Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.

Sample Answer


Inclusive growth refers to the process and the outcome where all groups of people have participated in growth and have benefited equitably from it.


Inclusive growth under market economy:

  • Increase in GDP due to competition, innovation, and higher efficiency by private sector.
  • Trickle-down effect by creation of Jobs and increase in income levels.
  • Increase in Tax-GDP ratio to fund welfare programmes.
  • Indicative planning (LPG-1991) to achieve inclusive growth.

Empirical evidence:

  • Decline in BPL population from 37% (2004-05) to 22% (2011-12)
  • Liberalisation of Telecom and Aviation sector

However, Inclusive Growth and Market Economy may be contradictory as:

  • Limited focus of Private sector in delivery of Public Goods and Services such as Education, Health etc.
  • Neglect of Rural and underdeveloped regions by private sector fosters regional disparities.
  • Concentration of wealth.
  • Absence of subsidised prices affects poor.
  • Limited Government role goes against the social welfare objective.

Empirical evidence:

  • US’s Gini Co-efficient higher than India.
  • Privatisation of PSBs would hurt inclusive growth.

Financial Inclusion refers to universal access to financial services such as Banking, Insurance, Pension at a reasonable cost. 7 UN-SDGs highlight financial inclusion for achieving sustainable development.

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Thus, addressing issues such as lack of Financial Literacy, Dominance of Bank Branches in Urban Areas, Poor quality of services etc. improve financial inclusion and promote development.

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