Download - AIMA Deloitte Inclusive Growth
September 2011www.deloitte.com/in
Inclusive growthA challenging opportunity
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Contents
Introduction 3
Theimperativenow 4
Theopportunity 5
Governance 10
Education 11
EnergyandResources 13
TelecomandTechnology 15
Infrastructure 16
Healthcare 18
Financialinclusion 21
Businessmodelinnovation 23
Conclusion 24
References 25
Acknowledgements 26
Inclusive Growth AChallengingOpportunity3
Introduction
Reformsundertakenintheearly1990smadeIndiaoneoftheworld’sfastestgrowingeconomies.TheboomoftheITindustryandimprovedagriculturalproductioncreatedanatmosphereofoptimism,whichledtothecoiningofphrases,suchasIncredibleIndia,IndiaShining,andIndia2020aroundtheendofthemillennium.
TheIndiangrowthstoryhasbeenoneofhighGrossDomesticProduct(GDP)growthbutprimarilydrivenbythegrowthinservicessector.Notallsectorsoftheeconomyhavegrownatthesamepaceasisreflectedintherelativelylowagriculturalgrowthrate,low-qualityemployment,pooreducation,inadequatehealthcareservices,rural-urbandivide,socialinequalities,andregionaldisparities.
Growththatisnotinclusiveaffectsthesociety,theeconomy,andthepolity.Alackofinclusivegrowthcanresultinrealorperceivedinequities,whichhasitsownsocialramifications.Inclusivegrowthpromoteseconomicgrowthpartlybybroadeningthebasefordomesticdemandandpartlybyincreasingthenumberofpeoplewithastakeinreformsandinastablegovernment.
Inclusivegrowththusseekstobroadentheflowofbenefitsofglobalizationtowardsthecurrentlyexcludedsections.However,forachievinginclusivegrowth,itisessentialthatthediffusionofopportunitiesbesupportedwithgoodgovernanceandaccountability.
Inordertoreducedisparityandpromoteinclusivegrowth,theIndiangovernmenthassetstate-specifictargetsforparameters,suchasGDPgrowthrate,agriculturalgrowthrate,newworkopportunities,povertyratio,dropoutrateinelementaryschools,literacyrate,gendergapinliteracyrate,infantmortalityrateandmaternalmortalityratio.
Inthelastfewyears,inclusivegrowthhasbeenattheforefrontofstudiessponsoredbymultilateralaidagencies,suchastheUnitedNations,theWorldBank,AsianDevelopmentBank,andseveralnongovernmentalorganizations(NGOs).Successivegovernmentshaveinitiatedseveralprojects,suchasJawaharRozgarYojna,IntegratedRuralDevelopmentProgram,RuralHousingScheme,andSwarnjayantiGramSwarozgarYojanatopromoteinclusivegrowth.However,forinclusivegrowthtohappeninacountrywiththescaleandsizeofIndia,privatesectorinvolvementisequallyimportant.Theprivatesectorhasstartedcontributingwithinitiatives,suchastheICICIFoundationhavingbeensetupwiththesolepurposeofpromotinginclusivegrowth.Thegovernmentandprivatesectorcanplaycomplementaryrolesindrivinginclusivegrowth.ThereisaneedforthepublicandtheprivatesectorinIndiatohaveaunifiedapproachtowardshowtheycanextend,innovate,andcollaborateinnewwaystodriveinclusivegrowth.
ThispaperelaboratestheneedtobuildInclusiveIndiaandemphasizeswhyitisimperativetofocusoninclusivegrowthnow.ItpresentstheopportunitiesavailableforbuildinganinclusiveIndiabyidentifyingkeyleversingovernance,education,energyandresources,telecomandtechnology,infrastructure,healthcare,financialinclusion,andbusinessmodelinnovation.Itgivesexamplesofinitiativesundertakenbyothercountriestobuildinclusiveness,suchasthosebyThailand,Malaysia,Kenya,andTheGambiaintheeducationsector.ItalsohighlightssomeofthereasonswhyeffortstobuildanInclusiveIndiainthepasthavehadonlylimitedsuccessandwhatcanbedonebetterinthefuturesothatinclusivegrowthisrealized.Thepaperfurtherstressesupontheneedforthepublicandtheprivatesectortoworkintandemandleverageeachother’sstrengthstodriveinclusivegrowth.
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The imperative now
ThefocusofthegovernmentinrecentyearshasshiftedfrompromotingIncredibleIndiatobuildingInclusiveIndia.Inclusivegrowthneedstobeachievedinordertoreducepovertyandothersocialandeconomicdisparities,andalsotosustaineconomicgrowth.Inrecognitionofthis,thePlanningCommissionhadmadeinclusivegrowthanexplicitgoalintheEleventhFiveYearPlan(2007-2012).ThedraftoftheTwelfthFiveYearPlan(2012-2017)liststwelvestrategychallengeswhichcontinuethefocusoninclusivegrowth.Theseincludeenhancingthecapacityforgrowth,generationofemployment,developmentofinfrastructure,improvedaccesstoqualityeducation,betterhealthcare,ruraltransformation,andsustainedagriculturalgrowth.
Despitethepresenceofover300,000NGOs,whichareworkinginsectorsspanningthegamutfromagriculturetomicrofinance,andfromminorityrightstoscientificandindustrialresearch1,India’sgrowthhasprimarilybenefiteditsurbaneliteandmiddleclasspopulationwhoareengagedlargelyinthefast-growingservicessector.TheIndianmiddleclass,definedasthoseconsumingbetween2and20USdollarsperday,hasgrownbyabout205millionbetween1990and2008.2However,around70%ofthepoorarefromruralareas3wherethereisalackofbasicsocialandinfrastructureservices,suchashealthcare,roads,education,anddrinkingwater.Stuntedagriculturalgrowth,relativelyhighfoodprices,lowruralwages,insufficientgovernmentspendingonruraldevelopmentandobsoleteinfrastructurearekeydeterminantsofruralpoverty.
SignificantinterstateaswellasintrastateregionaldisparitiescontinuetoexistinIndia.Lowgrowthratesandpoorpublicservicesinthepoorerstatesfurtherwidensthedisparityindevelopment.Forexample,povertyconcentrationcanbeseenintheadjoiningstatesofBihar,Jharkhand,Chhattisgarh,UP,MP,Orissa,andRajasthan.Thesestatescollectivelyaccountfor44%ofthetotalpopulationand60%ofthepoor.4Mostofthelow-incomestateshaverichnaturalresourcesbutpoorinfrastructureandhumandevelopment.Neighbourhoodeffectisseenwhenonesuchbackward
regiondragsdownitsneighbouringregions.Becauseofmutuallyreinforcingconsequencesofgeographicalclusteringandneighbourhoodeffect,thereisadangerthattheseadjoiningstateswillbecaughtinapovertytrap.
Women,labourers(includingagriculturallabourers),tribalpopulation,somescheduledcastegroups,andreligiousminoritiesinparticulararelaggingbehindinjobopportunities,earnings,andhumandevelopment.Around58%oftheworkersinIndiaareinvolvedintheagriculturalsector.Despitethis,thecontributionofagriculturalandalliedsectorsintheGDPisonlyaround14%.5Hence,fortheremovalofpovertyitisimperativethattheruralfarmandnonfarmsectorsbepromoted.Agriculturecontinuestosufferfromfragmentedlandholdingsandwateravailabilityproblems.Further,itisvulnerabletocropprocurementpricesandweatherconditions.Poormonsoonsleadtocropfailuresandsubsequentlyindebtrepaymentdistressforfarmers.
Figure 1: Population and GDP contribution by State (2010)
Population (%) GDP Contribution (%)
Uttar Pradesh Maharashtra Bihar
Tamil Nadu Rajasthan Gujarat
Kerala Jharkhand
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3% 2%3% 4%
5%7%
6%4%
6%
7%9%
3%
9%14%
16%8%
Source:Census2011(population);VMWAnalyticsServicedata(state-wiseGDP)
Inclusive Growth AChallengingOpportunity5
Anestimated86%oftheIndianworkforceisengagedintheinformalorunorganizedsector,6however,thequalityofemploymentremainsaproblem.Workersinthissectorhavevirtuallynosocialsecurity.AreportbyWorldBanksuggeststhat,inclusivegrowthapproachtakesalongertermperspectiveasthefocusisongeneratingproductiveemploymentratherthanondirectredistributionofincomeasameansofimprovingfinancialwell-beingoftheexcludedgroups.
