If growth rate not made inclusive it could lead to backlash: ADB

New Delhi, Apr 27 (UNI) The Asian Development Bank (ADB) today warned that the present high growth rate of 7 to 8 per cent in India could slip back to 3 to 4 per cent if it is not made "inclusive" due to a possible political and social backlash and said statutory reservation in the private sector could lead to a flight of capital from the country.

"In China the development model was such that more and more people were brought in the fold of the growth process. In India this has not necessarily been the case. The present high growth could swing back if it is not inclusive as a political and social backlash would result in foreign capital leaving the shores of the country and even domestic capital withdrawing", ADB Chief Economist Ifzal Ali said in reply to a question at the launch of a Report here.

The report brought out by ADB is titled 'Labour markets in Asia: Issues and Perspectives'.The Book has Country studies for India, China, Phillipines, and Vietnam.

The presentation of the report was followed by a Question- Answer session from the audience, which included the media.

Dr Ali said while the issue of reservation in educational institutions in Centres of Excellence like the IIMs and IITs was a limited one, but making reservation compulsory in the private sector would be incompatible with India's attempt to be part of the global economy. Indian firms have been undergoing a restructuring process reducing costs and improving productivity and consequentially becoming more efficient. Attempts to impose reservation from outside would go against this spirit, forcing foreign firms to set up shop outside India and also a withdrawal of the production process by indigenous enterprises.

Dr Rana Hasan, a co-author of the study, said Indian firms have been responding to globalisation, often resulting in reduction of manpower. In this sense, globalisation has adversely affected the employment situation in the formal sector.

As far as the rural sector was concerned, the impact of globalisation on this sector was not clearly discernible as this sector was by and large "disconnected" from the process.

The ADB economists said the National Rural Employment Programme was more an attempt at providing social security to the farming community than generating employment. This in poor areas of rural India was desirable.

Neverthless, the scheme has some positive features, like 'Right to Employment'. And as the Maharashtra experience demonstrates rural labour tends to benefit from such schemes, the economists said. They noted that the NREP was patterned after the Maharashtra Employment Guarantee Scheme, which has for long been in existence.

The Book has also been authored by Jesus Felipe, also an Economist with the ADB.

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