New Delhi: India is an underperformer compared to other emerging market economies when it comes to making its growth more inclusive, the Asian Development Bank (ADB) said on Wednesday.

The Manila-based multilateral lending agency, releasing its country partnership strategy for 2013-17 for India, said economic growth in India could be more inclusive. “Although the economy grew by more than 5% a year on average during FY1993-FY2009, the $1.25 per day poverty rate fell only by 1 percentage point per year, which is low by emerging market standards," it said.

But it added that growth in India has been inclusive. “In 1984, more than half of the population (56%) lived on less than $1.25 a day, but by 2010 the share shrank to 33%. The infant mortality rate, which was as high as 80 per 1,000 births in 1991, declined to 44 by 2011. Adult literacy rates rose from 48% in 1991 to 66% by 2008," it said.

India is the world’s third largest economy in terms of purchasing power parity and accounts for nearly 6% of the global gross domestic product (GDP)—more than double its share in 1980. “As a result of structural reforms, India’s economy experienced robust growth starting in the 1980s, following three decades of slow growth," ADB said.

But in other aspects, India still lags.

ADB said that although access to safe water is high (86%), about two-thirds of the Indian population still lacks access to sanitation. “Similarly, while life expectancy and maternal mortality rates have improved relative to the past, they need to be improved further in absolute terms," it said. “Inequality is also a concern, and persists between and within states. Although the proportion of girls entering primary and secondary education is increasing rapidly, progress is slow in the case of tertiary education."

N.C. Saxena, a member of the National Advisory Council that sets the social agenda for the government, said though India has been registering strong economic growth it has not resulted in social development. “Poorer countries such as Bangladesh, Vietnam have performed much better in socio-economic indicators such as poverty ratio, sanitation, infant mortality, compared to India," he said.

To sustain high as well as inclusive growth, India needs to expand and consolidate structural reforms, remove its infrastructure deficit and improve the quality and coverage of basic social services, ADB said. “Return to a high growth trajectory is possible, but this will require persisting with reforms and resolving some complex policy and regulatory issues, including those relating to land acquisition for industrial activity, environmental clearances, and allocation of licenses for natural resources," it said.

India’s economic growth declined to a decade low of 5% in 2012-13 and is widely expected by private economists to fall below that level in the current financial year ending 31 March 2014. The government, however, expects growth at 5-5.5% in the current year.

ADB during its new country partnership strategy will continue to lend India $2 billion annually till 2017, while focusing more on energy, transport, urban services and skill development with a shift towards more developed states from lagging states.

Though ADB said India will continue to remain its largest borrower, the agency could not increase its sovereign lending level to India under the new strategy period (2013-17) due to its financial constraints. “ADB’s sustainable lending level is set to decline to around $8 billion annually starting 2016 from $10 billion annually at present," an ADB official said on condition of anonymity. Under the new programme, ADB will devote three-quarters of its business plan during 2013–2015 on energy, transport and urban services, and the remainder will be spread among finance, public sector management (state-level reforms), agriculture and natural resources management (water resources management), and education (skills development).

While lagging states accounted for around 77% lending during the 2009-12 period, under the new strategy period such states will account for 40–50% of the total annual lending. This is because of the low capacity and hence low disbursement in such states in the earlier strategy period, the ADB official quoted above said.

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