(Online Course) Contemporary Issues for IAS Mains 2012: Yojana Magazine - Prospects and Policy Challenges in The Twelfth Plan

Yojana Magazine

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Q. Major Challenges for 12th Plan.

Answer: Much of what needs to be done to accelerate GDP growth during the Twelfth Plan will be done by the private sector, but the central and state governments have a crucial role to play in providing a policy environment that is seen as investor-friendly and is supportive of inclusive growth. Four critical challenges facing the economy in the Twelfth Plan, which are perhaps more serious than they were at the start of the Eleventh Plan, are those of (a) managing the energy situation, (b) managing the water economy, (c) addressing the problems posed by the urban transformation that is likely to occur, and (d) ensuring protection of the environment in a manner that can facilitate rapid growth. In addition, the efficiency in implementation of projects on the ground needs to be greatly improved.

Q. Performance&Multidimensionality of inclusiveness.


  • Improved economic performance has dramatically altered global perceptions of India’s potential. An early recognition of this was a Gold man Sachs report of November 2002, which included India, with Brazil, Russia and China in a new BRIC group of emerging market countries which was predicted to overtake the G-8 in terms of total GDP by 2035. Continued strong performance in the decade of the 2000s and resilience in the face of a global slowdown, has reinforced this positive assessment. The general perception today is that India may now be on the path of sustained high growth based on high rates of domestic savings, high quality of entrepreneurial and managerial skills, and the cumulative effect of economic reforms on productivity. Similar transitions have been achieved by the other Asian countries such as Japan, Korea, Taiwan, and most recently China, and it is felt that India may also now be in the same position.

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  • It is more difficult to assess performance on inclusiveness than on growth for three reasons. First, inclusiveness is a multidimensional concept and progress therefore needs to be assessed in many different dimensions. Second, the data relating to various aspects of inclusiveness become available only after a considerable lag, and information for the Eleventh Plan period is often not available. Third, most policies aimed at inclusiveness have an impact only over a relatively long term, and this means that even when policies are moving in the right direction, the results may only be evident much later. For example, steps taken to improve education for the poor will improve their earning ability in future, but this impact will only be reflected in actual income earning much later.

  • ¨ The multidimensional nature of inclusiveness is best illustrated by listing some of the many dimensions that are relevant. The extent of reduction in the percentage of the population below the poverty line is clearly a very important indicator of progress. However, many families that are above the poverty line in terms of per capita consumption may lack access to basic services such as education, health, clean drinking water and sanitation. Inclusiveness must obviously include progress in delivery of these essential services. Inclusiveness must also extend to addressing concerns about inequality. It is sometimes argued that inequality should not matter as long as the poor are getting better off and it is probably true that a rapid rate of improvement in incomes for the poor may make them willing to accept some increase in inequality. However, large increases in inequality, accompanying only modest improvements in the levels of living of the poor, are unlikely to be acceptable. Inequality in this context relates not only to the distribution of income or consumption across individuals, but also inequality across states, and in some cases, even across regions within states.

  • ¨ Inclusiveness in the Indian context also requires a special focus on particular social groups such as the scheduled castes (SC) and scheduled tribes (ST), and also the minorities. Since these groups are concentrated in the lower ranges of the income distribution, it may be thought that an effective strategy for reducing poverty or inequality addresses the concerns of these groups. However, if inclusiveness is defined as bringing these groups at par with the rest of the population, it has to address the issue of achieving a fair representation for these groups along the entire income distribution. This is conceptually very different from reduction in overall poverty or inequality, in the sense that it can be achieved leaving the incidence of poverty and the level of inequality unchanged. The Eleventh Plan explicitly recognised the multidimensional nature of inclusiveness by enumerating 27 monitor able targets of which GDP growth was only one. The others focused on different aspects of inclusion such as growth in agriculture, reduction in poverty, growth of employment opportunities, etc. One consequence of multidimensionality is that the extent of progress in different dimensions will vary. For example, it is perfectly possible for poverty to decline while inequality increases. Similarly, inequality among households in the country as a whole may decrease, or remain unchanged, while inequality across states increases. Any overall assessment of progress on inclusiveness will have to be based on a composite view of all these developments.

  • ¨ Both the extent of poverty and the lack of access to essential services remain serious problems. However on the positive side, there is steady improvement in many areas and if the rate of improvement observed in the period for which data are available has continued – and there is every reason to think it would have – the current situation may be significantly better than what the latest data suggest. Nevertheless, it cannot be denied that we have seen slower progress in ensuring inclusion than on accelerating growth and this contrast feeds the public perception that rapid growth has only led to a concentration of income and wealth at the upper end.

  • ¨ The perception of concentration of wealth and widening disparities is sharpened by the tendency of the media, including especially the electronic media which now has very wide reach, to publicise success at the top end, including the conspicuous consumption with which it is often associated, while simultaneously focusing attention on the depth of poverty at the other end. Both extremes are understandably viewed as newsworthy, but
    in focusing disproportionately on them, the steady improvement in living standards of the very substantial population in the middle, and the associated rise of a growing middle class receives much less attention than it should. And yet this not only represents an important welfare gain, but also an important social development, with potentially large positive effects in terms of expectations, values and a rising demand for better and more accountable government.

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