relies heavily on agriculture or services.

o Policy environment: Government policies, such as tax and regulatory policies, can
also impact the economy's potential for growth. Policies that support investment
and innovation can increase the potential for growth, while policies that stifle
investment and innovation can limit the potential for growth.

o Demographic factors: Demographic factors, such as population growth, aging, and

migration, can also impact the economy's potential for growth. For example, a
rapidly aging population can limit the potential for growth by reducing the size of
the labor force, while a growing and youthful population can increase the potential
for growth.

 There are several factors that have constrained India in achieving its potential Gross
Domestic Product (GDP) growth:

o Infrastructure: India faces significant infrastructure challenges, including inadequate

transportation systems, energy shortages, and limited access to modern
communication and technology. These constraints limit the country's ability to
attract investment, increase productivity, and stimulate economic growth.

o Regulatory Environment: India's complex and bureaucratic regulatory environment

has been a major constraint to the country's economic growth. This includes
regulations that limit foreign investment, slow the process of starting a business,
and restrict the flow of goods and services across borders.

o Agricultural productivity: Despite being one of the world's largest agricultural

producers, India's agricultural sector is characterized by low productivity, outdated
technology, and poor infrastructure. This has limited the sector's potential to
contribute to economic growth and has resulted in persistent food security
challenges.

o Education and skill development: The quality and relevance of education and skill
development programs in India have not kept pace with the changing needs of the
workforce. This has led to a shortage of skilled workers and a mismatch between the
skills of the workforce and the needs of the economy.

o Political stability: Political stability is a key factor in attracting investment and

promoting economic growth. India has faced political instability and policy
uncertainty in recent years, which has reduced investor confidence and limited the
country's ability to attract foreign investment.

o Corruption: Corruption remains a persistent challenge in India, affecting the delivery

of public services, the business environment, and economic growth. The corruption
has a direct impact on the economy by reducing investment, slowing down
economic activity, and distorting market competition.

Conclusion

Potential GDP is determined by the quantity and quality of available resources, technological
progress, and the efficiency of the production process. Understanding potential GDP is essential for
policymakers as it provides a benchmark for determining the economy's growth potential and
determining the appropriate monetary and fiscal policies to promote sustainable economic growth.
Accurately estimating potential GDP is challenging, and different methods may yield different
results. However, it is widely recognized as a valuable tool for understanding the underlying trends
and dynamics of an economy and making informed decisions that can positively impact the overall
well-being of a society.
Question 2: Inclusive growth is sine qua non for sustainable economic growth. Illustrate. (150 words)

Approach

 Write a brief introduction about inclusive growth.

 Describe the importance of inclusive growth in sustainable growth.

 Write a holistic and effective conclusion.

Introduction

 Inclusive growth refers to an economic growth that is both rapid and broad-based,
benefiting all segments of the population, particularly the
most disadvantaged and vulnerable.

 It is considered a sine qua non, or essential condition, for sustainable economic

growth because it ensures that the benefits of economic progress are widely shared and
that no one is left behind.

Body

 The push for economic growth in recent decades has led to substantial increases in wealth
for large numbers of people across the globe. But despite huge gains in global economic
output, there is evidence of exacerbating inequalities and volatility.

 According to the Oxfam Report, in India, the top 1% holds 51.53% of the national wealth,
while the remaining 99% make do with almost 48%.

 Inclusion and economic growth go hand in hand, and one leads to another and both lead to
a sustainable future.

 The concept of sustainable development was described by the 1987 Brundtland Commission
Report as “development that meets the needs of the present without compromising the
ability of future generations to meet their own needs.”

 Inclusive economic development will include poor, vulnerable, marginalised, women, youth
and people from every stratum of society in economic activity for a sustainable future.

 Women: Women account for 49.5 % of the population of the country and their inclusion in
the workforce and economic activities (presently only 19%) will greatly contribute to the
growth and sustainability of the economy. It will lead to fulfilment of Sustainable
Development Goal (SDG) 5 and 10.

o The initiatives like Maternity Benefit Act and Janani Suraksha Yojana to compensate
women’s workforce loss is a step towards sustainable economic growth.