Withtheworld’ssecondlargestpopulationandwidespreadurbanandruralpoverty,Indiafacesthechallengeofbridgingthegrowinggapbetweenthehavesandthehave-nots.Itisimperativetofocusoninclusivegrowthnowasitisinterrelatedwithseveralkeychallengesfacingthegovernment,suchaspovertyreduction,increaseinquantityandqualityofemployment,agriculturaldevelopment,socialsectordevelopment,reductioninregionaldisparities,andenvironmentalprotection.
Demographicdividendoccurswhenproportionoftheworkingclasspopulationislargerthanthedependednon-workingclasspopulation.Asaresult,fewerresourcesgointomeetingtheneedsofthedependentgroupsandmoreresourcesarereleasedforinvestmentineconomicgrowthandhumandevelopment.Thereisevidencethatdemographicdividendhasplayed
amajorroleinthetransitionofseveraleconomiesfromdevelopingtodeveloped.Forexample,inthe1960s,birthrateintheRepublicofKoreafellwhichresultedinelementaryschoolenrolmentsdeclining.FundspreviouslyallocatedforelementaryeducationwerefreedupandusedtoimprovethequalityofeducationathigherlevelsinKorea,whichresultedinfastergrowthinthelaterperiods.7AnewreportbytheRandCorporationhaspointedoutthatdemographicdividendsareestimatedtohavecontributedone-fourthtotwo-fifthsofEastAsianpercapitaGDPgrowthinthelate20thcenturyandIndiacurrentlyhastheopportunitytoreapthisdividend.
However,demographicdividendonlyprovidesashortwindowofopportunityanddoesnotguaranteeautomaticgrowthanddevelopmentunlesseffortsaremadetotakeadvantageofit.Forexample,Pakistanbeganexperiencingademographicdividendin1990andisexpectedtohaveitswindowofopportunityopentill2045.However,ithasbeenunabletocapitalizeonthisopportunityoverthepasttwodecades.8Hence,itisimportanttousetheperiodinwhichademographicdividendexiststomakeinvestmentsineducation,healthcare,andjobcreation.Asperthe2011Census,thedecadalgrowthrateoftheIndianpopulationhasseenadeclineforthefirsttimesinceIndianindependence,havingdroppedsharplyfrom21.15%in2001to17.64%in2011.Althoughthepercentageofthe15-34agegroupreachesitspeak(35.4%)in2010andtapersofffromthenonwards,thepercentageofthe15-59agegroupreachesitspeak(64.6%)onlyin2035,andtapersoffgraduallyoverthenext15yearsto61.6%in2050.AfailuretotakeadvantageofthisopportunitybyIndiacouldhaveadamagingeffectonitsfutureprospectsandleadtoaspirallingriseinpoverty,unemployment,andsocialinequalitiesinthecountry.Ontheotherhand,thesamedemographicdividendprovidesIndiaanopportunitywhichcouldseeitturnintoadevelopednationifbackedbyfavourablepolicies,goodplanning,andefficientimplementation.
InclusivegrowthisalsoakeycomponentifIndiaistofulfilitsMillenniumDevelopmentGoals,which193UnitedNationsmemberstatesaimtoachieve
Figure 2: Workforce and GDP contribution by sector
58%
15%
17%
30%
25%
55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Workforce (%) GDP (%)
Services Industries Agriculture
Source:Census2011(population);VMWAnalyticsServicedata(state-wiseGDP)
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by2015.Thesegoalscompriseeradicatingextremepoverty;achievinguniversalprimaryeducation;promotinggenderequality;reducingchildmortalityrates;improvingmaternalhealth;combatingAIDS,malaria,andotherdiseases;ensuringenvironmentalsustainability;anddevelopingglobalpartnershipsfordevelopment.
Environmentalconcerns,suchaslanddegradation,waterpollution,andairpollutionneedtobeaddressedwhilestrivingforrapiddevelopment.Highereconomicgrowthatthecostofindiscriminatedamageanddeteriorationoftheenvironmentcannotbesustainable.Attemptsofthegovernmenttoproviderapidandinclusivegrowthinthepasthaveoftenbeenmadedifficultduetolackofinfrastructure.Theroleofpublic-
privatepartnershipindevelopmentoftheinfrastructurerequiredforpromotinginclusivenessinIndiahasbeenrecognizedtobecrucial.
Inclusivenesscanberealizedbyhighgrowthratesonlywhenthesourcesofgrowthareexpandingandtherebyincludinganincreasingshareofthepopulationinthegrowthprocess.
“The government need not do any of the things that are better done by a competitive market. In agriculture, for example, a competitive market is important but the role of the state is also very important in providing infrastructure, rural connectivity, rural electrification, investment in irrigation, watershed management and so on. All these areas require a lot of participatory work by the community. In infrastructure, too, the role of the state is crucial. Historically, even in the U.S., infrastructure has been developed by the public sector. We are trying to do it through public-private partnerships.”
—Montek Singh Ahluwalia,DeputyChairmanofthePlanningCommissionofIndia,Nov2007
Inclusive Growth AChallengingOpportunity7
The opportunity
Theobjectivesofaninclusivegrowthagendaistoreducepoverty,improvequalityoflife,andensuretotheextentpossible,thatallsegmentsofsocietybenefitfromtheeconomicgrowthofthecountry.Anumberofmacroandmicrolevelinterventionshaveshowntobeconducivetopromotinginclusivegrowth.Atthemacrolevel,recommendationssuchasimprovingfiscaldiscipline,tradeliberalization,opennesstoForeignDirectInvestment,privatization,deregulation,taxreforms,labourmarketflexibility,providingsocialsafetynets,reorientationofpublicexpenditure,andlegalandpoliticalreformscanbeusefulinguidingpolicydiscussionsforpromotingrapidandinclusivegrowthindevelopingcountries.9Atthemicrolevel,reducingincomeandnon-incomerelatedinequality,improvingpublicinfrastructure,healthcare,education,accesstomarkets,accountability,women’sempowerment,roleplayedbycivilsocietyorganizations,andgoodgovernancecanhelpacceleratepovertyreduction.AnIndiawithasustainable9%orhighergrowthratewillbepossibleonlyifurbanandruralIndiaintegrateineconomicopportunitiesandqualityoflife.Thisimpliesthatthekeyleverstoachievinginclusivegrowthareincreasingtheavailability,accessibility,quality,
andaffordabilityofvariousproductsandservicessothatallsegmentsofpopulationhaveequitablesocialandeconomicopportunities.Toachievethis,thegovernmentandtheprivatesectorneedtoworkjointly,whileabidingbythefundamentalprinciplesofademocraticsociety.
Withinthiscontext,theresponsibilityofthegovernmentistocreateafavourableandstablemacroeconomicenvironmentthatfostersprivatesectorparticipationwithoutleadingtomarketdistortionssuchasmonopoliesorwindfallprofitstoafewselectfirms.Tocreatesuchanenvironment,thegovernmentneedstocreateandimplementlawsthatareequitable,facilitatetheprocurementofnaturaland/orscarceresources,andprovideeconomicincentivesthatencouragetheprivatesectortopromoteinclusivegrowthbyservingunservedorunderservedmarketsegments.Additionally,insectorsofnationalimportance(suchasdefence)orthosethatpromotesocialwelfare(suchassocialprotectionandpro-pooremployment),thegovernmentcansupplementprivatesectorparticipationthrougheffectivelymanagedpublicsectorundertakingsorwelfareprojects.
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Onitspart,topromoteinclusivegrowth,theprivatesectormustutilizeitsexpertiseandaccesstotechnology,capital,andhumanresourcesinbuildinginnovativebusinessmodelsthathelpincreaseacompany’stoplineandprofitabilitywhileensuringthatbenefitsaccruetoalargerpopulationbase.Contrarytopopularbelief,theprofitmotiveofprivatecompaniesandsocialgoodthatisenvisagedbyinclusivegrowthisnotnecessarilyatoddswitheachother.Therearenumerousinstances,bothinIndiaandabroad,wherecompanieshavedevelopedbusinessmodelsthatprofitablyservecustomersatthebottomofthepyramid.
TheIndianmiddleclasswillcontinuetoexpandsignificantlyinthecomingyearsprovidedthecurrentlevelofeconomicgrowthissustained.Inrecognitionofthis,anumberofproductsandservices,suchastheTataNanoandflightsoperatedbylow-costcarriershavebeenintroducedinrecentyears.AstheincomegrowthacrossIndiahascontinued,thecharacterofconsumptionhasalsochanged.Alesserproportionofthetotalspendingisbeingusedbythemiddleclassonbasicnecessities,suchasfoodandclothingand
thereisincreasedexpenditureonitems,suchasmobilephones,consumerelectronics,andentertainment.Widespreadadoptionofmobilephonesandtelevisionsets,andincreasingpenetrationoftheInternet,opensupnewmarketsforadvertisementsandpromotions.Forcorporationsaroundtheworld,theIndianmiddleclassthuspresentsahugeandrapidlygrowingbusinessopportunity.
