INCLUSIVE GROWTH
Content
- INCOME INEQUALITY IN INDIA
- World Inequality Database (WID)
- INCLUSIVE GROWTH
- Multiple Dimensions of Inclusive Development
- India’s Achievements in Inclusive Development
- Key Challenges to Inclusive Growth
- Way Forward for India’s Inclusive Growth
- FAQs
India’s development story is often described as fast-growing yet uneven. While the economy has expanded rapidly over the past decades, the benefits of this growth have not been equally shared. Income inequality remains a major challenge, reflected in widening income gaps, unequal access to opportunities, and persistent regional imbalances.
In this context, the idea of inclusive growth becomes central, growth that is not only high and sustained. But also broad-based, equitable, and capable of improving the quality of life for all sections of society. This article explores the dynamics of income inequality in India. And examines how inclusive growth can pave the way for a more just and sustainable development pathway.
INCOME INEQUALITY IN INDIA – VARIOUS PERSPECTIVES
The World Bank Report India Poverty and Equity Brief: April 2025 claims that India has nearly eradicated extreme poverty. And that consumption inequality has significantly reduced since 2011-12. According to the report:
- India’s Gini Coefficient, a measure of inequality, places it among the top four least unequal countries globally.
- India is more equal than every member of the developed G7 and the wider G20.
- The Gini Index measures the deviation of income or consumption distribution from perfect equality (0 = perfect equality, 100 = perfect inequality).
- India’s current Gini coefficient stands at 25.5, classified by the World Bank as having “moderately low” inequality.
- India is just 0.5 points away from joining the “low inequality” group alongside countries like Slovak Republic (24.1), Slovenia (24.3), and Belarus (24.4).
What is this report based on?
- Household Consumption Expenditure Survey (HCES) for FY23. This data was collected using the Modified Mixed Reference Period (MMRP) method.
Critics:
- World Bank report doesn’t give the true picture:
- While inequality in consumption may be low, income and wealth inequality in India are extremely high. And have increased over time, making India one of the most unequal economies in the world.
- Data on consumption spending comes from the Household Consumption Expenditure Surveys (HCES) of 2011-12 and 2022-23. These surveys provide accurate information on low levels of expenditure but are unable to capture extreme high incomes, thus underestimating inequality.
- There are significant methodological changes between the two surveys that render them incompatible.
- While inequality in consumption may be low, income and wealth inequality in India are extremely high. And have increased over time, making India one of the most unequal economies in the world.
World Inequality Database (WID):
Recent research led by Thomas Piketty has analyzed multiple data sources, including national surveys, tax records, and published lists of India’s ultra-rich. Some key findings:
- The Gini coefficient for pre-tax income in India was estimated at 0.61 in 2022-23—up substantially from 0.47 in 2000, reflecting a sharp rise in income inequality.
- Out of 218 economies covered by the World Inequality Database (WID), 170 countries have a lower level of income inequality than India, making India one of the most unequal economies globally.
- The Gini coefficient for wealth in India is even higher, at 0.75 in 2022-23, indicating wealth is much more concentrated than income or consumption. Wealth inequality has also risen from 0.70 to 0.75 though this increase is smaller because wealth concentration was already extremely high.
- Among the 218 countries analyzed, 67 have a lower wealth Gini than India.
- According to WID estimates, the top 1% of adults in India controlled almost 40% of net personal wealth in 2022-23.
- Only four countries—Uruguay, Eswatini (Swaziland), Russia, and South Africa—exhibit a higher level of wealth concentration than India.
These figures underscore India’s position among the world’s most unequal societies, particularly in terms of wealth distribution.
INCLUSIVE GROWTH
Introduction
- Inclusive growth is a process of economic development where the opportunities for advancement are extended to all sections of society, ensuring equal participation and equitable benefits irrespective of individual circumstances.
- Unlike growth that benefits only a select few, inclusive growth seeks to make prosperity accessible to everyone, enabling every member of society to contribute to and share in the nation’s advancement.
- Various expressions such as “Broad-Based Growth,” “Shared Growth,” “Pro-Poor Growth,” and “Growth with Equity” encapsulate this vision. All emphasizing the imperative to reduce disadvantages while fostering progress.
Key Characteristics of Inclusive Growth
The concept of inclusive growth is fundamentally supported by five interconnected pillars:
- Participation: This pillar ensures individuals can fully engage in economic and social life, taking active roles in markets, government decision-making, and civic engagement.
- Equity: It focuses on providing equal opportunities, particularly for low-income and marginalized groups, ensuring their access to resources and public services such as education, healthcare, and infrastructure.