 Farmers: In India, approx. more than 50% of the population is dependent on agricultural
activities. Inclusivity of farmers in the value chain, value addition with adequate skill is
prerequisite for food security for the nation and achievement of SDG 2 in particular and
SDG1 in general.

o Bringing millets among the popular diet by International Millet year, will benefits
farmers of dry prone regions and economic inclusivity among farmers itself.
  Youth: The youth age group 15-35 years account for 66% of India’s population (as per ILO).
This population indicates the demographic dividend in India, which will last till 2055-56.

o Inclusion of youth in a country's economic journey by providing them with skills and
employment (by schemes like PMKVY or Skill India Mission) will contribute greatly to
long term sustained economic growth. A skilled and capable youth can strive to
achieve almost all the SDGs and especially SDG 8.

 Tribal: In India tribes are the poorest among the poor. Their inclusion in the mainstream
economy with skills. Their development by respecting the cultural and social sentiment can
increase India's workforce more than 5%. It will increase social and cultural sustainability.
The sustainable lifestyle of tribals is a learning chapter for the world to achieve the SDG.

o The schemes like Eklavya Model Residential Schools for education to tribal youth
and Skill development program like GOAL (Going Online as Leaders) will provide
them their proportional share in the growth of pie and bring an inclusive society.

 Small Businesses: There are more than 60 million small businesses in India.

o Formalization of all the firms in economic, legal, Labour norms will not only lead to
welfare of all the stakeholders but also achievement of SDG 8, 9 and 10.

o The initiatives like viable gap funding and credit link subsidies create a preferable
environment that will let small businesses thrive along with great conglomerates.

 Regional Inclusivity: Uneven progress of development in India leads to a mega industrialised

region at few places but others left from the development journey of India. Holistic and
inclusive regional development will make India vibrant and flourished with strong
institutions and peace. It will help India to achieve SDG 16 and 17. And will prevail for future
prosperity.

o In inclusive economic development the share of development must reach to every

individual.

Conclusion

Therefore, Sustainability and inclusive growth can’t be achieved in isolation, and they supplement
each other. In this way, economic inclusion will lead to financial, social, cultural, political and
environmental sustainability.

Goal 8 of Sustainable Development Goals specifically aims to promote inclusive and sustainable
economic growth. We should work together toward expanding opportunities and reducing
vulnerabilities with the hope to ensure sustainable economic growth for all, leaving nobody behind
to achieve “Sabka Sath, Sabka Vikas, Sabka Vishwas” for New Inclusive India.
Inclusive growth

Inclusive growth means economic growth that benefits everyone by creating jobs, reducing poverty,
and providing access to essential services like healthcare and education. It involves giving everyone
an equal chance to succeed through education and skill development. Inclusive growth also focuses
on protecting the environment, promoting good governance, and building a society that respects
gender equality. According to the OECD (Organisation for Economic Co-operation and Development),
inclusive growth is about making sure that economic growth benefits everyone in society and
creates opportunities for all.

Elements of Inclusive Growth:

1. Skill Development:

 Skill development is crucial for utilizing the potential of the working-age population.

 India faces two challenges: a shortage of highly skilled workers and unemployed
young people with traditional education.

 Over 30% of Indian youth are not in education, employment, or training, according
to the Economic Survey 2017. UNICEF 2019 reports that at least 47% of Indian youth
lack necessary education and skills for future employment.

2. Financial Inclusion:

 Financial Inclusion ensures access to financial services for vulnerable groups at

affordable costs.

 It promotes saving, which drives economic growth.

3. Technological Advancement:

 We're entering Industrial Revolution 4.0, with technology's potential to either

increase or decrease inequality.

 Government initiatives like Digital India Mission aim to empower a digitally literate
population.

 Technology aids in various sectors:

 Agriculture: Enhances efficiency and competitiveness in the agro-value

chain.