However,therapidgrowthresultingfromtheeconomicliberalizationinitiatedin1992hasalsowidenedthegapbetweenthehavesandthehave-nots.Inordertoreducethisgapandbringthosecurrentlyintheperipheryintothegrowthstory,thegovernmentandprivatesectorneedtoimplementinitiativesacrosseightbroaddimensions—governance,education,energyandresources,telecomandtechnology,infrastructure,healthcare,financialinclusion,andbusinessmodelinnovation.
Inclusive Growth AChallengingOpportunity9
Goodgovernanceisatthecoreofimprovingthedeliveryofessentialpubliclyprovidedservices.Itprovidesthemechanismforlinkinginclusion,decisionmaking,andaccountability.Problemsininfrastructure,criticalforbuildinganinclusiveIndia,canoftenbetracedbacktopoorgovernance.Redtape,lackofaccountability,andcorruptionhasplaguedIndiasinceindependence.
Thegovernmenthaslaunchedalargenumberofinitiativesovertheyearsinordertoachievetheobjectiveofrapidgrowthcoupledwithpovertyalleviationandinclusiveness.Manyoftheseinitiativeshavefailedtoachievetheirgoalsbecauseofpoordesign,insufficientaccountability,andcorruptionatvariouslevels.Withouteffectiveimplementation,evensubstantialgovernmentexpenditureresultsinlimitedsuccess.
AsofOctober2010,outofthe559projectsundertakenbythegovernmentforinfrastructuredevelopment,14wereaheadofschedule,117wereonschedule,293aredelayedandforthebalance135projects,nodateshadbeenfixedforcommissioning.10
Realizingthataccountabilityandtransparencyarecriticalelementsofgoodgovernance,theRighttoInformationAct(RTI)wasenactedin2005.RTIempowerspeopletogetinformationfromthegovernmentandthusconstitutesabigsteptowardstransparencyandaccountability.However,theRTIitselfsuffersfrompoormonitoringofitsimplementation.ThegovernmentofficialsareoftenreluctanttoshareinformationwhilecommonpeoplehavealowlevelofawarenessregardingprovisionsoftheRTI.IthasbeenfoundthatthereisoftenunnecessarydelayintheexecutionofRTIapplicationsduetolackofmotivationonthepartofgovernmentofficials.Unsurprisingly,ithasbeenobservedthatinIndia,inordertofixtheprocesses,appropriatechangesfirstneedtobeeffectedatinstitutionallevelstofixtheinstitutionsthatdesigntheprocesses.11
Goodgovernancedependsonprocessesandincentivestonotonlydesigngoodpolicies,butmoreimportantly
oninstitutionstoimplementthesepoliciesefficientlyandwithefficientutilizationofresources.Transparencyandaccountabilityinthedeliveryofpublicservicescanbeimplementedthroughinvolvementoflocalself-governments,community,andcivilsocietygroups.
Althoughgovernanceislargelythemandateofademocraticallyelectedgovernment,privatesectorexpertisecanbeleveragedashasbeendoneinthecaseoftheUniqueIdentificationNumber(UID)project,whereinthecentralgovernmentisimplementingtheprojectundertheleadershipofNandanNilekani,whosecareerwaslargelyintheprivatesector.Utilizingtheknowledgeandexpertiseofprivatesectorleadersinothergovernancemechanisms,suchasthePlanningCommission,publicdistributionsystem,andruralemploymentcanhelpdeliverbettergovernanceatboth,thecentralandthestatelevels.Privatesectorcanplayabiggerroleinimplementingtheseinitiativesinthee-governancespace.Forinstance,Mindtree,aBangalore-basedITcompany,isworkingondevelopingandmaintainingapplicationsforrolloutoftheUIDprogram.
AnotherexampleofgoodgovernanceisprovidedbytheNorthAmericanElectricReliabilityCorporation(NERC),whichbeganasaprivate,voluntaryorganizationestablishedbythecompaniesthatsupplyelectricpowertotheelectricalgridoftheUnitedStatesandCanada.Inanefforttoguardagainstthecausesandeffectsofregionalblackoutsandothermajorservicedisruptionsthatareharmfultotheirbusiness,thesuppliersagreedonanenforceablesetofstandardsrelatedtotheiroperationswithNERChavingthelegalauthoritytoenforcecompliancewithNERCreliabilitystandards.
Effectivegovernancewillhelpingeneratingimprovedservicedeliverywithbetteroutreachtothepoor.Thiswillenhancethechancesofthepoormovingoutofpovertyandalsoreducediscriminationinaccesstobasicpublicservices,suchaseducationandhealthcareandtherebypromoteinclusivegrowth.
Governance
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“Corruption manifests itself in many forms. In some instances, funds meant for schemes for the welfare of the common man end up in the pocket of government officials. In some other instances, government discretion is used to favour a selected few. There are also cases where government contracts are wrongfully awarded to the wrong people. We cannot let such activities continue unchecked. I believe that there is no single big step which we can take to eradicate corruption. In fact, we will have to act simultaneously on many fronts. We will have to improve our justice delivery system.” —Dr.ManmohanSingh,onIndia’s65thIndependenceDay,15thAug2011
Inclusive Growth AChallengingOpportunity11
Bettereducationisoftenanimportantmeanstobetterjobs,increasedincome,andabetterqualityoflife.Toillustrate,JapaneseinvestmentsineducationaftertheSecondWorldWarhelpedittransformfromadefeatednationtoanindustrialnationthatcreatedinnovativeproducts,increasedemployment,andprovidedinclusivegrowthtoitscitizens.
Overthepastfewdecades,theglobaleconomyhasshiftedfrombeingmanufacturing-centrictoaknowledgedrivenone.Theservicessectorcontributionofworldproductionhasgrownfromaround52%in1970to68%in2005.12India’sincreasingintegrationwiththeglobaleconomyandthegrowthofsectorssuchasIT,BPO,andfinancialserviceshaveledtoanincreaseddemandforknowledgeworkers.AlthoughIndiacurrentlyhasaround480universitiesand22,000colleges13,inthenext10years,Indiawillneed700newuniversitiesand35,000newcolleges.ThepopulationofIndia,cuttingacrossregions,languages,andsocioeconomicstatus,hasbeguntoappreciatethevalueofeducationinaglobaleconomyanddemonstratedanincreasedwillingnesstopayforqualityeducation.AnecdotalevidencesaboundofdomestichelpersusingtheirearningstosendtheirchildrentoEnglishmediumschoolsinthehopeofabetterfuture.
“Indianeedstowidenitseducationbaseradically,”14saidProf.AmartyaSenafterreceivinganhonorarydegreeofDoctorofLiteraturefromtheNationalUniversityofEducationalPlanningandAdministrationatNewDelhiinJuly2011.
However,asmentionedbyProf.Sen,thereisalotthatremainstobedone.TheprimaryeducationsectorinIndiaismarkedbyvariations—theSeventhAllIndia
EducationSurveypublishedbytheNationalCouncilofEducationalResearchandTrainingin2006foundthatalthough80%ofchildreninthe5-14agerangewereenrolledintoschools,theratedroppedtolessthan50%forsecondaryschools.Nearly15%ofgovernmentschoolsaresingle-teacherschools.InsomestatessuchasBiharandRajasthan,girlswereonlyhalfaslikelytobeenrolledinsecondaryschoolsasboys.However,instatessuchasKeralaandTamilNadu,thesecondaryeducationenrolmentratesarepro-female.
ThegovernmenthaspassedtheRighttoEducationAct,whichmakeseducationafundamentalrightforallchildrenintheagegroupof6-14,butforthegoalof
Education
The government can provide the physical infrastructure in terms of classrooms, equipment, etc. (for example, existing infrastructure at the various industrial training institutes can be upgraded and used) and the private sector can create training material, train teachers, determine certification criteria, and recruit certified students.
