Inclusive & Sustainable Growth – Role of Reserve Bank of India

Abstract

Fast paced economic growth is supposed to be the panacea for many problems in developing countries like poverty reduction, generation of employment, improvement in standard of living etc. However, just fast paced growth if not necessarily inclusive and sustainable will not meet the desired objectives for under- developed and emerging economies in the long-run.

In India, after independence the government targeted economic growth but relied on the ‘Trickle Down’ effect for a balanced and equitable growth. It was during the Ninth plan period that the government documents having realised that the ‘Trickle-down effect’ did not work as was predicted by economic pundits and the benefits of economic growth were not being equitably shared.

The conceptual change in the policy making was thus adopted in India after the Ninth Five Year Plan has been that instead of focusing the policy making to income redistribution aspects, the focus would be on sustainable and ‘inclusive growth’ essentially meaning a growth process involving participation of all sections of the society in economic activity, generating income through it and being able to spend that income with choice.

Inclusive and sustainable growth has since then become the focal point of the government’s policy making efforts. Fast paced economic growth that is sustainable as well as inclusive is only possible through easy access to finances, well developed financial markets i.e. ‘financial inclusion’. The development of financial markets and its various measures positively contribute to economic growth.

The role of India’s Central bank is vital in this regard as it is the primary body responsible for ‘financial inclusion’.