Intro: Can India become truly developed if growth creates too few jobs? How can AI reduce inequality instead of widening it? Will climate change threaten livelihoods faster than policies can respond? And can India unlock its demographic dividend without empowering women, rural communities and smaller cities? All these and many more critical questions towards an inclusive economy were answered in this deep conversation by former IAS officer Dr. Shiladitya Chatterjee. Speaking to Mahima Sharma of Indiastat, the former economist at Asian Development Bank, shares the pathways ahead that would be crucial in shaping India’s next decade. Our Socio-economic Voice of the Week.

MS: India is now among the world’s fastest-growing major economies. But amid the global slowdown and beyond, how do you think this growth can become more inclusive for rural families, informal workers and small entrepreneurs over the next decade?

Dr. Chatterjee: India’s growth is unequal and insufficiently employment generating. Focus on and revitalisation of the rural sector which has two-thirds of the population and almost 80 percent of the poor, hence, is essential for inclusion. This requires improving agricultural productivity focusing on small and marginal farmers and landless labourers. Accelerating rural industrialisation is also essential to provide alternate employment avenues for the rural poor. More investments in rural infrastructure and R&D and policy reforms are needed but must be accomplished involving the rural community as partners.

Informal workers in low-paid unproductive work with poor working conditions dominate services and industries and facilitating their transition to formality is essential for inclusive growth. Inhibiting factors must be overcome such as lack of education and skills, finance and social and gender discriminations. Helping them organise for their rights and providing social protection are also needed.

Small and microenterprises with very low productivity dominate the industrial sector contributing substantially to GDP and exports and providing the bulk of industrial employment. More frequent surveys to ascertain their many problems (such as lack of capacity, skills, finance and access to modern technology) must be undertaken and remedial measures initiated at both the Central and state levels.

MS: With rising discussions around AI, automation and digital transformation, how can India ensure that technology creates faster jobs instead of widening economic inequality?

Dr. Chatterjee: Technology and AI have immense potential to accelerate growth but can jeopardise inclusion through job redundancies. India’s ICT sector, for example, has experienced phenomenal growth (3.5 times between 2011-12 and 2021-22) and accounted for about half of services exports. Yet it contributed only 4 percent to services sector employment.

However, technology has immense potential to generate inclusion. Technology can, for example, transform agriculture through better information to farmers on weather, climate change, pest infestation, soil conditions, use of appropriate fertilisers and prices of inputs and outputs; and facilitate efficient trading through electronic platforms. Satellite imagery (using changes in night luminosities) can help detect changes in poverty; and identify hunger hot spots (by using satellite identified soil productivity changes combined with price data) to improve hunger targeting interventions. Better logistics data using AI can improve food distribution and help eradicate hunger.

Technology can also help immensely in expanding basic services such as through virtual classrooms and distance learning; through telemedicine for reaching health to rural populations; and expanding public services through e-governance.

With applications in almost every sector including manufacturing, construction, transportation etc. technology can contribute to both growth and employment either directly or indirectly if guided by active state policy.

MS: Women-led development has become a major national conversation. What better policy shifts and urgent implementation do you believe can significantly improve female workforce participation in India?

Dr. Chatterjee: India’s female labour force participation rate (FLFPR) is low compared to world and regional levels. At just 33 percent it is far below the world average (50 percent), that of Sub-Saharan Africa (65 percent) and even some South Asian neighbours such as Bhutan (57 percent) and Bangladesh (44 percent). Low FLFPR is a major hindrance to India’s inclusive growth.

An important factor that hinders women’s participation is social attitudes. Attitudes differ between communities. Tribal communities, for example, are generally more accommodative to women’s work and States with large tribal populations have higher FLFPR as a consequence. Communities where early marriages are common also hinder women’s work. Social and attitudinal changes through education and work of NGOs can counter this.

It is also necessary to create more employment opportunities for women outside agriculture. Expanding self-employment opportunities and enabling access to micro-finance are needed. Service and industrial enterprises which provide greater opportunities for women (such as health care, teaching and garment manufacturing) need to be expanded. To facilitate such employment, enhancing skills of women through expansion of secondary and vocational education is crucial.

Finally, improvement of working conditions for women is crucial through attention to safety, provision of transport and child care facilities.

MS: Climate change and economic growth are now deeply connected. How can India balance sustainability goals while still ensuring inclusive livelihood opportunities for millions dependent on agriculture and MSMEs?

Dr. Chatterjee: Climate change poses a massive threat to India and its manifestations – temperature increase, sea level rise, variation in rainfall, heat waves, droughts, floods, cyclones etc – are already impacting India and likely to become more severe. Apart from directly affecting production such as in agriculture, mitigation and adaptation measures will cause additional costs to the economy. An RBI study estimated the loss to GDP at 2.0 to 4.0 percent annually.

