Our Future Depends on Inclusive Growth Management Convention: Trivandrum Management Association February 04 – 05, 2011

Vinod Thomas Director-General and Senior Vice President

Independent Evaluation GroupWorld Bank Group

Spotlight on Inclusive Growth

New York Times Davos, Jan 27, 2011

“India is trying hard not to be forgotten at the World Economic Forum amid a focus on China. The South Asian country has brought the single biggest delegation to Davos, and advertisements with its ‘Inclusive Growth’ slogan could be seen not just in the conference center but on public buses in town.”

Indian posters at World Economic Forum

IMPORTANCE OF INCLUSIVENESS

What Is Inclusive Growth?

Inclusive growth signals a process by which economic growth is generated and distributed in ways that are broad-based, with the lower-income strata in society sharing in progress.

World Bank Lending and Inclusion?World Bank Lending by Sector for FY 2010

Sector Amount in US$ Billion

Energy and Mining $11

Economic Policy $10Financial and Private Sector Development $10

Transport $7

Education $4Agriculture and Rural Development $3

Health, Nutrition and Population $3

Urban Development $3

Social Protection $3

Water $2

Other $3

Top Five World Bank Borrowers in FY 2010

Country Amount in US$ Billion

India $9.3

Mexico $6.4

South Africa $3.8

Brazil $3.7

Turkey $3.0

Why Does Inclusion Matter?

► It helps reduce poverty sharply—Brazil, past vs. present

► It affects social stability and peace— Egypt, Mexico

► It contributes to growth – Korea, Japan in the 20th Century

► It may be essential for high growth to continue—China and India

Falling Poverty Rates in Brazil, India, and China

Brazil India

19811983

19851987

19891992

19951997

19992002

20042006

0

5

10

15

20

25

Brazil

Pove

rty

Head

coun

t ($1

.25

a da

y)

China

Source: World Bank PovCalNet Data

19811985

19901993

19951997

19992005

0

20

40

60

80

100

China Rural China Urban

Pove

rty

Head

coun

t ($1

.25

a da

y)

1977-8 1983 1987-8 1993-4 2004-50

20

40

60

80

100

India Rural India Urban

Pove

rty

Head

coun

t ($1

.25

a da

y)

Rising Inequality in India and China Versus Brazil

19771980

19831986

19891992

19951998

20012004

20070

10

20

30

40

50

60

70

Brazil China-Rural

Gini

(%)

Source: World Bank PovCalNet Data. Note: Zero signifies complete equality and 100 extreme inequality.

Increasing Concentration of Wealth in India

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

5

10

15

20

25

Perc

ent o

f GDP

Source: Forbe.com and World Development Indicators. Cited from M. Walton (2008).

Net worth of local Indian billionaires in relation to GDP

Kerala Is Different -- Or Is It?

► India: Imbalance between economic and social development, with the latter lagging behind

► Kerala: Imbalance in the opposite direction. With only half the level of per capita income of the richest state Goa, Kerala had the highest human development index.

Source: UNDP HDI data 2005.

ACTIONS FOR INCLUSIVENESS

1. Education and Skills

► Access to secondary and higher education remain crucial gaps for India.

► Relevance, quality, learning outcomes, and link to skills and jobs are vital for Kerala.

2. Labor and Employment

► Must link education, productivity, and jobs

► Protectionism, trade and domestic employment

► Labor market policies and greater labor mobility within India

3. Agriculture, Industry, and Services

► Confronting India’s urban-rural divide is essential to inclusion

► Kerala’s challenges in agricultural financing and productivity

► Kerala’s crisis in urban infrastructure, congestion, and garbage management

4. Corporate Structure and Finance

► Large corporations with global reach are essential.

► But they must be part of a competitive Indian economy.

► Vigorous entry of small, medium, and large businesses is needed

► Reform competition, judiciary, financial, and land policies.

5. Governance and Service Delivery

► We need a state that is accountable to citizens

► Central government over stretched

► Kerala’s example of decentralization —, but how to make it work to benefit citizens?

“We are trying to give a concrete shape to growth with a human

face or growth with social justice.”

Dr. Manmohan Singh, Prime Minister of India