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completeliteracytobeachieved,greaterinvestmentisneededinthephysicalandintellectualinfrastructure.Themiddaymealschemeenactedbymanystategovernments,withsupportfromvariousNGOsandtheprivatesectorcompanies,addressesafundamentalproblemthathasplaguedtheeducationsector—increasingstudentattendanceanddecreasingdropoutrates.However,otherproblemscontinuetopersist.Reportsofteacherabsenteeism,genderinequalityinenrolment,andinadequateinfrastructure,suchascrowdedclassroomsarenotuncommon.Forexample,theRighttoEducationActmandatesamaximumpupil-to-teacherratioof30:1,butaccordingtotheNationalUniversityofEducationPlanningandAdministration,over12%ofthenation’sschoolshadapupil-to-teacherratioof60ormorein2010.Correctingthisimbalancerequiresinvestinginteachertraininginstitutes,increasingthenumberoffull-timeteachersthroughbetterincentives,andintheinterimbridgingthegapthroughinnovativemodels,suchaspara-teachersorcontractteachersforshortdurations.
Indiacanleveragetheexperienceandsuccessthatothercountrieshavehadinaddressingsuchchallengesthroughinnovativesolutions.Toillustrate,TheGambiastartedaninitiativein2001tomakeschoolsmoregirlfriendly.Thisinitiativeincludedtheprovisionofgirl’stoiletsandwatersothatgirlscouldmanagetheirpersonalhygienebetter.Inaddition,thegovernmenthadsetuptheScholarshipFundTrustforGirlssothatallcostsrequiredforeducatingagirlchildaremet.Finally,inareaswheregirls’enrolmentwaslow,acampaignwasconductedtoeducatesociety,andaddressculturalfactorsthatresultingirlsbeingdeniededucation.Also,tofullyutilizeexistingclassroomcapacitywhilenewclassroomswerebeingbuilt,schoolsoperatedinshiftsonsixdaysoftheweek.15
MajorityofIndianprivateeducationrevenuesaccruefromformaleducationinstitutions.Theprivatesectorhasapresenceacrosstheformaleducationspectrumrangingfrompreschoolstohighereducationinstitutions.Whileprivateeducationisconsideredsuperiortopubliceducationintermsofitsquality,itisalsomoreexpensiveandlargelyrestrictedtourbanandsemi-urbanareasandispredominantlyinthekindergartenthrough12thstandard.16Atthetertiarylevel,ofthe~600universitiesinIndia,lessthanone-fifthareintheprivatesector.17However,itisestimatedthatover800newuniversitieswillbeaddedinIndiainthecomingdecade.18Theprivatesectorcanplayasignificantrolein
establishingnewuniversitiesgivenitsaccesstocapitalandphysicalinfrastructure,providedthattheregulatoryregimeforsettingupandoperatinguniversitiesisreformedtoenablefasterapprovalsandaccreditations.Infosys,forexample,hassetupafacilityinMysore,whichiscapableoftraining13,500employeesatatimeinaresidentialprogramwhichlastsaroundfourmonths.Asoneofitsco-foundersNandanNilekaninoted,itisprobably“theworld’slargestcorporateuniversity”.19ShivNadar,thechairmanofHCLTechnologiesLtd.,hassetupauniversity,whichaimstoprovidemultidisciplinaryandworldclasshighereducation.Itwillbeginoperationsthisyearandcanaccommodate4000studentsuponcompletionofthefirstphaseofcampusdevelopmentitself.IntheUnitedStates,whichhasanumberofthetopuniversitiesintheworld,everystatehasabodywhichisdesignedtopromotecollaborationbetweenhighereducationinstitutions.Someofthetopinstitutes,suchasHarvard,MIT,andStanfordareallprivateinstitutes.
Inadditiontoincreasedprivatesectorparticipationinformaleducation,thereexistssignificantpotentialatthetertiarylevelintheformofsettingupadditionalvocationaltrainingcoursesandinstitutes.Indiafacesashortageofskilledlabourinsunrisesectors,suchasretail,construction,andhospitality.Thegovernmentcanprovidethephysicalinfrastructureintermsofclassrooms,equipment,etc.(forexample,existinginfrastructureatthevariousindustrialtraininginstitutescanbeupgradedandused)andtheprivatesectorcancreatetrainingmaterial,trainteachers,determinecertificationcriteria,andrecruitcertifiedstudents.Suchanarrangementcanreduceindustrytrainingcostsandprovideindustrieswithalargerpoolofskilled,productive,andemployableresources.
Thailand,forexample,hasaDualVocationalTrainingprogrammodelledaftertheGermanmodelinwhichthestudentsworkastemporaryemployeesevenduringthecourseoftheprogramandarecompensatedfortheircontributionstowardsthecompany’stoplineandbottomline.Thisenablesstudentstogethands-on,relevantworkexperienceduringtheircourseasagainstinternshipsinwhichstudentsmaygetassignedtoirrelevantjobs.InThailand’sDVTprogram,companiesalsoofferpermanentemploymenttostudentsupongraduation.20
Thus,meetingthechallengesofuniversaleducationinpursuitofinclusivegrowthwillrequireaconcertedeffortfromboth,governmentandindustry.
Inclusive Growth AChallengingOpportunity13
EconomicgrowthandhigherincomeshaveledtoanacceleratingdemandforenergyandnaturalresourcesinIndiabutIndia’sgenerationcapacityandeffectiveutilizationiscurrentlyinadequate.
Theenergysectorsuffersduetoveryhighdistributionlossesandtheft.Lackofcompetitioninmanycriticalsegmentsoftheindustry,especiallydistribution,resultsininefficienciesastheexistingmonopoliesofstate-owneddistributioncontinuetounderperform.Thisresultsinunreliablepowersupply,whichhampersagricultureandindustryandalsopenalizeshouseholdswhilecausinglargewelfarelosses.Ruralelectrificationisanimportanttooltobringaboutinclusivegrowthbymakingelectricityavailabletofarmersandinruralareas.Electricitysupplyisthusoneofthecrucialinputsinthecontextofinclusion.
Reformssuchasstrengtheningofregulations,improvingdistribution,openingbulksupplytocompetition,andrevisionoftariffstomoreeconomiclevelsareessentialforrealizinginclusivegrowth.
Providingincentivestoprivatesectorcompaniestosetupnewplantsorfactoriesinbackwardregionscancatalysethedevelopmentthere.However,itisessential
forthegovernmenttoensurethattherightsofanytribalinhabitants,forestdwellers,andlocalsaresafeguardedwhentheseprojectsareimplemented.Thegovernmentcanincludeclausestoguaranteereservationofjobsforlocalsinthecontractthatitsignswiththeprivatecompanies.Itcanalsoincludeconditionsinthecontractforpromotionofancillaryanddownstreamindustries,whichwouldleadtofurthercreationofjobsanddevelopmentofpublicinfrastructureintheregiontherebypromotinginclusivegrowth.
ResourceendowmentsarenotaconstraintformostofthepoorIndianstatesastheyarerichlyendowedwithmineralandforestresources.ThestatesofMP,Bihar,andOrissahavesubstantialcoalandironoredeposits,whileRajasthanhassubstantialzinc,phosphorite,andcopperdeposits.IntheNorth-East,Assamhaspetroleumandnaturalgas.Jharkhandalonehas33%ofthecountry’smineralreserves.21Itmightseemparadoxicalthatahighlevelofmineralpresenceisoftencorrelatedwithweakereconomicperformance,lowergrowthrates,andinferiordevelopmentoutcomes.Thisresourcecursecanoftenbeseeninregionsthataredependentonresourcesextractedfromanarrowgeographicbaseandtheseregionsoftenperformpoorlyacrossarangeofdevelopmentindicators.
Energy and Resources
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LessonsfromsuccessfulminingregionsincountriessuchasAustraliaandNorwayhaveshownthatinordertoavoidthisresourcecurse,Indianeedstoimplementreforms,whichpursueabroad-basedgrowthstrategybackedbystronginstitutionswhilealsofocusingonsequencingofthereformsanddevelopments.22
Mininginisolationisunlikelytogeneratebroad-basedgrowthanddevelopment.Theminingsuccessstoriesareineconomieswheremineralextractionhasspurredorcomplementeddevelopmentinothersectorsoftheeconomy.Butthiscanonlyoccurifthereisaninvestmentfriendlyclimatethatpromoteslinkageswithupstreamordownstreamindustriesorcreatesinvestmentopportunitiesinothersectors.Theseinturnaidingeneratingjobsandfuellinggrowththatspreadthebenefitsofmining.
Stronginstitutionsareneededtopreventthecapturingofbenefitsbyaselectfewandpromoteinvestment.Institutionsarealsonecessarytoaddressthemanyandvariedenvironmentalandsocialcostsofmineralextractionthatcanimpedegrowth.
