[Model Answer QP2022 GS3]Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.

Inclusive growth is economic growth that is distributed fairly across society and creates opportunities for all.
Unless all sections of society benefit from faster and more economic growth, the social conditions in such countries can deteriorate and lead to violence and chaos. 
For instance,  mass uprisings like the Arab Spring and the Occupy Movements where the inequalities and the inequities of the capitalist system were out in full glare and hence, the bottom half decided to take matters into their own hands and express their resentment at the injustice of the top 1%.  Slogans such as we are the 99% were on display which were meant to symbolize the non-inclusive nature of growth across the world.

Market Economy increasing Inequality which puts our world at risk

1. Market Economies: In many OECD countries, inequalities are at their highest levels in 30 years and are widening and further rising due to the COVID-19 crisis. The top 10% of income earners take home over ten times more pay than the bottom 10%.
2. Inclusive growth goes beyond GDP: The 2008 financial crisis was a dramatic wake-up call. Growth as we know it doesn’t work for all and is putting everyone’s well being at risk. We need to develop new and improved models and focus on ensuring growth actually improves lives.
3. Investing Bias: Some social groups and territories, even in developed market economies, have been left out for decades and need support. These create  divides that threaten our future prosperity.

Inclusive Growth is possible under market economy provided these are taken care off:

  1. Giving everyone a stake in growth
    1. People would feel more motivated and involved if the benefits of economic growth were not allowed to flow into the pockets of a rich minority.
    2. There are ways of making this happen, for example, by:
      • Making our tax systems fairer and more effective
      • Ensuring people are able to earn the wages they need to thrive
      • Creating a business environment that attracts new firms and boosts communities
  1. Preparing for the future
    1. We need to anticipate the radical changes induced by globalisation, digitalisation and demographic shifts. For example, how can we build the skills of tomorrow’s workforce? How can we support risk-taking and entrepreneurship while safeguarding job quality, collective bargaining and social protection? How do we integrate the growing number of migrants to enhance solidarity, performance and cohesion in our societies?
  2. Build trust
    1. Large segments of population are losing faith in their institutions. This trend can be reversed if public authorities demonstrate the highest standards of integrity and efficiency in their work, and promote more transparency and public participation. For Example Fighting tax evasion by multinationals. 

Significance of financial inclusion in achieving economic growth in India

  1. The rural masses will get access to banking like cash receipts, cash payments, balance enquiry and statement of account can be completed using fingerprint authentication. The confidence of fulfilment is provided by issuing an online receipt to the customer.
  2. Reduction in cash economy as more money is brought into the banking ecosystem
  3. It inculcates the habit to save, thus increasing capital formation in the country and giving it an economic boost.
  4. Direct cash transfers to beneficiary bank accounts, instead of physical cash payments against subsidies will become possible. This also ensures that the funds actually reach the intended recipients instead of being siphoned off along the way.
  5. Availability of adequate and transparent credit from formal banking channels will foster the entrepreneurial spirit of the masses to increase output and prosperity in the countryside.

Case Study of Financial Inclusion In India

1. The success of the Pradhan Mantri Jan Dhan Yojana (PMJDY) since August 28, 2014 is reflected in terms of opening of over 46 crore bank accounts with deposit balance of ₹1.74 lakh crore with its expanded coverage to 67% rural or semi-urban areas as well as 56% of women Jan Dhan account holders according to the Finance Minister. 

2. There has been a shift in focus from ‘every household’ to ‘every adult’, with added emphasis on usage of accounts by enhancing Direct Benefit Transfer (DBT) flows through these (PMKDY) accounts, promoting digital payments through the use of RuPay cards, etc.

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