- Growth: The economy must consistently and adequately produce goods and services to meet the needs of all sections of society, ensuring broad-based and sustained economic expansion.
- Sustainability: Economic progress should not compromise environmental health or the well-being of future generations, emphasizing the balance between development and ecological preservation.
- Stability: Growth should be steady and resilient, avoiding disruptive shocks, thereby fostering confidence among citizens and businesses.
Multiple Dimensions of Inclusive Development
Economic Dimension
Economically, inclusive growth is marked by sustained, equitable expansion that uplifts poor and low-income households through both increased capacities and opportunities.
Employment-intensive strategies are at the core, focusing on drawing marginalized groups into the formal labor market. The advancement of entrepreneurship and skill development makes the workforce more adaptable and benefits wider sections.
Inclusive fiscal policies such as progressive taxation and high-priority public spending on health, education, and infrastructure contribute to equitable opportunity distribution. Furthermore, a special emphasis on agriculture and rural development is vital, given India’s demographic realities. Improving agricultural productivity, investing in rural infrastructure, and supporting small farmers directly contribute to broader inclusion.
Technological Dimension
In the technological domain, innovation is a catalyst for inclusion, creating fresh employment possibilities, improving educational outcomes, and facilitating access to public services.
The transition to new technologies often means some traditional jobs may be rendered obsolete making broad-based upskilling and reskilling essential for inclusive growth. For example, the rise of generative AI highlights the need for continuous technological adaptation across all regions and sectors. Additionally, technology is a transformative force for governance, agriculture, healthcare, and education, helping to create opportunities for historically marginalized groups.
Environmental Sustainability
Sustainable development ensures that growth today does not undermine the prospects of future generations. Efficient resource use, pollution control, and reduction in carbon emissions are central.
Without sustainability, rapid development risks creating depleted water tables, degraded lands, and lost ecosystems, undermining intergenerational equity.
Social Dimension
The social aspect of inclusive development prioritizes the empowerment of marginalized communities, ensuring fair access to quality education and healthcare as the bedrock of well-being. Gender equality must be integrated, expanding opportunities in all spheres of life like education, employment, and political participation.
Robust social security nets for vulnerable populations such as the aged people, disabled, or unemployed are essential supports. Removing institutional and policy barriers increases access to productive assets, further enabling fuller participation in the growth process. Finally, strengthening the political dimension—broadening citizen engagement in governance cements sustained inclusivity.
India’s Achievements in Inclusive Development
- India has emerged as the world’s fastest-growing major economy for 2024–25. With a projected growth rate of 6.5%, showcasing its ability to combine economic growth with inclusivity.
- Financial inclusion has seen groundbreaking progress through the JAM Trinity (Jan Dhan, Aadhaar, Mobile). It is significantly expanding access to banking and financial services, alongside pension and insurance coverage.
- Entrepreneurial initiatives like Startup India, Standup India, and MUDRA have positioned India among the leading global startup hubs, boosting inclusive entrepreneurship.
- Focused social policies targeting vulnerable groups, including women and marginalized communities like Scs and STs. It has enhanced equitable participation in the growth process.
- The Aspirational Districts and Aspirational Blocks programs aim to reduce regional disparities by fostering development in lagging areas and improving connectivity via schemes such as UDAN.
- Small and marginal farmers have benefited from agriculture-centric schemes supported by rural infrastructure enhancements, fostering more inclusive rural prosperity.
- Technological innovation and infrastructure development continue to strengthen India’s inclusive growth, with increased investments targeted at research and development.
- India leads globally in climate action, achieving its non-fossil electricity generation capacity target five years ahead of schedule and championing initiatives like the International Solar Alliance and Mission LiFE for sustainable development.
- Health indicators have improved with India’s doctor-patient ratio surpassing WHO norms and initiatives like Ayushman Bharat extending healthcare coverage nationwide.
- Educational access has expanded, earning India progressive rankings in global education monitoring reports.
- Poverty reduction has been remarkable, with extreme poverty rates falling to 5.3% in 2024 despite the World Bank raising the poverty threshold to $3 per day.
Key Challenges to Inclusive Growth
Economic Challenges
- India experiences jobless growth with low employment elasticity in fast-growing sectors like services and capital-intensive manufacturing.
- Agriculture, which employs around 45% of the workforce, contributes less than 20% to GDP, indicating low productivity. Skill gaps remain wide, with the Indian workforce having some of the largest skill deficiencies globally.
- Furthermore, despite increased bank account penetration, financial services like credit and insurance remain inaccessible to many, particularly in rural areas.
