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Steering India Towards Inclusive Growth

Incredible !ndia – so goes the catchphrase of one of the most successful Indian tourism campaigns. Having had the opportunity to work in India and travel around the country myself, I can only agree with the slogan. But India is not only incredible; it is also transforming (incredibly) fast.

In political terms, India is establishing itself as a heavyweight – witness its increasing influence in multilateral forums such as the G20, the Doha Round or Climate Change negotiations. But perhaps even more noticeable is its economic growth. Second only to China among large economies, India has grown at an average of over 8% in the last five years, and has lifted millions of its citizens out of poverty in the process. It has attracted billions of dollars in foreign direct investments (FDI), and is home to some of the world’s most dynamic firms. And with both young demographics as well as a growing middle class, the country has the necessary ingredients for continued growth.

But as the saying goes, all that glitters is not gold. In spite of strong economic growth, India is confronted with huge challenges. It has one of the world’s highest malnutrition and maternal mortality rates. And while economic growth rates may have been high, it is hard to argue that all populations have benefited. According to a UN study published last year more of the world's poor still live in India than in all of sub-Saharan Africa. The headline grabbing Buddh Circuit, a Formula One race track in Uttar Pradesh inaugurated last week, exemplifies the stark contrast between the wealthy and poor in India: high-speed racing cars zooming in circles on freshly paved tarmac on the inside, widespread poverty and lack of proper roads on the outside.

Unsurprisingly, the distribution of the benefits of growth across different segments of society has been questioned and become a topic of national debate. Inclusive growth, the idea that economic prosperity should benefit all populations, was made an explicit goal in the 11th 5-Year Plan and it is likely to be a central component of the upcoming 12th 5-Year Plan as well. But while the need for inclusive growth is evident if India is to continue down the road of prosperity, the means of achieving it are less clear.

FSG’s recent publication on Creating Shared Value in India sheds light on this question. While recognizing that the Government of India and philanthropists both have critical roles to play, we believe the private sector possesses the necessary know-how, technology and resources to address social issues at a large scale. Creating Shared Value (CSV) holds that firms can create competitive advantages and long-term business value by tackling social problems head-on. Our India study highlights twelve powerful examples of companies that are currently creating shared value in the areas of health and sanitation, agriculture, and financial services. In healthcare, companies such as Novartis India and Vaatsalya are expanding access to their products and services to underserved populations, thereby contributing to improved health outcomes. In agriculture, firms like Jain Irrigation and eFarm are increasing agricultural productivity and creating fair and transparent markets, while simultaneously generating revenues for their businesses. And in the financial services sector, companies such as Eko Indian Financial Services and IFMR Rural Finance are bringing financial services to the unbanked through innovative products that do not require savings accounts.

The case studies demonstrate the vast business opportunities that are inherent in addressing social issues, and that are there for the taking for those companies that think innovatively about reconceiving products and markets, redefining value chains, and enabling local cluster development. Our hope is that this paper will inspire more Indian companies to jump on the CSV bandwagon, and ultimately help steer India’s fast-paced transformation in the direction of inclusive growth.

Simon Meier

Former Associate Director, FSG