Place thrust on job creation, regional

development: President Pranab Mukherjee

NEW DELHI: Trade liberalisation and economic cooperation will not fully serve the purpose till
they result in tangible benefits for the people through job creation and regional development,
President Pranab Mukherjee said today.
"Increased trade liberalisation and economic cooperation will not count for much unless they
result in tangible benefits for our people. Hence, thrust should also be placed on meeting
objectives like employment generation and regional development," he said while inaugurating
the India International Trade Fair (IITF) here.
The last decade has marked a paradigm shift in development approach towards improving
quality of life of people, Mukherjee said, adding that empowerment through entitlements backed
by legal guarantees such as NREGA, RTE and Food Security Act have fostered the process of
inclusive growth of India.
He said: "In order to keep pace with the rapid global changes, we need to constantly fine-tune the
skills of our work force. There is an urgent need to incorporate skill development and vocational
training in the process of our economic growth."
The vision of inclusiveness is not just the removal of poverty but encompasses equality of
opportunity as well as economic and social mobility for all sections of society, Mukherjee added.
Empowerment of the disadvantaged and marginalised groups is an essential part of inclusive
growth, he said, adding that the vision must also include a clear commitment to pursue a
development process which is environmentally sustainable.
Mukherjee said the country's financial integration with the world has also been as rapid as its
trade globalisation. Exports have a very important role to play in the economic growth of our
country and have the potential to drive the socio-economic development of our country.
"The contribution that this sector makes to employment is of utmost importance to our vision of
equitable and inclusive growth," he said.

Chapter 1 The political economy of inclusive growth Growth is inclusive if it supports high levels of
employment and rising wages. For developing countries, this means acquiring competitiveness in new
sectors and technologies. Policies to support inclusive growth have to address significant market failures
and have a mixed record across countries. Part of the difficulty lies in the political settlement or social
order in which policies and institutions are embedded. The political settlement is structurally different in
developing countries compared to advanced ones, and across developing countries. Ambitious good

governance strategies that aim to achieve strong enforcement of property rights across the board are
unlikely to succeed in developing countries. The thrust of reform strategies has to shift towards building
pragmatic developmental governance capabilities that can enable the implementation of policies that
target specific market failures in specific political settlements. The general argument is illustrated with
reference to the recent experiences of Thailand.
Chapter 2 Finance, regulation and inclusive growth Regulatory agencies that foster competition
among private financial institutions, promote transparency throughout the financial system and work
relentlessly to reform policies that perversely distort the incentives of private institutions encourage
inclusive growth. In contrast, regulations that stymie competition in the name of stability and policies that
funnel credit to politically-favoured ends in the name of the poor typically curtail inclusive growth. Political
economy factors are paramount in shaping the design and implementation of financial regulatory policies
since powerful segments ofsociety may seek exclusive - not inclusive - growth.
Chapter 3 Individualised service provision and the new welfare state: Are there lessons from
Northern Europe for developing countries? Welfare states in the advanced countries are responding
to the rise of new, immeasurable risks by relying less on social insurance and more on the provision of
customised social services, such as education, which enable citizens to acquire the capacities needed to
respond to the risks they face. These services are provided by a novel form of organisation that
addresses the classic problems of public administration - how to limit discretion while increasing the
responsiveness of the organisation to changing circumstance - by authorising front-line workers to search
for new solutions, but with the requirement that they explain and justify their decisions to peers. The
successful Finnish school system exemplifies this new type of organisation. Research on the limited
effectiveness of conditional cash transfers, which is the favoured strategy for improving social services in
developing countries, suggests the need for customisation in this setting too, so changes in advanced
country service provision may hold lessons for development.
Chapter 4 Making green sources of growth more inclusive A Green Growth Strategy pursues
economic growth combined with significant improvements in environmental quality and sustainable
resource use. Such a policy requires a shift in production and consumption, which is potentially costly for
major production sectors, certain types of households or entire economies. Technological change can
reduce the cost but the extent of cost reductions depends on the nature of knowledge spillovers and
technology policies. With appropriate burden-sharing rules and complementary policies, low-income
groups and countries can gain, thus making green growth inclusive. We discuss several aspects of the
mechanisms behind inclusive green growth and the policies that could support it.
Chapter 5 Fiscal democracy or why sound fiscal policy, budget consolidation and inclusive
growth require fewer, not more, attempts to control the future Tackling deficits is like treating a
symptom, not the disease. Todays disease is largely related to something unique in all of modern history:
officials who have increasingly competed to control most, all, or more than all of the resources that are
likely to be available to government for the future. This has created four related economic problems:
unsustainable long-term budgets; a weakened ability to conduct future counter-cyclical policy; fiscal
sclerosis due to budgets being increasingly focused on consumption; and an aged set of policies to
promote inclusive growth. Meanwhile three political dilemmas arise: a decline in fiscal democracy and in
the related ability of each generation of voters to decide what it wants to do with the revenues that
accompany economic growth; a classic prisoners dilemma where both the political left and right lose by
acquiescing, respectively, to spending cuts or tax increases; and difficulty in fixing government, since to
do anything new requires reneging on some past promise.
Chapter 6 Sequencing public interventions to support techno-entrepreneurship While the area of
innovation studies is extensive and rapidly expanding, analysis of innovation policy is much less
developed. A view that policy applications can be inferred linearly as an afterthought of positive analysis
parallels the logic of a linear innovation model, whereby innovation is almost a straightforward outcome of
either university research or company R&D. Taking as an example Israels cluster of technology start-ups
and venture capital industry, the paper develops a theory of innovation policy as an endogenous variable.

A three-phase model of innovation policy evolution is introduced, as well as directions for the adaptation
of the model for middle-income economies.
Chapter 7 Competition and innovation-driven inclusive growth We investigate the strength of
innovation-driven employment growth, the role of competition in stimulating and facilitating it, and whether
it is inclusive. In a sample of over 26 000 manufacturing establishments across 71 countries (both OECD
and developing), we find that firms that innovate in products or processes, or that have attained higher
total factor productivity, exhibit higher employment growth than non-innovative firms. The strength of
firms' innovation-driven employment growth is significantly positively associated with the share of the
firms' workforce that is unskilled, debunking the conventional wisdom that innovation-driven growth is not
inclusive in that it is focused on jobs characterized by higher levels of qualification. We also find that
young firms have higher propensities for product or process innovation in countries with better Doing
Business ranks (both overall and ranks for constituent components focused on credit availability and
property registration). Firms generally innovate more and show greater employment growth if they are
exposed to more information (through Internet use and membership in business organisations) and are
exporters. he empirical results support the policy propositions that innovation is a powerful driver of
employment growth, that innovation-driven growth is inclusive in its creation of unskilled jobs, and that the
underlying innovations are fostered by a pro-competitive business environment providing ready access to
information, financing, export opportunities, and other essential business services that facilitate the entry
and expansion of young firms