“Inclusive Growth” and Income Inequality in India Under Globalization: Causes, Consequences and Policy Responses

Abstract

In the eighth chapter, the author provides an overview of the factors responsible for India’s spatial structure of growth and development. He argues that growth so far has not translated into development and one of its manifestations is high regional imbalance. The author takes up multiple parameters like income, consumption, poverty, employment, urbanization and migration for the last two decades at the state level and shows that in the post-globalization phase, there has been a rise in economic inequality. Considering the disparity across size, class and urban centres, he argues that per capita consumption expenditure in metropolitan cities has increased at a significantly higher rate compared to other urban areas. Such increasing inequality is primarily because many of these metropolitan cities have got directly linked to the global market in recent years. Surprisingly, mobility among the Indian population has gone down, particularly towards large metropolitan cities. He has attributed such a reverse trend to growing regionalism, and assertion of regional identity, change in skill requirement in the urban labour market, ­land-use restrictions at the city level, inhospitable attitude towards migrants, etc. With the growing impact of global economy, migration to cities has become selective as a substantial number of migrants are now from the middle income group. Declining mobility among the poor would make poverty levels in backward states persistently high, as migration, he argues, is a definite instrument of improving economic well being and escaping poverty. He then extensively discusses the institutions and programmes that are instrumental for balanced regional development in India and thinks that programmes for structural reforms in early 1990s have led to further concentration of public and private investments in developed regions, guided by the consideration of economic efficiency. Importantly, India has gradually made a distinct shift in its regional development strategy, giving thrust to vulnerable districts, blocks and settlements within the framework of decentralisation. Since 2004–05, there is a paradigm shift, as many of the backward states including those in the Northeast, have recorded significant acceleration in their growth, whereby the inter-state disparity in the growth rate of State Domestic Product or in per capita SDP has shown some stability. Unfortunately, this pattern of growth has not been sustained in recent years with many of the backward states showing deceleration in growth, and income inequality increasing again. The author thinks that research and policy discussion on the factors responsible for such regional disparity in India is inconclusive and inadequate. Given the planning apparatus in the country which is essentially centralized, there has not been a big demand for empirical studies to restructure the policies and programmes at the state and lower levels. Therefore at the level of policy formulation process, such gaps need to be filled up to ensure unbiased outcome and then to enhance greater socio-economic equity, which alone can guarantee faster growth in the long run.