Also,thesequencingofthesereformsiscrucialassimilardevelopmentscanproducepositiveornegative
outcomesdependingonwhetherstronggoverninginstitutionsarepresent.Withinstitutionalstrengtheningandpropersequencing,thesereformsprovideanopportunityforincreasinginclusioninthelaggingstatesusingamineralintensivegrowthstrategy.
Finally,theprivatesectorcansignificantlycontributeininitiativesthataddresstheissuesofgreenandsustainableenergy.Forexample,theBerkeley-IndiaJointLeadershiponEnergyandtheEnvironmentisapartnershipbetweenthegovernment,privatesector,andeducationalinstitutionsofU.S.andIndiatoassistbothcountriesadoptpathwaysandapproachesforreducingtheemissionsofgreenhousegaseswhilepursuingsustainableeconomicdevelopment.NERC’spowersupplyintheU.S.andGE’sEcomaginationcampaignwhichpromisedtodoublethecompany’sinvestmentsincleanenergy23areadditionalexamplesofrolesthatcanbeplayedbytheprivatesector.SimilarinitiativesareneededtoharnessIndia’spotential,suchassolarpower,giventhegeographiclocationofthecountry.Awell-plannedenergydevelopmentandutilizationroadmapbackedbyeffectiveexecutionandprogrammanagementcanenableIndiatobridgetheenergygapandenableinclusivegrowthwithoutcompromisingontheenvironment.
Reforms such as strengthening of regulations, improving distribution, opening bulk supply to competition, and revision of tariffs to more economic levels are essential for realizing inclusive growth.
Inclusive Growth AChallengingOpportunity15
Undoubtedly,thetechnologyandtelecomsectorsinIndiahaveexperiencedtremendoussuccess.ThepastdecadehasseenanexplosioninthegrowthofcommunicationsconnectivityandthetechnologyindustryinIndia.AsofMarch2011,Indiahasatele-densityof70%(urbantele-densityexceeds150%,whereasruraltele-densityis~33%)24andtheITindustrycontributesto~6%oftheGDP.TheoutsourcingindustryisexpectedtogrowtoUSD225billionoverthenextdecade.25Withover25lakhpeopleemployeddirectlyandindirectlybytheITindustry,itisoneofthelargestjobcreatorsintheIndianeconomy.Alargeuntappeddomesticmarket,acriticalmassoftechnology-savvyprofessionals,andarobustecosystemwithproveninnovationstailoredfortheIndianmarketarealluniqueassetsthatcanbeleveragedtodriveinclusivegrowthinthecountry.
Thereareover800millionwirelesssubscribersinIndiatoday26andthecountryhasoneofthelowesttariffsintheworld.Ruralcommunitiescannowaccessup-to-dateinformationataffordablepricesfacilitatedthroughinitiativessuchasITC’sE-Choupal.E-Choupalimprovestheearningcapabilityofandminimizesriskforsmallfarmersbyprovidingthemwithrelevantandtimelyinformationrelatedtoweather,cropprices,bestpractices,etc.,throughamobilephone.Similarmodelscanhelpworkersinotherindustriesthatdominatetheruraleconomy,suchasfisheries,handicrafts,andtextiles.
TheubiquitousmobilephonecanalsoserveasanInternetaccessdeviceandbeusedtodeliverotherbasicservices,suchaslandadministrationrecords,mobilecouponsforaccessingpublicdistributionsystems,etc.Suchinitiativeswouldhelpsocialbenefitsreachtheintendedbeneficiariesandreducesystemiccorruption.Further,amobilephonecanalsoprovideaccesstoinformationandexpertiseandminimizetheimpactofgeographicaldistanceorlocation.Forexample,theSouthAfricanDokozasystemusescost-effectiveSMSforinformationmanagement,transactionalexchange,andpersonalcommunicationforuseinrollingouttreatmentsrelatedtoAIDSandtuberculosisacrossthewholecountry.27Thus,themobileecosystemcanbeusedtoimprovequalityoflifebyhelpingimproveservicessuchasprimaryhealthcare.
Withtherolloutof3Gandthedecliningpricesofhandsetswithincreasingfeatures,everlargernumberof
peoplewillhavetheabilitytoaccessandconsumericherinformation.Capabilitiesof3Gsuchasonlinevideostreaming,videocalling,andfasterdownloadscanbeutilizedtoprovidevalue-addedservicessuchasremoteeducation.
Inanefforttoprovidetelecomservicesataffordableprices,multiplemeasures,suchasMobileNumberPortability,bringingmorenumberofmobileoperatorstoinfusecompetitiveness,settingupofTelecomCentresofExcellenceandtheCoordinationCentreinPPPmodelshavebeentakenoverthelastfewyears.TofurthergiveimpetustothetelecominfrastructureinIndia,thePPPinitiativesneedtojointlyaddresscapabilitybuildingforcreatingmarket-readytalentpool,continuoustechnologyadaptationtomeetIndia-specificeconomicandsocialdevelopmentneeds,fasterdeploymentofservices,andeffectivelybridgingtherural-urbandigitaldivide.
Onthetechnologyfront,theIndiantechnologysectorhasprovidedjobs,increasedincomes,andimprovedthelivelihoodsforthousandsofpeople.Althoughthecountrywasinitiallyattractiveduetoitslow-cost,high-qualitytalent,thiscostarbitragehassincebeendiminishingduetowagepressuresandthesectorwitnessinghighemployeeturnover.TheIndiantechnologysectorisnowincreasinglycompetingwithotheroutsourcing/offshoringdestinationcountriessuchasVietnamandPhilippines,especiallyinrelativelylow-skillservices,suchasvoice-basedcallcentresanddataentryoperations.28Someofthelostadvantagescanberegainedbyleveraginghigh-speedwirelessInternetaccessibilitytosetupruralorsemi-urbanBPOs.Inadditiontoloweringcosts,providingjobs,andincreasingincomesinthetier2and3cities,suchamovewillalsohelpstemthemigrationfromruralareastourbanIndia,whichiscausingsignificantpressureonurbaninfrastructureandlivingstandards.29Further,thesettingupofindustriesintier2and3citiescoupledwithincreaseddisposableincomeofthelocalpopulationwillhavecascadingeffectsandhelpthesettingupandgrowthofsecondaryservices,suchasfoodcateringandlanguagetutorialsinthosecities.
Hence,providingeverycitizenwithaccesstoinformationandharnessingtechnologytoinnovativelydeliverserviceswithintheIndiancontextwillbethekeytodrivinginclusivegrowthinanincreasinglydigitalworld.
Telecom and Technology
16
Investmentininfrastructuredrivesthegrowthofacountry’seconomy.In1980,IndiahadagreaterinvestmentandinfrastructurebasethanChina,buttoday,Chinaisaheadinphysicalinfrastructureavailability,quality,andquantity.30India’spopulation,availabilityofnaturalresources,andlowcostbasemakeitattractiveasamanufacturingdestinationandthemanufacturingsectorcansubsequentlydrivegrowthinjobsandincomes.However,formanufacturingtobecompetitiveandsustainablerequiresanefficientsupplychainandphysicalinfrastructureforprocurementofrawmaterials,storageofwork-in-processandfinishedgoods,andspeedytransportationtocustomersbasedondemand.AspointedoutbythePlanningCommission—“Goodqualityinfrastructureisthemostcriticalphysicalrequirementforattainingfastergrowthinacompetitiveworldandalsoforensuringinvestmentinbackwardregions.”31
ThePrimeMinisterofIndia,Dr.ManmohanSinghhassaidthatIndianeedstoinvestoverUSD1trillionininfrastructureby2017ifthecountryistoachieve10%annualgrowthrates.32TheEleventhFiveYearPlanenvisagesimproving~26,000kilometresofarterialroutes,thedevelopmentofthegoldenquadrilateral,theNorth-South-East-Westcorridor,twodedicatedfreightcorridors,andtheupgradationandexpansionofover70airports.
However,fundingnewinfrastructureprojectswilladdressonlyapartoftheissue.Inordertopromoteinclusivegrowth,systemicreformsareneededtofixtheinstitutionsandtheprocessesusedtocreateinfrastructure.Currently,thelandacquisitionprocessforpublicprojectsisbureaucraticanddoesnotadequatelyaddresstherehabilitationandcompensationmechanismsforthedispossessedtherebyleadingtoill-willandpublicprotests.Equitablepoliciesthatallow
fortimelyacquisitioncoupledwiththeabilitytoresolveissuesamicablyandwithindefinedtimelinesareneeded.
