Table of contents

                       i.            INTRODUCTION

                     ii.            DEFINING INCLUSIVE GROWTH

                    iii.            POINTS ABOUT INCLUSIVE GROWTH

                    iv.            FACTS AND FIGURES

                      v.          INCLUSIVE GROWTH INDICATOR AND DIMENSIONS

·         HEALTH INDICATOR

·         EDUCATION INDICATOR

·         DEMOGRAPHICS

                ·        GOVERNANCE INDICATOR
                              

                      vi.            MEASUREMENT OF INCLUSIVE GROWTH

                    vii.            HOW TO ACHIEVE INCLUSIVE GROWTH

INTRODUCTION

We sometimes listen about inclusive growth but we have no clear meanings about it. In this blog I struggled out to define inclusive growth; in this sense that even every person understands idea of inclusive growth. Inclusive growth has a central idea in development. However inclusive growth needs broad and complex analysis; because the broader the definition, the greater the confusion. So I prefer simple definition to explain the concept.

For growth to be inclusive, the consumption by the excluded group should increase by at least the same rate as the growth rate.

The excluded group could be clearly defined based on the country context and could include combinations of groups, including the poor, people in the lowest income percent. Growth will be inclusive when the benefits will reach to the poor.

Another aspect of inclusive growth is defined in this way.  Inclusive growths introduce the efforts to tackle the poverty and inequality. Inclusive growth starts from the position that the relationship between growth, inequality and poverty can no longer be assumed inevitably to be trickle down or a trade-off.

We use this instrument to overcome the poverty, inequality and increase level of employment. Nature of the inclusive growth implies a direct link between the macro and micro determinants and inclusive growth is a concept that enhances the sustainable economic growth but sometimes it is difficult because growth may give rise to negative externalities, such as rise in poverty and corruption, which is a major problem in developing countries. It is an essential ingredient of any successful strategy.

Government should be played a dominant role in growth to be inclusive. There is a need to improve our understanding of growth determinants. Government needs to play an important role in any economy, correcting market failures, but especially in the creative economy in a society with very little inequality, the only role of the state is to provide collective goods and correct market failures.

Main objective of this blog is defining inclusive growth in different point of views and describe its determinants and measurement.

Defining Inclusive Growth

Rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to and benefit from economic growth.

The ‘inclusive growth’ as a strategy of economic development received attention owing to a rising concern that the benefits of economic growth have not been equitably shared. Growth is inclusive when it creates economic opportunities along with ensuring equal access to them. Apart from addressing the issue of inequality, the inclusive growth may also make the poverty reduction efforts more effective by explicitly creating productive economic opportunities for the poor and vulnerable sections of the society.  The inclusive growth by encompassing the hitherto excluded population can bring in several other benefits as well to the economy.   The concept “Inclusion” should be seen as a process of including the excluded as agents whose participation is essential in the very design of the development process, and not simply as welfare targets of development programmers’ (Planning Commission, 2007). 

Inclusive growth refers to both the pace and distribution of economic growth. In order for growth to be sustainable and effective in reducing poverty, it needs to be inclusive (Berg and Ostry, 2011; and Kraay, 2004). Traditionally, poverty (or inequality) and economic growth analyses have been done separately.[1]

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[1] See, for example, IMF (2007).

Inclusive growth requires: “economic growth and employment opportunities, social inclusion, social protection, as well as good governance and institutions…”

                                                                                                           (ADB, 2011)[2]

Points about IG

•   IG focuses on economic growth which is a necessary and crucial condition for poverty  reduction.
•     IG adopts a long term perspective and is concerned with sustained growth.
•     IG focuses on both the pace and pattern of growth.
•    IG focuses on productive employment rather than income redistribution. Hence the focus is      not only on employment growth but also on productivity growth.
•     IG has not only the firm, but also the individual as the subject of analysis.
•    IG is in line with the absolute definition of pro-poor growth, not the relative one.
•   IG is not defined in terms of specific targets such as employment generation or income  distribution. These are potential outcomes, not specific goals.
•  IG is typically fueled by market-driven sources of growth with the government playing a facilitating  role.