 Manufacturing: Solves finance, raw material procurement, and market

linkages.

 Education: Facilitates adaptive learning and real-time data access.

 Health: Transforms public health services with remote care.

 Governance: Reduces delays, corruption, and inefficiency in public services

delivery.

4. Economic Growth:

 India's among the fastest-growing economies globally, yet faces slowdowns due to
cyclic and structural challenges.
  Aiming for a $5 trillion economy by 2024-25 can help reduce inequality, increase
social spending, and ensure employment opportunities for all.

5. Social Development:

 Social development empowers marginalized groups like SC/ST/OBC/Minorities,

women, and transgenders.

 Enhancing social institutions like hospitals, schools, and universities fosters growth
and creates a capable workforce for the future.

India grapples with several challenges in its pursuit of inclusive growth.

1. Poverty: Despite significant progress, poverty remains a pressing issue. India has lifted
millions out of poverty, but disparities persist, especially in rural and marginalized
communities12.

2. Employment Opportunities: Ensuring adequate employment opportunities for all citizens is

crucial. The lack of quality jobs, especially in rural areas, hinders inclusive growth.

3. Education and Skill Development: Unequal access to education and skill development
programs limits upward mobility. Bridging this gap is essential for inclusive growth.

4. Infrastructure: Both social and physical infrastructure play pivotal roles. Insufficient
healthcare facilities, inadequate roads, and limited access to basic amenities hinder
progress.

5. Governance Deficit: Backward regions often face governance challenges. Effective

administration and targeted policies are necessary to address this deficit.

6. Social Disparities: India’s social indicators vary significantly across different groups. Focusing
on marginalized communities (such as OBCs, SCs, STs, and Muslims) is crucial for inclusive
growth2.

To achieve inclusive growth, India must adopt a holistic approach, emphasizing sustainable
development, equitable distribution, and broad-based economic diversification

1. Poverty:

 Despite significant progress, 373 million Indians still face severe deprivation.

 8.8% of the population lives in severe multidimensional poverty, and 19.3% are
vulnerable to it.

 India shows pro-poor progress, but disparities persist, especially in the poorest
regions and among children.

2. Unemployment:

 Urban unemployment stands at 7.8%, rural at 5.3%, totaling 6.1%.

 Low job growth due to factors like low investment, capital utilization, and agriculture
growth.

 Over 80% work in the informal sector without social security, stemming from low
literacy and agriculture dependence.
 3. Agriculture Backwardness:

 Agriculture employs 44% but contributes only 16.5% to GDP, leading to widespread
poverty.

 Challenges include declining land availability, low productivity, and climate-induced

yield decline.

4. Issues with Social Development:

 Significant disparities across regions, social groups, and genders hinder social
development.

 Low public expenditure growth in health and education, poor service quality, and
lower social indicators for marginalized groups.

 India ranks 102nd in Global Hunger Index, highlighting malnutrition among children.

5. Regional Disparities:

 Regional disparities driven by factors like caste and income gaps.

 Literacy rates vary greatly; Kerala has 93.1% literacy, while Bihar lags at 63.82%.

 Per capita income in Goa is Rs 4,67,998, contrasting sharply with Bihar's Rs 43,822.

Measuring Inclusive Growth:

1. Inclusive Development Index (IDI):

 India ranked 62nd out of 74 emerging countries in the IDI by the World
Economic Forum and was among the least inclusive countries in Group of 20
(G-20) countries.
 It focuses on three aspects: growth and development, inclusion, and
intergenerational equity and sustainability.
 India performed best in "intergenerational equity and sustainability" due to its
demographic dividend.( ranked 44th position )
 The IDI emphasizes people's standards of living over GDP.
 India also did not make it to the top 10 most inclusive emerging and
developing economies, where its neighbours Nepal, China and Sri Lanka made
a mark.
2. Social Progress Index (SPI):
 SPI measures social and environmental indicators including basic human
needs, well-being, and opportunities.
 It's more comprehensive than GDP ( as It does not include non-market
activities. Excludes factors like environment, equality, etc), Gini
Coefficient( as Only income inequalities are included and other inequalities
like social inequality, equality of opportunities, etc are ignored.), Gross
Happiness Index ( as Ignores gender neutrality, education, etc), and HDI( as
The unequal distribution of wealth is ignored.) .
 Benefits of SPI index – SPI measures outcomes of govt measure rather tahn
 It reflects government outcomes and efficiency in spending.
3. Global Slavery Index:
 It's released by the Walk Free Foundation and focuses on modern slavery.
  Modern slavery involves controlling someone's freedom for exploitation.
 Factors include lack of rights, safety, access to necessities, and migration
patterns.
 India has taken steps to combat modern slavery by criminalizing various forms
of exploitation like criminalizing trafficking, slavery, forced labor, child
prostitution, and child marriage.
 Measures Taken India to Achieve Inclusive Growth
 Several schemes are being implemented by the government for inclusive growth which includes the
following:
 Mahatma Gandhi National Rural Employment Guarantee Act Scheme (MGNREGA)
 Prime Minister’s Employment Generation Programme (PMEGP)
 Mudra Bank scheme
 Pt. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY)
 Deendayal Antyodaya Yojana- National Urban Livelihoods Mission (DAY-NULM)
 Sarva Siksha Abhiyan (SSA)
 National Rural Health Mission (NRHM)
 Bharat Nirman
 Swachh Bharat Mission
 Mission Ayushman
 Pradhan Mantri Jan Dhan Yojana
 Government is working with NGOs and International groupings in policy making eg:
 DISHA Project is being implemented in partnership with UNDP for creating employment and
entrepreneurship opportunities for women in India.
 NITI Aayog's Strategy for New India @75 has the following objectives for the inclusive growth:
 To have a rapid growth, which reaches 9-10% by 2022-23, which is inclusive, clean, sustained and
formalized.
 To Leverage technology for inclusive, sustainable and participatory development by 2022-23.
 To have an inclusive development in the cities to ensure that urban poor and slum dwellers including
recent migrants can avail city services.
 To make schools more inclusive by addressing the barriers related to the physical environment (e.g.
accessible toilets), admission procedures as well as curriculum design.
 To make higher education more inclusive for the most vulnerable groups.
 To provide quality ambulatory services for an inclusive package of diagnostic, curative, rehabilitative and
palliative care, close to the people.
 World Economic Forum has suggested 3 practical ways by which countries can boost social
inclusion as well as economic growth:

o First, countries should increase public and private investment in their citizens’
capabilities, which is the most important way they can durably lift their rate of
productivity growth.

o Second, governments, together with employers’ and workers’ organizations, should

upgrade national rules and institutions relating to work. These influence the
quantity and distribution of job opportunities and compensation, and thus the level
of purchasing power and aggregate demand within the economy.

o Third, countries should increase public and private investment in labor-intensive

economic sectors that generate wider benefits for society. These include sustainable
water, energy, digital, and transport infrastructure, care sectors, the rural economy,
and education and training.( The statement suggests that countries should prioritize
increasing both public and private investment in specific economic sectors that have
the potential to create more jobs and deliver broader benefits to society. These
sectors are characterized by their labor-intensive nature and their capacity to
contribute to sustainable development goals.)

Conclusion

Indian government along with the state governments and local governments should
continue to focus on eradicating poverty and achieving sustainable development in
order to improve the lives of India's people.

Through innovative partnerships with an international organization, civil societies,

and private companies, inclusive and equitable growth can be targeted.

Inclusive growth will help in the empowerment of vulnerable and marginalized

populations, improve livelihoods, and augment skill-building for women.

Economic growth and economic development

 . Economic growth refers to the prolonged increase in a country's real national and
per capita income. Economic development, on the other hand, is characterized by
the sustained enhancement of the material well-being of society. It's important to
note that economic development is a broader concept than economic growth.

