 "Inclusive growth a global challenge: Sonal Varma at BS BFSI Summit 2023")
Inclusive growth is not a challenge limited to India but is global, Sonal Varma, chief economist for India and Asia ex-Japan at Nomura, said at the Business Standard BFSI Insight Summit 2023 in Mumbai on Monday. She said that the concept of inclusion is more broad-based than income inequality.
"In the last 10 years, the role of technological changes, globalisation and financialisation has increased inequality worldwide," she said in a panel discussion on "Is inclusive economic growth still a mirage?".
"We don't have just income but also access to health, education, entrepreneurial opportunity, and financial inclusion," she said, highlighting that India has performed well in some parameters like crop insurance, and health.
However, she said that in some sectors like employment and education, there is still work to do. "We do need private capital expenditure for the rural recovery to be sustainable."
Adding to this, Samiran Chakraborty, chief India economist at Citibank India, said that employment in urban India is not growing as fast as in the rural regions. Moreover, although employment has grown by 25 million in 2023, out of this, 23 million have been self-employed.
"They don't earn as much as normal wage workers," he said, highlighting that the average wage in India is Rs 20,000 per month but it's half for the self-employed.
He added that, generally, income inequality worsens when a country records a high growth rate.
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Stating that the income differential between North and East states, as compared to South and West ones, has doubled to $1,800 in the last 10 years, he said, "For India, managing its demographic dividend will be a challenge."
Abheek Barua, chief economist at HDFC Bank, said that the problem of uneven growth is two-fold. The first is in the process of growth. Another is in the employment elasticity.
"If you take a very long period, the output growth in India has not led to adequate job creation. It needs to be addressed," he said. He, however, added that India's welfare schemes are working better than in the past.
But the "process of growth and how to make it more employment-intensive is a long-term challenge", he said.
Aditi Nayar, chief economist at Icra, added that there is uneven demand in India as per household income. Richer households are consuming more luxury goods but not so rich households are consuming lower-end products.
"I don't think it's entirely gloom and doom for that part of the society. I see a lot of aspiration and consumption at that price point. At different price points, different sectors will thrive," she said.
Stating that India's domestic macros are well preserved, she added that the real per capita income in 10 states has grown by Rs 6,000. On the other hand, the income of other states has jumped by Rs 15,000 to Rs 20,000.
Sounding optimistic, Soumya Kanti Ghosh, group chief economic advisor of State Bank of India, said that in the last 10 years, per capita income inequality between larger and smaller states in India has narrowed.
"India is a large economy, there will be challenges. We need to accept that there have been structural reforms in the next 4-5 years and at some point in time, these numbers will reflect in the headline GDP numbers," he said.
Sajjid Chinoy, chief India economist at JP Morgan, added that the world is struggling with creating blue-collar jobs. In India, it is particularly important for the next 10-15 years.
"India's challenge is to make blue collar jobs, which is at the heart of compressing the inequality on how you get exports and manufacturing exports. Creating white-collar jobs is our revealed comparative advantage. The next 5-7 years are crucial," he said.
The economists at the session unanimously said that the global economy is facing difficulties and that there is no room for complacency in India.
"Building resilience is the main challenge for India," Sonal added.