Infrastructure and Regional Disparities
- Infrastructural inefficiencies hamper the development of remote and rural areas, increasing logistic costs and limiting access to markets and jobs.
- Regional concentration of industries leads to uneven economic development. States like Bihar, Jharkhand, and Uttar Pradesh are lagging behind others in growth and human development indicators.
Technological and Digital Divide
- While emerging technologies such as AI and machine learning offer growth potential. Their benefits are disproportionately captured by a few nations and firms, posing risks of widening inequality.
- Digital penetration remains below 40% in rural India, limiting the reach of technology-driven inclusion efforts.
Environmental and Social Challenges
- Environmental degradation, natural disasters, and climate change disproportionately affect vulnerable populations, undermining inclusive development.
- Persistent social hierarchies, including caste-based discrimination, gender inequality, and disparities in education and healthcare access. It continues to limit opportunities for large sections of society.
Governance and Political Issues
- Corruption, lack of transparency, rigid regulatory frameworks, and weak accountability hinder the effective implementation of policies and programs aimed at inclusive growth.
- Political factors like dynastic loyalties and identity-based voting reduce the focus on equitable development and inclusive representation.
Global and External Factors
- International tensions, supply chain disruptions, and dependence on imports for critical inputs like fertilizers and crude oil expose the economy to global shocks, complicating efforts toward stable and inclusive growth.
Way Forward for India’s Inclusive Growth
- Promote Sustainable and Efficient Economic Growth
To achieve the vision of a ‘Viksit Bharat’ (Developed India) by 2047, India must sustain an annual growth rate of around 8%. This requires increasing productive employment, emphasizing skill transition programs inspired by successful international models like Singapore’s SkillsFuture. Rapid labor reforms, higher minimum wages, and transparent wage policies are critical to this objective. - Invest in Technology and Innovation
Investing in research, development, and modern technologies will enable India to diversify its economy, improve productivity, and create more inclusive opportunities, especially for youth from weaker sections. Prioritization of critical sectors such as renewable energy, digital infrastructure, and advanced manufacturing will be crucial. - Focus on Environmental Sustainability
Embedding environmental sustainability into economic development involves promoting renewable energy, energy efficiency, and sustainable transportation. Initiatives like the International Solar Alliance and Mission LiFE aim to align economic growth with climate resilience and ecological preservation, ensuring long-term inclusive benefits. - Enhance Social Inclusion
Investment in education, healthcare, water, and sanitation is vital to empower disadvantaged groups. Implementing progressive taxation, gender budgeting, and affirmative action will promote equitable access to resources and opportunities. Expanding social safety nets and ensuring transparent delivery of welfare schemes are essential steps. - Strengthen Political Empowerment and Governance
Empowering marginalized communities through political participation and ensuring a level playing field in electoral processes are necessary for accountable governance. Strengthening institutions to ensure transparency, reduce corruption, and simplify regulations will enhance the efficiency of public service delivery. - Foster Multi-stakeholder Partnerships
Collaboration among government agencies, private sector, civil society, and local communities can significantly enhance resource mobilization, accountability, and reach. Civil society’s role in monitoring public programs and fighting corruption can further ensure that benefits reach the intended populations.
These approaches collectively aim to create a balanced, inclusive growth trajectory that benefits all sections of society, ensuring long-term development and social harmony.
FAQs
1. What are the major causes of income inequality in India?
Income inequality in India arises from factors such as unequal access to education and healthcare, job polarization, skill disparities, regressive social structures, regional imbalances, informality in the labour market, and unequal ownership of land and capital.
2. How does income inequality affect economic growth?
High inequality reduces overall demand, restricts human capital formation among disadvantaged groups, weakens social cohesion, and can hinder long-term economic growth by limiting equal participation in the economy.
3. What is meant by inclusive growth in the Indian context?
Inclusive growth refers to economic expansion that generates widespread benefits by ensuring equal access to opportunities, reducing poverty, improving social mobility, and promoting equitable distribution of resources across regions and social groups.
4. What policy measures has the Government of India taken to promote inclusive growth?
Key measures include MGNREGA, PMJDY, PM-KISAN, National Education Policy (NEP 2020), Skill India, JAM Trinity, Ayushman Bharat, National Food Security Act (NFSA), and investments in infrastructure and social sector schemes aimed at reducing exclusion.
5. What are the major challenges in achieving inclusive growth in India?
Challenges include persistent regional disparities, slow job creation, high informality, low female workforce participation, quality deficits in education and health, digital divide, and inadequate social protection coverage.