Thekeycomponentstophysicalinfrastructurearetransportationconnectivityandwarehousingstorage.2%ofIndia’sroads(theNationalHighways)carryover40%oftheroadtransport.ThepoorconditionofIndia’sroadsreducestheaveragespeedoftrucksto40kmphascomparedto80kmphindevelopedeconomies.Therailwayroutenetworkexpansionhasbeenslowatanannualgrowthrateof0.3%andmanywagonsemployobsoletetechnologyandhavenotbeenupgradedindecades.Internationalairportsindevelopedcountrieshandle~75take-offsandlandingsperhour,whereastheMumbaiinternationalairportcanhandle~35take-offsandlandingsperhour.33Over90%ofthewarehousingcapacityisintheunorganizedsector.Mostwarehousesaremerelycoveredstoragespaceswithlowcapacities,outdatedtechnologies,andlackfacilities,suchascoldstorage,verticalspaceutilization,andadvancedwarehousemanagementsystems.34
Improvingtransportationconnectivityrequiresinvestmentsinboth,urbanaswellasruralinfrastructure.WhileportsandairportsconnectIndiatotherestoftheworld,theroadsandrailwaysarethebackboneforconnectingvariouspartsofIndia,specificallyruralIndiatourbanIndia.Fundingcanbeobtainedthroughanumberofmeans—governmentinvestment,public-privatepartnerships,andprivateinvestments.Indiahasstillnotfullyexploitedthepotentialofinsuranceandpensionfundsintheinfrastructuresector.35Inadditiontofunding,apropermonitoringmechanismisneededtomonitorprojectssothattheydonotoverrunbudgetsandschedules,leakagesareminimized,andthattheassetscreatedareofinternationalstandards.InnovativemodelssuchastheuseoftheNationalRuralEmploymentGuaranteeAct(NREGA)tocreate
Infrastructure
Funding new infrastructure projects will address only a part of the issue. In order to promote inclusive growth, systemic reforms are needed to fix the institutions and the processes used to create infrastructure.
Inclusive Growth AChallengingOpportunity17
roadnetworksandexpandrailwaynetworkswhilesimultaneouslycreatingjobscanbeusedtospeedupthepaceofinfrastructureassetcreation.
Globally,countriessuchasMalaysiahaveformulatedpoliciesthatencourageprivatesectorinvestmentininfrastructureandinrecentyears,theprivatesectorinvestmentininfrastructurehasexceededthatofthepublicsector.Manyofthehighways,expressways,andurbanroadshavebeenbuiltbytheprivatesectorastollroads.
ThesuccessfulcompletionoftheDelhiMetroonbudgetandalmostthreeyearsaheadofscheduleisproofthatifinstitutionaldelaysareminimizedandpowerisdevolvedappropriately,Indiahasthecapabilitytoexecutelargeinfrastructureprojectsefficiently.36
Investinginwarehousingfacilitieswillbenefitnotonlymanufacturingindustriesbutwillalsoserveinfurtheringsocialwelfaregoals.In2010,thegovernmentofIndiaestimatedthatoverRs.50,000croreworthoffooditemsiswastedeveryyearduetotheunavailabilityorinadequacyofstoragefacilities.37Creatingcoldstoragecapacityforperishablesbyleveragingtechnologycanhelpreducewastageandtherebydecreasefoodprices
whileincreasingthenation’sfoodsecurity.Theprivatesector’saccesstocapital,technology,andprocessexpertisecanbeharnessedusingthePPPmodelinbuildingandoperatingofwarehouses.
Likeinmanyothercountries,urbanization—themovementofpeoplefromruralareastosemi-urbanandfromsemi-urbantourbaninsearchofjobsandabetterqualityoflife—isagrowingphenomenoninIndia.By2030,Indiaisexpectedtohave41%ofitspopulationlivingincitiesandtowns.38Therefore,underinvestmentininfrastructurecreation,costoverrunsofprojects,andpoorqualityofphysicalinfrastructureareriskstotheIndianeconomicgrowthstoryandtoensuringinclusivegrowth.WhileboththepublicandtheprivatesectorsareawareofthekeyshortcomingspresentinIndia’sinfrastructure,theapproachtowardsaddressingtheseshortcomingsneedtobemoreformalized.Articulatingsystematizedreformsacrosstheinfrastructuredevelopmentlifecycle—fromconceptualizingtoplanningstagetocreatingprocessesforinfrastructuredevelopmentandfinalexecution,canhelpachievethemuchanticipatedresultsinIndia’sinfrastructuredevelopmentstory.
18
ThehealthcareindustryinIndiapromisestobeoneofthefastgrowingonesandisexpectedtobeaUSD280billionindustryby2020.39Thecountryhasworld-classhospitals,highlyqualifiedmedicalpersonnel,andisgraduallyemergingasapreferreddestinationformedicaltourismforcitizensofthedevelopedworld.However,theactualdeliveryofhealthcareservicesisinadequateforalargesectionofthelocalpopulation.Indiacomparespoorlytootherdevelopingcountriesonparameters,suchashospitalbeddensity,physiciandensity,numberofdoctorsgraduatingeveryyearfromIndianuniversities,andpublicexpenditureonhealthcare.40Also,thelowpenetrationofhealthinsurance(only~15%ofthepopulationhasanyformofhealthinsurance41)impliesthataseriousillnessorhospitalizationcausessignificanteconomichardshiptomanysectionsofsociety,especiallytheurbanpoorandtheruralpopulation.Inthecontextofhealthcare,inclusivegrowthimpliesthathealthcareresourcesareallocatedequitablysuchthatthebenefitsaresharedbyallsegmentsofthesociety.
Today,healthcareisnoteasilyavailabletoallsectionsoftheIndiansociety.Aruralpersonseekinghealthcarehastotravel~10kmswhichtakesanentireday(andconsequentlyaday’searnings)duetopoorphysicalconnectivity.Suchsituationscanhavedireconsequencesduringmedicalemergencies.Thelackofinfrastructure,poormonetarycompensation,andsocialprejudicesresultindoctorsbeingreluctanttopracticeinruralareasandtherebyfurtherreducinghealthcareavailability.Whileitismandatedforallmedicalstudentstospendoneyearinruralareasaspartoftheirinternship,makinghealthcareuniversallyavailablerequiresmoreefforts.Someprivatehospitalshavebegunbysettinguphealthcarefacilitiesintier2and3citiesusingbusinessmodelswhichlowercostandconsequently,allowthemtooperateatlowerpricepointsthanthoseinmetros.Privateplayersareexperimentinginstrikingabalancebetweenprojectassets,location,investmentamount,andpricingtodeliverqualityhealthcareinnonurbanareas.
Intheabsenceofinsurance,almostthree-fourthsofallhealthcareexpenditureisbornebytheconsumer.Healthcarecostsarerisinggiventhedemand-supplymismatchinavailabilityofservices.Tomakehealthcaremoreaffordable,allstakeholdersarerequiredtocollectivelyworktowardsreducingthecostsofhealthcareandensuringthatindividualshavethe
purchasingabilitythroughincreasedhealthinsurancecoverage.CertaingovernmenthealthinsuranceschemessuchastheYeshaswinischeme(Karnataka)haveseensuccessinincreasingcoverageandprovidingaffordablehealthcaretononurbanpopulations.42However,thereremainssignificantuntappedpotentialinaspects,suchasthesettingupofno-frillshospitals,frugalinnovationinmedicaltechnologies,drugdevelopment,andleveragingeconomiesofscaletoreducecosts.
Thedisparityinqualityofhealthcareservicesprovidedatprivatehospitalsvis-à-visgovernmenthospitalsislarge.Theunderlyingfactorsforsuchdisparityarethelackofcompetition,poorinfrastructure,andlackofaccountabilityandmonitoringmechanisms.Inanefforttoaddressthiseffectively,theprivateandpublicsectorneedtopartnerininitiativestowardspromoting
Healthcare
Private players are experimenting in striking a balance between project assets, location, investment amount, and pricing to deliver quality healthcare in nonurban areas. Figure 3: Number of hospital beds (per 1000 population)
9.7
4.1
2.4
0.9
Russia China Brazil India
Source:WHOHealthStatistics2011,DeloitteAnalysis
Inclusive Growth AChallengingOpportunity19
“A multi-pronged strategy involving various stakeholders is necessary. Both public and private sectors need to work in tandem to make healthcare available, accessible, and affordable to all.” —SheilaDikshit,ChiefMinisterofDelhi
20
awarenessanduseofhealthcarefacilities,upgradingskillsforhealthcaredeliveryprofessionals,andincreasingtheuseoftechnology(suchastelemedicine)indeliveringhealthcareservices.SomestatessuchasGujaratandTamilNaduhavestartedaccreditingtheirpublichealthcarefacilities,suchashospitals,labs,andbloodbanks.Thismodelshouldbeimplementednation-wideandthegovernment,inassociationwithreputedmedicalresearchinstitutionsshoulddevelopconsistent,reliable,andeasilyunderstoodaccreditationnorms.
TheprivatesectorcanalsoplayalargerroleinenablingtheweakersectionstoaffordandaccesshealthcarebydevelopingmicrohealthinsuranceproductsandrollingoutcashlessadmissiontohospitalsinruralIndia.AsimilarinitiativealreadyexistsinKenyathroughtheCooperativeInsuranceCompanyofKenya,whichmarketsitsinsuranceproductsthroughmicrofinanceinstitutions.Theseinstitutions,inturn,enablethelow-incomecitizenstomakeannualpremiumpaymentsthroughloanswhicharetoberepaidmonthly.
GivenIndia’spopulationandregionalvariations,isolatedorsporadicinnovationswillnotensureinclusivehealthcare.Fordrivingsustainablehealthcaredevelopment,itisimportanttoeffectivelyusetechnologyacrossallareasofthehealthcarevaluechainfrominformationcapturetodiagnosistorecoverymonitoring.Itisalsonecessarytocomplementtechnologyinnovationswithinvestmentsinthemedicalacademicinfrastructureintermsofquantityandqualityofmedicaleducationavailable.Moreover,theneedforthepublicandprivatesectortoworktogethercannotbeundermined.Whilethegovernmentbringsintherightlevelofplanningandinvestmentsrequiredforbroad-basedaccesstohealthcare,theprivatesectorparticipationincomplementingeffortstowardssettingupofthephysicalinfrastructure,creatingawareness,andensuringaccesstoqualityhealthcarefacilitiesisequallyimportant.
The private sector can also play a larger role in enabling the weaker sections to afford and access healthcare by developing micro health insurance products and rolling out cashless admission to hospitals in rural India.
Inclusive Growth AChallengingOpportunity21
Financial inclusion
Asocietycanbeconsideredfinanciallyinclusivewhenallsegmentsandstrataofsocietyhaveaccesstofinancialservicesandtimelyandadequatesourcesofformalcredit.Similartoaccesstoeducationandhealthcare,theaccesstofinanceisanimportantoneforallsegmentsofsociety,andespeciallytothepoorandmarginalizedsections,asitcanfacilitatethemtoekeoutasustainablelivingandalleviatethemfrompoverty.Forexample,thelawonexclusion(1998)inFranceunderscorestheindividual’srighttoabankaccount.Similarly,theCommunityReinvestmentActof1997intheUSAmandatesbankstooffercredittoallpopulationsegmentswithinitsareaofoperationandpreventsspecifictargetingoftherich.
Today,thebulkofIndia’spopulationlacksaccesstofinancialproductsandservices,suchassavingsaccounts,loans,insurance,pensionschemes,payments,etc.Bankingpenetrationisestimatedtobeonlyabout5%amongthelowerincomeclasses,andevenamongthemiddle-andhigh-incomeclassesthepenetrationisabout45%.43Mostofthepopulationbelongingtothelowerincomegroupsdoesnothaveaccesstoformalbankingandcredit.Thisleadstoaviciouscycleinwhichthevulnerableareforcedtoresorttoborrowingfrominformalsources(suchasmoneylenders)atusuriousratesofinterest.Thisnotonlyhamperstheirabilitytopaybackandgetdrawnintofurtherdebt,butalsotakesawayasubstantialportionoftheiralreadymeagreearnings.Thisdebttrapworsenspovertylevelsandcaseswherethedebtorhascommittedsuicidefearinganinabilitytopaydebtsarenotunheardof.
Realizingtheimportanceoffinancialinclusion,theReserveBankofIndiahaspushedforthesamethroughpolicymeasures.Recognizingthatprivatebankscanhaveanimportantroletoplayinincreasingbanking
penetration,inearlyJuly2011,theRBIissuedacircularmandatingallscheduledbankstoopenatleast25%oftheirnewbranchesinruralareas.Further,theRBIhasidentifiedover70,000villageswithpopulationsgreaterthan2,000thatarecurrentlyunservedbybanks.However,inadditiontoopeningnewbranchesincurrentlyunderservedareas,itisalsoimperativetoaddressotherfactorsthatimpairaccesstofinancialservices.
Theabilitytoaccesssmallamountsofcapitalthroughformalmicrofinanceloanshasenabledmanypeoplebelowthepovertylinetostartsuccessfulsmallenterprisesandworktheirwayoutofpoverty.GrameenBankinBangladeshpioneerednotonlymicrofinanceloansbutalsoplayedapartininclusivegrowththroughinitiatives,suchasfinancialliteracysessions,women’sempowermentthroughgrouploans,andbysettinggoalstoeliminatepovertyinareasofbranchoperation(measuredbybenchmarksrelatingtoaccesstofood,water,andsanitaryfacilities).ThemicrofinanceindustryhasprivatesectorparticipationinIndiabuthashadcontroversiesrecentlyrelatingtoconsumerprotectionandcorporategovernanceissues.TheMicrofinanceBillwhichisexpectedtobeintroducedinParliamentshortlyaimstobealegislationthataddressesthechallengesofthemicrofinanceindustryintermsofaregulatoryauthority,clientprotectionmeasures,andensuringthatmicrofinanceinvestorsdonotmakeexcessiveprofitsattheexpenseoftheborrowers.
Likeinmanyothersectors,technologycanbealeveller.Forexample,themobilephonecanactasasmartwalletaswellasatransactionalmedium.Thiscanbeusefulinremoteareaswheresettingupphysicalbankinginfrastructurewouldnotbefeasible.Similarly,paymentsfromsocialwelfareschemessuchasNREGAcanbe
The mobile phone can act as a smart wallet as well as a transactional medium. This can be useful in remote areas where setting up physical banking infrastructure would not be feasible.
22
madedirectlytosmartcardswithbiometricinformationsoastofacilitatemorepeopletohaveaccesstoandusebankingfacilities.
Theprivatesectorcanplayitspartinreducingthebarrierstoadoptionandaddressingsomeofinteractingfactorsthataffectfinancialinclusion.Mostimportantly,productsandservicesneedtobetailoredconsideringthesocioeconomicfabricofnonurbanIndia.Thiswouldimplydesigningnewproductsandservices.Giventhelackofasocialsecuritynet,innovationssuchasmicroinsuranceandmicrosystematicinvestmentplansforretirementcanbesuccessfulifdesignedandmarketedproperly.Othermonetaryaspectssuchasminimumbalanceandservicechargesonsavingsaccountswillneedtobetweakedappropriatelysothatservicesareaffordabletothetargetcustomersegmentandyetallowthefinancialintermediarytobeprofitable.
Removingotherbarrierstoadoptionwillalsoposeachallengethatneedstobeaddressedjointlybytheprivateandpublicsectorbanks.Giventheirlackoffamiliaritywithbanksandfinancialintermediaries,alargemajorityofthecurrentlyunbankedpopulationmightbehesitanttousesuchservices.Campaignstoeducatethepopulationaboutthebenefitsoffinancialinclusioncanhelpbringtheunbankedintotheformalbankingsystem.Tobeeffective,theprivatesectorcanpoolresourcesandconductcampaignsjointlysothatlargerareascanbecoveredtherebydrivinggreater
penetration.Equallyimportantwillbetodesignsimpleproceduresthatreducetransactionalcostsforthecustomer—noteverybodyinruralareaswillhavethedocumentation(suchasidentityprooforaddressproof)requiredtoopenanaccount.Otherbehaviouralfactorssuchasthelackofliteracyorcomfortwithonlyasingleregionallanguagemustbefactoredinwhiledevelopingmethodsthatmakeiteasyforsuchpeopletoaccesstheiraccountsorformalbankingchannels.
Recognizingtheimportanceofafinanciallyinclusivesociety,theRBIhasformulatedpoliciessuchasthemandateforbankstoofferno-frillsaccount,simplerKnowYourCustomernorms,andeasiercreditfacilities(suchastheGeneralCreditCardsscheme)whicharetailoredtowardsservingtheunbankedpopulationandincreasingbankingpenetration.Both,publicandprivatesectorfinancialinstitutionsneedtogiveafurtherimpetustodrivefinancialinclusionoverthecomingyears.
