Answer: 

Introduction:

As per OECD, inclusive growth is economic growth that is distributed fairly across society and creates opportunities for all. In a market economy, the production of goods and services is directed by the laws of supply and demand and is driven by profit with no government intervention.

Enroll now for UPSC Online Course

Body:

Inclusive growth is difficult in a market economy because:

• Access to essential services: The profit-driven efficient utilization of market economy does not take into consideration the deprivations faced by the marginalized sections of the population leading to further socio-economic marginalization of the weaker sections.
  • Example: Displacement of people for setting up of industries makes the people deprived in every aspect of their life.
• No leverage for government: The absence of government intervention does not leave any substantial scope for the government to control the economy and spend on social welfare schemes.
• Income inequality: A distorted and GDP-focused approach promoted by the market economy hinders inclusive growth.
  • India’s top 1% owned more than 40.5% of its total wealth in 2021, according to a report by Oxfam. From 8.5% in 1991 to 2.8% in 2021, the lowest 50% ‘s share of the nation’s wealth has decreased steadily.
• Imbalanced: The market economy focuses on a particular type of product, sector and workforce and is concentrated in certain regions with favourable conditions.
• Example: Skilled workforce of Bengaluru is employed, while others in and around the city are excluded. The growth is also concentrated in cities.
• Unsustainable: The market economy is led by consumerism and it rarely seeks to be in line with a region’s natural environment. This makes the growth of a market economy non-inclusive as the future generation is deprived of all the natural resources.

Inclusive growth in a market economy is not possible without government intervention. Government can fill the gap where the private sector does not want to enter. For instance, the market economy provides employment to skilled workforce in the cities. The government introduced MGNREGA for unskilled workforce in rural areas thereby promoting inclusive growth.

Financial inclusion is an important component of the inclusive growth envisaged for the people of India.

Role of financial inclusion in promoting economic growth in India:

• Expand resource base: Financial inclusion contributes to economic development by fostering a culture of saving among a significant portion of the rural population and expanding the financial system’s resource base.
  • For instance, more than 43 billion beneficiaries have deposited money through PMJDY since it began, totalling Rs. 146,231 billion.
• Stimulate economic activity: Financial Inclusion facilitates access to credit and financial resources which can help promote the entrepreneurial spirit and increase productivity.
  • For instance, PM Mudra Yojana was aimed at this aspect. With the availability of capital, more MSMEs, start-ups, etc., can be established that can play a crucial role in economic growth.
• Financial Inclusion leads to conditions for greater economic growth: Technology like UPI helps in plugging leakages, increase savings avenue and thereby ensure greater integration with the formal financial services in the country. This promotes growth in the economy.
• Security: The availability of insurance and pension schemes ensures that people are not so worried about their future and thus are able to invest in economic growth.

Since the 11^th Five Year Plan, it has been clearly stated that economic growth must be inclusive in nature because for a country like India, economic growth means nothing unless it’s inclusive. The market economy of India gave us tremendous growth. While the government need not intervene in the way the market economy functions, it must act in order to ensure financial inclusion and make the growth inclusive.