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[2] Asian Development Bank

www.youtube.com/watch?v=GX3gQq8UonY

Facts and figures

Pakistan today faces multiple challenges on the security, political and economic fronts. Therefore, the Panel suggests that the 10th Plan, from 2010-11 to 2014-15, should not target like previous Plans for high growth rates of GDP of 7 to 8 %. Instead, a realistic strategy is proposed which is based initially on the removal of physical constraints to growth and an improvement in the investment climate within the next two years. Thereafter, the expectation is that the growth process will pick up momentum. As such, from GDP growth rate of about 3% in the base year of the Plan, the growth rate could rise to 5% by 2012-13 and approach 7 % by 2014-15. Overall, the average growth rate expectation during the Plan period is just above 5 %.

Inclusive growth indicators and dimensions

Some recipes for inclusive growth contain many familiar elements from standard growth strategies such as macroeconomic stability and economic openness. The index for social development is devised on four major indicators; Health, Education, Governance and Demographics, further subdivided into 21 variables.

Health Indicator

It includes the variables; Crude Birth Rate (per 1000 people), Crude Death Rate (per 1000people), Life Expectancy at Birth (years), Infant Mortality Rate (per 1000 live births), Fertility Rate (births per woman) and Population per Hospital Bed.

Education Indicator

In a society where literal definition of literacy includes being able to write one’s name and reading the newspaper, the education indicator focuses on lower level education by including Primary, Middle and Secondary stage enrollment of pupils, and number of teachers in Primary, Middle and Secondary stage, and literacy rate.

Demographics

This indicator focuses on the demo graphical aspects by examining the nature of urbanization, level of employment and population statistics. It includes Population Density, Total Population, Total Labor Force, Labor Force Participation Rate, Unemployment (percentage of total labor force).

Governance Indicator    

This indicator includes different modes of public spending, with focus on the fundamental needs of people. Public spending on health, on education and military expenditure, as percentage of GDP, aides in determining the public priorities, meaning thereby the governments focus on provision of social amenities.

Measurement of Inclusive Growth

A measure of inclusiveness is based on the concept of a concentration curve.8 Following Ali and Son (2007), we define a generalized concentration curve, which we call social mobility curve. A higher curve implies greater social mobility, growth is inclusive if the social mobility curve moves upward at all points. However, there may be degrees of inclusive growth depending on: how much the curve moves up (growth) and how the distribution of income changes (equity), that is, how the curvature changes. This feature of the social mobility curve is the basis of the proposed integrated measure of inclusive growth. Thus, if two generalized concentration curves do not intersect, they could be ranked on social mobility, that is, inclusive growth.

To illustrate the point made above, Figure 1 depicts two social mobility curves with the same average income (ȳ) but different degrees of inclusiveness (i.e., different income distribution). The social mobility curve ‘A1B’ is more inclusive than the social mobility curve ‘AB’, as the average income of the bottom segment of the society is higher.[3]

How to Achieve Inclusive Growth

The objective to achieve inclusive growth is at the top of many governments’ agendas because high levels of inequalities negatively affect the well-being and growth. Yet, innovation policies have been examined to date essentially with regards to their impact on the growth of aggregate value. This is because innovation is central for growth both to address social challenges and to improve economic performance and create jobs.

                                           

The figure to the right provides an illustration of the distributional impacts to be analyzed and how different policies focus mainly on one or the other and thus, depending on the characteristics of the innovation system, have impacts on industrial or social inclusiveness. Some policies aim directly at both.                   

                                                                                    

                  

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[3] International  Monetary Fund

References

• Ali, Ifzal and Hyun Hwa Son, 2007, “Measuring Inclusive Growth,” Asian Development Review, Vol. 24, No. 1, pp. 11–31.
• Berg, Andrew and Jonathan D. Ostry, 2011, “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” IMF Staff Discussion Note 11/08 (Washington: International Monetary Fund).
• ADB, 2011, Asia 2050: Realizing the Asian Century, Manila, p.4.
• International Monetary Fund, 2007, “Globalization and Inequality,” World Economic Outlook, Chapter 4, October (Washington: International Monetary Fund).
• Kraay, Aart, 2004, “When is Growth Pro-Poor? Cross-Country Evidence,” IMF Working Paper 04/47 (Washington: International Monetary Fund).
• Government of India, Planning Commission. 2006. India’s Eleventh Five-Year Plan, 2007–2012. New Delhi.
• http://www.voxeu.org/article/inclusive-growth-revisited-measurement-and-evolution