To insulate agriculture from climate shocks India will have to take climate proofing countermeasures such as expanding irrigation, undertaking R&D on climate resistant crops, expanding crop insurance etc. Alternate livelihood measures for “climate refugees” with appropriate skilling interventions will be necessary. Social insurance to provide a safety net to the most vulnerable e.g. by expansion of rural employment guarantee schemes will be required.

Non-agricultural enterprises most likely to be impacted are MSMEs. Climate induced shocks to supply chains and energy and other input availability, requirements of green standards on production and exports, etc., will cause a rise in capital and working capital needs in the already finance starved sector. Their ability to grow under such circumstances will require support for adopting new technologies, skills development and adequate access to affordable finance.

MS: India’s startup ecosystem is expanding rapidly beyond metro cities. What role can Tier-2 and Tier-3 cities play in driving truly inclusive economic growth?

Dr. Chatterjee: India’s growth particularly in the modern high-tech sectors has clustered around metropolitan areas. A 2023 report by Deloitte and Nasscom states that the majority of India’s 5.4 million persons employed in the technology industry work around the seven major metropolitan areas of Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad and Pune although 60 percent of graduates hail from smaller cities of which a significant proportion migrate to the metro areas seeking work. This imbalance has aggravated India’s non-inclusive growth.

The more important actions that are necessary to drive the growth of the Tier-2 and Tier-3 cities are development of infrastructure and connectivity including high-speed internet connectivity; encouraging ICT and other high-tech companies to relocate to these cities by providing tax and other incentives; increasing the liveability of these cities to encourage entrepreneurs and workers to relocate; and ensuring adequate development and supply of human resources for the growth of these centres.

Growth of smaller cities and towns will reduce the geographical imbalance and further inclusive growth. This will also provide more employment to local youth and help in reducing unemployment and income disparities. Acting as new growth poles they can provide an impetus to growth of the surrounding local economy.

MS: Financial inclusion through digital payments and Jan Dhan accounts has transformed access to banking. What should be the next big reform to improve economic participation at the grassroots level?

Dr. Chatterjee: Although India has achieved considerable success in access to finance with more than 90 percent of adults having accounts with banks or financial institutions yet the World Bank's Global Findex Database 2025 found that about one-sixth of account-holders in India had an inactive account in 2024, indicating that genuine financial inclusion was still elusive particularly for the lower income groups - mainly the result of their being excluded from India’s growth.

Therefore, accelerating growth at the “bottom of the pyramid” is essential. More focused attention on the needs of this segment of the population is needed. Areas of emphasis include improving the quality of basic education; expanding vocational education; providing access to health care for all; ensuring universal access to other basic services such as water and sanitation; expanding productive livelihood opportunities; gender empowerment etc.

However, to deliver services that make the economy at the grassroots level more productive for decent living there is a need to alter policy priorities focusing attention to this segment; and strengthening local service providers i.e. the gram panchayats and the urban local bodies. Most such bodies do not possess the financial wherewithal and capacities to function effectively and must be enabled to do so.

MS: India’s young population is often called its biggest strength. What immediate steps are necessary to convert this demographic advantage into long-term socio-economic progress?

Dr. Chatterjee: Among the major factors that have helped India’s growth is the so-called “demographic dividend” caused by the falling dependency ratio, leading to higher savings rates. This trend is likely to be reinforced for some time in the future.

However, to realise the demographic dividend, the economy must absorb the additions to the work force in gainful employment. The unemployment rate in India, however, is high and averaged nearly 5.0 percent in the 5 years prior to 2024 which is higher than most comparator economies in Asia. Also, while the unemployment rate simply measures those in employment, it does not consider job quality. A large proportion of India’s work force is in the informal sector and employed in low-paying unproductive jobs.

Creating productive jobs on the massive scale necessary is a major challenge and represents one of the highest priorities for India’s economic managers. Focus on inclusive growth, evenly balanced across the country will be needed. There are a large number of sectors (such as agriculture, MSMEs and the vast informal economy) and states (such as West Bengal) which are underperforming and have immense potential to grow and provide employment. They must be supported through policy and other interventions.

MS: There is increasing emphasis on “Viksit Bharat 2047.” In your view, what social indicators should improve amid the global slowdown, alongside GDP growth, for India to truly become a developed nation?

Dr. Chatterjee: Achieving high-income status alone, the major goal under Viksit Bharat 2047, does not guarantee that other essential non-income dimensions of development such as education, health, clean environment etc., are achieved as the link between growth and these objectives is uncertain. For example, neither the government nor households may use income increases to prioritise these essential objectives. Indian budgets, for example, have in recent years, emphasised expenditures on infrastructure, insufficiently emphasising development areas such as agriculture and social development.