Economic growth is defined as the total value of the final goods and services
produced in an economy over a given period. It is calculated in real terms to corner
the effects of inflation and to arrive at the real picture of the economy. It is usually
calculated as a percent Gross Domestic Product (GDP) increase.

Factors Affecting Economic Growth

The factors affecting economic growth are as follows:

o Infrastructure: Developing key infrastructure assets in the economy, like road machinery and
railways, increases efficiency and leads to economies of scale.

o Optimum utilization of natural resources: To ensure growth, it is of utmost importance that

the resources are best utilized to reduce wastage and boost economic productivity.

o Research and development: Investing research and development domain positively impacts
development, increasing labor productivity and reducing the cost involved.

o Human capital: Human resources are the key to the development of an economy. The higher
the skills and capacities of the workforce, the greater the development of the economy.

o Infrastructure development, including transportation and energy, impacts overall economic

performance.

o The availability and efficiency of financial resources, including banking systems, influence
economic growth.

o Global economic conditions and international trade dynamics affect India's economic
performance.

Economic development is the process of improving a country's economy over time.

It involves increasing the nation's wealth and standard of living for its people.
Economic development includes various factors like growth in income, better job
opportunities, improved healthcare, and education. It aims to create a stable and
prosperous economy for the well-being of the entire population.

Factors Governing Economic Development

The factors affecting economic development are as follows:

Human Resources: An increase in human capital in the economy leads to the overall
growth and development of the economy.

Education: Better literacy rates among the population leads to better understanding.
It not only raises the workforce's efficiency but also leads to the development of the
economy.
 Infrastructure development: Growth in the infrastructure parameter raises the
economy's efficiency and improves the standard of living.

Natural resources: The availability of natural resources like forests, wildlife,

minerals, etc, has the potential to result in economic development.

Capital formation: Capital formation is the country's savings and investment rate.
The economic development of a country depends on the rate of capital formation in
the country.

Difference between Economic Growth and

Economic Development
The difference between economic growth and economic development is given in a
tabular format for better understanding.

Economic Growth Economic Development

It is the value of final goods and It is the development of the social-economic
services of an economy over a given parameters of the economy which raises the
period of time standard of living of the population.
Economic growth is a short-term Development is a long-term process.
process.
It is the improvement in the quantitative It is an improvement in both the quantitative
aspects. and qualitative aspects.
It is narrow in scope as it deals only with It is much wider in scope as it covers both the
the economic growth of a country. economic aspects and the overall quality of life
of the population of a country.
The term economic growth is concerned Economic development is much related to
mainly with developed economies. developing economies.
Measurements to deduce economic Measurements to arrive at economic
growth are Gross Domestic product and development are Green GDP, Gender Inequality
gross national product. Index, Gross Happiness Index, etc.
It reflects the national or per capita It reflects the positive progress made by a
growth in income. country.
Features of Economic Development

The features of economic development are as follows:

o Economic Development refers to the positive change brought about in the living standard of
the citizens of the economy by development in social indicators like health education, etc.

o Economic development leads to the reduction in poverty levels and improvement in the
quality of life of the citizens.

o Economic development is a positive process which results in structural changes in the

economy in terms of infrastructural developments, etc.

o The process of economic development is a never-ending process.

o Economic development helps in raising the per capita income in the country which would
result in a boost of national income.
 5 pillers of economic development are – health , education, infrastructure ,IT /
transportation , environment

Measurements of Economic Development

Economic development can be measured through indicators like human poverty

index, infant mortality rate, maternal mortality rate, happiness index, etc. Unlike
economic growth, economic development focuses on qualitative and quantitative
changes. The measurements of economic development are as follows:

Green GDP

Green GDP is the measurement undertaken to adjust the environmental

degradation from the GDP. It involves subtracting the causes of the environmental
damages from the GDP to arrive at sustainable GDP. It was initiated first through a
system of national accounts.

