Inclusive growth

Updated: Jul 27 2006, 05:30am hrs
India Development Policy Review (DPR) 2006, the World Bank flagship report for the country, unfolds a more flexible reforms package for improving delivery of services and expanding inclusive growth. It is a logical extension of the World Development Report (WDR) 2006, which focussed on equity and development, and it also responds to the growing national concerns of transforming outlays into incomes. The DPR suggests a subtle change in WB perspectives and of a more nuanced approach to problem solving. For instance, the report not only refutes the contention that governments can and should do nothing to promote a more equitable economy, but goes on to say that lack of action is politically wrong and socially untenable. It also cautions against attacking agriculture subsidies, another sensitive issue, and advocates a strategy that will bring about a negotiated rationalisation of the present system. The report agrees that labour reforms should not allow automatic hire and fire and recommends that any changes must fully protect worker interests.

But it is not that the Bank has suddenly sold out to such heretical ideas, as important caveats follow. Equitable growth is to be promoted not through the failed redistribution models of the past but by facilitating broad-based growth and empowerment, and by promoting access to both assets and input and output markets. A solution to the labour tangle is to be found through incremental steps that provide institutional continuity and credibility. All are sensitively packaged solutions that can be easier handled by coalition governments.

Optimism reigns when the DPR talks of tackling services delivery, as the issue is identified not as a complete failure of the state but rather of incomplete successes. Poor service delivery, says the report, is not so much an organisational problem which can be rectified through policy tinkering or better management, but an institutional one where internal and external lines of accountability have broken down. Viable new approaches for creating greater accountability are also laid out.

Improved equity is to be delivered by helping laggard states to build new infrastructure and a better investment climate. Pointing out that there is no intrinsic contradiction between commercial viability and fair market access to the poor, the WB notes the experience of the recent entry of private firms in credit and marketing. All prescriptions that offer some hope to a coalition government that seems to have run out of ideas.