The international community – including India – agreed to pursue the 17 key Sustainable Development Goals (SDGs) in 2015 which cover the whole gamut of development: social, economic and environmental. Unfortunately, current trends indicate that India will miss attaining targets set for a very large number of the SDG indicators.

Pursuing the SDGs, however, are not only good in themselves for their intrinsic benefits helping countries to proceed in a more meaningful, inclusive and sustainable manner but also because they are pre-requisites for the high-income objective itself.

Moreover and importantly, given the current global uncertainties and falling growth rates, attaining acceptable levels of these indicators are possible without necessarily attaining high-income status and therefore should be earnestly pursued to make India truly developed.

MS: Mental health, urban stress and work-life imbalance are emerging socio-economic concerns among young professionals. Do you think future economic planning should also include wellbeing indicators? What measures are required to be implemented?

Dr. Chatterjee: Measures of development have evolved over time with refinements progressively attempting to capture its true constituents. Thus, beginning with the single metric of GDP, changes in measuring development incorporated education and health under the Human Development Index and later influenced by Amartya Sen etc. and the capability approach, development was conceptualised as freedom from deprivations such as lack of education, health, agency, ability to live in a clean environment, etc.

These became incorporated first in the MDGs and later more comprehensively in the SDGs. Thus, the inclusion of well-being indicators such as leisure, mental peace, liveable cities and ultimately happiness to better define development is a logical extension of this process and is beginning to be recognised, following Bhutan’s example of measuring Gross National Happiness.

To implement this understanding in planning development, first indicators of development have to be refined further taking into account the desires of the youth and citizenry. Measures such as the SDGs can be tweaked to include mental health, stress-free working conditions, etc. Indicators backed by data have to be developed. And sincere efforts with adequate resources and appropriate policy reforms must be introduced to realise these objectives within a target date and progress monitored regularly.

MS: Looking ahead to the next 10 years, which single or more reform or development areas do you believe can create the biggest impact on inclusive economic growth in India? And how?

Dr. Chatterjee: Mahatma Gandhi is often quoted as having said, “The true measure of any society can be found in how it treats its most vulnerable members.” Following this precept sincerely requires that economic planners while pursuing faster growth to also reorient their focus to generate growth in the economy at the bottom of the pyramid: towards small and marginal farmers in the lagging agriculture sector; MSMEs in the industries sector; the vast army of informal workers in the services sector. At the same time economy-wide imbalances will have to be corrected: the socially disadvantaged groups and women; the lagging states and regions and the rural-urban divide.

Generating growth, productive employment and decent incomes in the generally left behind production sectors, sub-sectors and population groups will require targeted attention towards them and implementation of the necessary actions that have been well studied and understood. But the insufficient attention they have commanded is principally owing to their lack of voice and political influence. Inclusive growth can succeed only if the necessary institutional and governance reforms are undertaken to rectify this including a strengthened and truly representative democracy with each of its four pillars functioning effectively and a fully transparent and accountable administration.

About Dr. Shiladitya Chatterjee

Shiladitya Chatterjee joined the IAS in 1976 and contributed to grassroots level development in Assam; Centre-State financial relations at the Finance Ministry; and economic reforms of 1991, as Director, Prime Minister’s Office. Currently he is Visiting Senior Fellow, Institute for Studies in Industrial Development, New Delhi; President, Global Forum for Sustainable Rural Development; independent advisor. As an author, his latest work is “Inclusive Economic Growth in India” published by Routledge. Joining Asian Development Bank in 1994 he supported lending operations and policy reform in Asian countries as Country Economist, Philippines; Country Team Leader, Indonesia; Head, Poverty Practice; and Regional Advisor on SDGs.

About the Interviewer

Mahima Sharma is an Independent Senior Journalist based in Delhi NCR with a career spanning TV, Print, and Online Journalism since 2005. She has played key roles at several media houses including roles at CNN-News18, ANI, Voice of India, and Hindustan Times.

Founder & Editor of The Think Pot, she is also a recipient of the REX Karmaveer Chakra (Gold & Silver) by iCONGO in association with the United Nations. Since March 2022, she has served as an Entrepreneurship Education Mentor at Women Will, a Google-backed program in collaboration with SHEROES. Mahima can be reached at media@indiastat.com

Disclaimer : The facts & statistics, the work profile details of the protagonist and the opinions appearing in the answers do not reflect the views of Indiastat or the Journalist. Indiastat or the Journalist do not hold any responsibility or liability for the same