Gender Inequality index

o The gender inequality index measures gender inequalities in the economy under 3 major
aspects:

o Reproductive health, which is measured by maternal metal rate and adolescent birth
rates,

o Empowerment is measured by the proportion of the parliamentary seats which

females occupy and

o The proportion of adult males and females above 25 years with some secondary
education.

o The gender inequality index helps ascertain the true position of women in the countries and
highlights the major areas where gender gaps exist.

Major Principles of Economic Development

and Growth
Economic growth and development are influenced by several key principles:.

o Natural resources, such as land, drainage systems, and mines, play a

significant role. Mercantilism, for instance, emphasizes that a country's
wealth, including gold and trade surpluses, can stimulate growth.
o Capital formation, as noted in Adam Smith's theory, contributes to increasing
returns to economic scale. It depends on workers' activity and savings, which
can be invested in producing more capital.
o Human resources are vital, as per the neo-classical model, focusing on labor
productivity, workforce size, and factor inputs. Skilled and effective labor can
boost growth and productivity, fostering technological advancements and
better health.
o Population growth is seen as positive in underpopulated countries but,
according to Malthusian theory, excessive population can lead to food and
resource scarcity.
Importance of Economic Growth and
Economic Development
The importance of economic growth and development is as follows:

o Economic growth boosts a country's overall prosperity and standard of living.

o It creates more job opportunities for people, reducing unemployment rates.
o Increased economic growth means more revenue for the government, which
can be used for public services and infrastructure development.
o It encourages investment in new technologies and industries, driving
innovation and progress.
o Economic growth contributes to reducing poverty and income inequality in a
nation.
o Economic development ensures long-term and sustainable growth for a
country.
o It focuses on improving the well-being of citizens, including better healthcare
and education.
o Developing various sectors of the economy leads to balanced and diversified
growth.
o Economic development addresses social issues like poverty, hunger, and
gender inequality.
o It helps in a nation's overall progress and stability, creating a better quality of
life for its people.

Issues in India’s growth, development, and employment

The major factors impending India’s growth, development, and employment are as
follows:

Illiteracy: Though India has made considerable progress in literacy, a quarter of the
population still lacks in this aspect which adversely impacts the development and
the growth of the economy.

Poverty: A handful of the country's population lives below the poverty line, which is
a blot on the higher growth rate of the economy as it fails to result in the
development of the economy.

Declining growth rate: The decline in the growth rate adversely impacts the
development of the economy.

Inadequate secondary sector: India’s growth is driven by the service sector, which
fields to accommodate the ever-growing workforce. The stagnation in the
manufacturing sector is a major cause of unemployment in the workforce.

Agriculture sector dependent on monsoon: Approx 55% of the agricultural sector is

still dependent on the vagaries of monsoon. Thus the primary sector, too, is left in
the hands of nature.

Unemployment and underemployment: Due to the paucity of meaningful

employment in the economy, the growing workforce is concentrated in the
 agricultural sector or fails to find employment that suits their capabilities resulting in
a higher unemployment rate.

Gross Domestic Product (GDP) is often used as an indicator of a country’s economic

health and standard of living. However, its reliability as a measure of a country’s
welfare is a subject of debate. Here’s why:

Pros of Using GDP as a Welfare Indicator:

 GDP measures the total value of goods and services produced within a country in a given
period12. It provides a snapshot of a country’s economic activity and capacity3.

 A higher GDP often correlates with better access to goods and services, improved
infrastructure, and increased employment opportunities.

Cons of Using GDP as a Welfare Indicator:

 GDP does not account for income inequality4. A country might have a high GDP, but if wealth
is concentrated among a small percentage of the population, the majority may not benefit.

 GDP does not consider non-market transactions, such as volunteer work or unpaid domestic
work, which contribute to welfare.

 GDP does not account for the depletion of natural resources used in production.

 It does not measure the negative effects of economic growth, such as pollution or social
unrest.

Therefore, while GDP can provide some insight into a country’s economic health, it
may not fully reflect the welfare of its citizens. Other indicators, such as the Human
Development Index (HDI), Gini coefficient, or measures of environmental
sustainability, may provide a more comprehensive view of a country’s welfare.