Inclusive Growth AChallengingOpportunity23
Business model innovation
In2010,lessthanone-fifthoftheIndianpopulationhadanaveragedailypercapitaincomegreaterthanUSD4.However,by2030,itisestimatedthatoverhalfoftheIndianpopulationwillhaveanaveragedailypercapitaincomegreaterthanUSD4.44Growthindisposableincomecoupledwithtechnologyinnovationsthatmakeiteasierforcompaniestoreachconsumersimpliesalargeandpotentiallyprofitablemarket.However,simplytransplantingproducts,services,orstrategiesfromthedevelopedworldorevenfromurbanIndiamaynotalwaysworkinalarge,developing,anddiversemarketsuchasIndia.Inclusivegrowthrequirescompaniestoinnovatetheirbusinessmodeltoprofitablyservethe“bottomofthepyramid”.Thisentailsunderstandingthespecificneedsofthevarioustargetcustomersegments,theirpreferences,purchasingpower,anddesigningsuitablecustomervaluepropositions.
SeveralexamplesofinnovationcanalreadybefoundintheIndiancontext.In2008,GodrejlaunchedtheChotuKool—asmaller,cheaper,portablerefrigeratorthatusedsignificantlyfewerpartsthanaregularrefrigerator.Insteadofusingtheconventionalcoolingtubesandrefrigerant,theChotuKoolwasdesignedtouseafanthatranefficientlyonevenerraticpowersupply,andwastargetedatthelowerincomeclasseswhotypicallyhavelessfoodforstoragethandothemiddleandupperclasses.Similarly,theadventofdual-SIMmobilephoneswasbasedonunderstandingthatmanymobilephonesubscribershavetwophones—oneforincomingcalls,andanotheronetomakeoutgoingcallsandtherebytakeadvantageofthecostdifferentialinprepaidplansofferedbydifferentmobileoperators.TheNano,acardesignedtobesoldatthepricepointofUSD2,500wastheresultofRatanTata’sinsightintothecustomerpsycheandneeds.Seeingafamilyoffourtravellingonascooter,hebelievedthatacarthatofferedbettersafety,comfort,andwasaffordablewouldbeacompellingvalueproposition.45DuringhisvisittoIndiain2010,theUSPresident,Mr.BarackObamaappreciatedtheKisaanSancharService(roughlytranslatedas“Farmers’NewsService”)providedthroughajointventurebetweenBhartiAirtel,IFFCO,andStarGlobal.TheKisaanSancharServiceleveragestechnologytoempowerfarmerswithrelevantandtimelyinformationtomakebetterdecisions.46
However,thereissufficientscopeforadditionalinnovativebusinessmodelsineverysector.Forexample,vaccinesandsurgeriesthatarelowcostwhilecomplyingwithinternationalqualityrequirementsareneededinthehealthcaresector.Theconvergenceoftelecommunications,media,andtechnologypresentsanumberofopportunitiestodriveinclusivegrowththroughnewproductsandservicessuchasremoteeducationandmobilebanking.
Akeytakeawayfromalltheaboveexamplesisthatboththepublicandtheprivateenterprisesneedarefreshedapproachtowardscreatingagenuineandinclusivevalueproposition—onethatfocuseson“getting-the-job-done”asagainstsimplyintroducingascaleddownorcheaperversionofanexistingproductorservice.Acookie-cutter“onesizefitsall”approachisunlikelytobesuccessfulincreatinginclusivegrowth.Tosucceed,companiesneedtodevelopacompellingcustomervalueproposition—provideaclearsolutiontoacustomerneed—whilecreatingvalueforthecustomerandthecompany.Leveragingexistingresources(technologyandpersonnel)andprocessescanhelpdesignnewproductsandservicesataffordablepricepoints.
Further,publicprivatepartnershipscantaketheformwhereinprivatesectorbringsaccesstoproducts,services,andcapitalandthepublicsector,givenitsbetterreachinthehinterlands,providessalesanddistributionsupport,withthejointobjectiveofeffectivelyservingabroadercustomerbasewithinnovativeproductsthathelpmeetcustomers’specificneeds.
Innovation,bydefinition,isrisky.Therehavebeenandwillcontinuetobeinnovationsthatwillnotsucceedasenvisaged.However,theprobabilityofsuccesscanbeincreasedifcompaniesreinventtheirbusinessmodelstoconsiderinclusivityasakeyfactoratthedesignstageitself.Innovativebusinessmodelsthatareinclusiveinnaturenotonlybenefitsocietyasawhole,butalsoserveasanewandprofitablerevenuestreamforenterprises.
24
Conclusion
Inordertoachieveinclusivegrowth,holisticandintegratedsolutionsareneededtofacilitaterapidandsustainablegrowth.ThetaskofbuildinganInclusiveIndiaforits1.2billionpeopleissolargeandcomplexthatitcannotbeaccomplishedbyeitherthegovernmentorbytheprivatesectorworkinginisolation.AchievinginclusivegrowthisnotonlytobeseenasapriorityinthePlanningCommission’sFiveYearPlans,butalsoasanequallysignificantopportunityforeveryenterpriseinthepublicandtheprivatesector.Today,‘Inclusion’forIndiaisn’tamerebuzzwordthatindividualsandenterprisestalkabout,butanimperativethatcallsforconcertedactiontowardsbringinginclusionineveryaspectofhowindividuals,publicandprivateenterprisesaswellasthegovernmentoperateandenvisagetogrow.
Focusofthegovernmentonbetterandmoreefficientdeliverymechanismstoimproveaccesstocurrentlybackwardregionsiscrucial.Ithasalreadybeenobservedthatmajorityofthelow-incomestateshaverichgeographicresources.However,duetopoorinfrastructure,theseregionsareoftencaughtinaviciouspovertycirclefromwhichtheyfinddifficulttobreakout.However,iftheseregionscantakealeafoutofexperiencesincountriessuchasAustraliaandtailoritforlocalneeds,theypresentagreateropportunityforitspeople.
IthasbeenarguedthatthedemographicdividendplayedaroleintheeconomicmiraclesofthefourEastAsianTigers—HongKong,Singapore,Korea,andTaiwan.47Indiahasastrategicopportunityasaresultofitsdemographicsdividend,itsentrepreneurs,itstechnologyprowess,itsdemocracy,andthelargeEnglish-speakingpopulation.However,thiswindowof
opportunitycouldbeshortandhenceitisimperativeforthegovernmenttotryandachieverapid,sustainable,andinclusivegrowth.
Privatesectorparticipationcanbringaccesstotalent,capital,processes,andtechnologyinnovationneededtodriveinclusivegrowth.Thechallengefortheprivatesectoristoincorporateinclusivenessinitscorporatephilosophyandtofacilitateitsleadersandbusinessmanagerstoactivelyparticipateandplaytheirroleinfosteringnewproducts,services,andbusinessmodelsthatenableamorewidespreadandequitablegrowthintheyearstocome.Additionally,theprivatesectormusttakeonalargerrolebyconsistentlyprovidingitsskills,suchasstructuredandgoal-orientedprocesses,effectiveprogrammanagement,efficientexecutionandmonitoringmechanisms,tothegovernmentandthepublicsectortowardstheunifiedgoalofachievingthemuchdesiredinclusioninIndia.
AsNandanNilekaninotesinhisbookImaginingIndia(2008):“Indianowstandsevenlybalanced,betweenourreluctancetochangeinthefaceofimmensechallengesandthepossibilitieswedohaveifwedotackletheseissueshead-on.Theconsequencesofthesetwochoicesareinextremes—inthelongtermwewilleitherbecomeacountrythatgreatlydisappointswhencomparedtoourpotentialoronethatbeatsallexpectations.”
Indiahasahugepotentialtobearolemodelforthiscenturyiftheeffortsattheinclusivegrowthbythegovernmentandprivatesectorsucceed.Theopportunitytoactisnow.
Inclusive Growth AChallengingOpportunity25
References
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26
Acknowledgements
Joydeep Datta GuptaChiefOperatingOfficerDeloitteandToucheConsultingIndiaPvt.LtdE-mail:[email protected]
Jeffrey L. SchwartzManagingDirectorHumanCapital,DeloitteConsultingIndia(P)LtdE-mail:[email protected]
Vikram LatawaSeniorManagerStrategyandOperationsConsultingE-mail:[email protected]
Pradyot AnandManagerStrategyandOperationsConsultingE-mail:[email protected]
Suman DubeyManagerStrategyandOperationsConsultingE-mail:[email protected]
Abhishek SinghSeniorConsultantStrategyandOperationsConsultingE-mail:[email protected]
Anupriya NayyarSeniorConsultantStrategyandOperationsConsultingE-mail:[email protected]
Inclusive Growth AChallengingOpportunity27
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