WEF Report on Inclusive Growth and Development: China Versus India

WEF Report on Inclusive Growth and Development: China Versus India

Question : The WEF has released its maiden Inclusive Growth and Development Report recently. Discuss its implications for the two Asian emerging economies-India and China. Which nation fared better?

- World Economic Forum/WEF has released the maiden Inclusive Growth and Development report recently

- Report aims to understand how policy initiatives and institutional mechanisms can make growth socially inclusive without harming incentives to invest, save and work

India Specific Findings

- The report has found that though sustained economic growth has lifted many out of poverty, yet improvements in living standards have not moved in consonance with GDP growth or evenly distributed

- India ranked in the bottom half of 38 nations in terms of overall inclusive growth among the lower middle income countries

- India also ranked 37th of 38 in fiscal transfers, 32nd for tax code and 36 for social protection

- India was the last on the list(38th rank) in small business ownership category

- Though India fared better on business and political ethics, its overall place in the 2014-2015 Global Competitiveness Index ranked 71 of 144

- WEF found that a majority of countries like India are missing opportunities for reducing income inequality

- WEF has also said economic strategies need to be pro growth as well as pro labour

- Another area where India must improve its performance is asset building and entrepreneurship, especially small business ownership

- For business and political ethics, India ranked 12th while it was 11th on the final intermediation of real economy investment pillar

India Versus China

- The report covering 112 economies emphasised the need for social participation in furthering economic growth.

- Though India and China are the largest emerging economies in the world yet there is a considerable difference between the two in the WEF rankings

- Using 140 indicators including labour productivity, women’s pay, size of middle class and health care coverage, inclusive growth in each country including India and China was studied

- Survey used the Gini index indicating the higher the number, the more skewed the income distribution and the larger a fan between rich and poor.

- Gini index has a zero to 100 scale and WEF found India and China came in just above 50 on this index indicating income equality in both nations is the same

- But on other indicators, China was clearly at an advantage

- Research showed that most of China’s population is accessing education and healthcare and China has a much larger middle class

- Moreover, China’s economy is 4 times the size of India’s and India is 13 years behind China

- China was also categorize as a upper middle income economy while India was relegated to the status of lower middle income economy.

Facts and Stats

Other Findings of the Report

- There exists considerable diversity in attainment of inclusive growth across as well as within nations

- Trade off between social inclusion and economic growth cannot be made; one cannot exist without the other

- Larger fiscal transfers are not the primary or most effective option for enhancing socioeconomic inclusion though they do promote growth and competitiveness to some extent

- Policies and institutions for social inclusion are not restricted to high income countries

- Pro labour and pro business approach to growth is as important as zero effect, zero defect