Modeling Sustainable Development: Exploring Environmental Behavior of private sector with Government towards Inclusive Growth
1. Introduction
Despite the focus on the role of aid in promoting development, it is mainly business that drives the economic growth that is needed to alleviate poverty in developing countries. The private sector is responsible for creating most jobs and wealth, and competition stimulates the investment, innovation and technological progress that underpin economic growth.
2. Country development overview
With a population of just over 1 billion, India is the world's largest democracy. In the past decade, the country has witnessed accelerated economic growth, emerged as a global player with the world's fourth largest economy in purchasing power parity terms, and made progress on most of the Millennium Development Goals. However, poverty remains a major challenge. According to the revised official poverty line, 37.2% of the population (about 410 million people) remains poor, making India home to one third of the world's poor people. Resources generated from recent growth are now being invested into a set of very ambitious programs to deliver services to the poor. These programs -- to provide elementary education, basic health care, health insurance, rural roads and rural connectivity, and other services aim at realizing the fundamental rights of the people. These programs are achieving partial results on the ground. Between 2003 and 2009, the number of out-of-school children declined from 25 million to 8 million (less than 5% of the 6-14 age groups). Leprosy, polio, and TB are almost under control and the spread of AIDS has been kept in check. Large numbers of women have been mobilized into self-help groups to generate new livelihood opportunities. Massive new initiatives are being pioneered that arerevolutionizing the way services are being delivered to low-income groups.
The urgency of addressing India's development challenges has been exacerbated by the global economic crisis of 2007/09. Although India's economy grew at 6.1% in the last quarter of 2009, which was among the highest growth rates in the world, this still represents a significant dip from the peak of 9.7% growth in fiscal year 2006/07. With a mix of monetary and fiscal tools, the Government responded fairly quickly to the financial crisis, and was successful in shielding the country from the fallout felt throughout the world. Nevertheless, although the Mid-Term Appraisal of the Eleventh Five-Year Plan (2007-2012) shows India's economy to have rebounded, there are indications that economic uncertainty may affect the remainder of the Eleventh Plan period. It is now clear that a number of targets will only be met under the next Plan.
3. Importance of private sector in development
Many private actors outside the traditional development community are addressing the challenges of development:
3.1 Companies
- Large corporations (both multinational and local) are leading private ecosystems that develop and strengthen the capabilities of local small and medium enterprises and microenterprises.
- Global financial institutions and emerging local financial institutions are developing innovative approaches and technologies to improve access to credit for the poor and for small and medium enterprises.
- Individual companies, generally multinational corporations but also some large local ones are launching corporate social responsibility programmes to address specific development needs.
- Important local companies—alone or with domestic private sector associations—are broadening their strategy and reach from strictly lobbying for actions beneficial to the private sector to informing and influencing the development process.
3.2 Associations and foundations
International private sector associations, such as the Council on Sustainable Development, International Chamber of Commerce, International Business Leaders Forum, World Economic Forum, International Organization of Employers and others at the regional level, such as the West African Business Network and the Commonwealth Business Forum, are focusing on various aspects of development. National business associations, such as the Confederation of Indian Industries and the Federation of Malaysian Manufacturers, have played a key role in national economic planning. Private foundations are engaging in the broader development process, with a focus on accountability and results.
3.3 Academic institutions
- Academic institutions (including management schools)—in the country that are members of the Organization for Economic Co-operation and Development are focusing more on private sector development and broader development issues.
- Leading business schools are working for the joint management training of local public officials and private sector leaders.
3.4 Networks of individuals
- Individuals are playing or wishing to play a bigger role in resolving global issues by contributing their know-how and services to various types of "developmental peace corps" organizations (retired senior executives, business administration students, and financial sector experts).
- Expatriate executives of multinational corporations are mentoring local entrepreneurs or teaching business in schools where they are stationed.
4. Ways in which private sector can harness to the development
In India majority of the population do not have access to the pure water, housing, education and health services and the population of India is also increasing at a very large pace, so to meet up the requirements of all the people the government need a huge amount of money. Though the Government of India is getting much amount of money in form of the aids from the various international organizations and the govt. has also made it compulsory for the corporate to follow the practices of CSR (corporate social responsibility), but the problem is govt. cannot work alone, govt. need money and money is there in the private sector.
Even today according to the many survey and research poor people living in the India get many of the basic services nor from the govt. neither from the N.P.Os (non-profit organizations), but from the private sector only. People need to pay to get access to basic facilities like pure drinking water from private sector, thus leading to a bottom of pyramid penalty. There is a need to integrate poor people into the supply chain in a very effective way, the govt. is building up schemes and providing subsidies but that alone is not sufficient mainly because of one problem that state bodies do not exist to create a business opportunity for the poor, using the govt. initiatives and private philanthropy. Green Revolution is the perfect example of the involvement of private sector in the development practices. In what way private sector can harness the development in India.
Products which it produces
The problem is that for the people living at the bottom of pyramid don't have choices, if the private sector starts exploring the sector in a way that it could provide products which could
help in a way which could help in fulfilling the requirements of the people and the same time should be affordable to them, for eg. Health services etc.
Process with which it produces
By process it means that, who is the business employing, how many jobs are being created, is the business following sustainable approach or not?
Reality of the presence of business
There are many ways in which business can be good for the society, for example paying taxes, providing services, and existence of business is itself a powerful and inspiring motivation for the others. There can be negative challenges associated with business as well.
5. Role of microfinance
Microfinance
is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services. More broadly, it is a movement whose object is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers. In India, microfinance has played and is playing a significant role for the purpose of development and upliftment of the poor; private sectors are also exploring the sector of microfinance for gaining access to the rural market and at the same time contributing to the development of India. For example, in the financial sector ICICI Bank-India is offering innovative ways to deliver financial services to the poor. It has developed two models:
- The direct-access–bank-led model promotes and nurtures self-help groups, to create a savings pool. Once a pool reaches a certain size (few hundred U.S. dollars), ICICI will consider making loans of $5,000 with a distribution of $250 per individual. Group pressure is the best collateral, and repayment rates are 99.9%.
- In the indirect channel ICICI partners with microfinance institutions drawing on the advantages of each. The microfinance institution draws on its skills to contribute the social intermediation aspects, while the bank carries out the financial intermediation and bears the credit risk. This can effectively leverage the risk capital that already exists with banks and can be a potential solution to the capital constraints of microfinance institutions. This model reduces the cost of intermediation without affecting the quality of the portfolio.
The strategy has both made good business sense and had significant development impact. For example, the number of self-help groups has increased to over 10,000, allowing ICICI to substantially increase its market share in rural areas. Villagers have had a surge in financing opportunities. Interestingly, a study conducted independently has shown a strong surge in self-confidence of members in self-help groups
Conclusion:
Indian economy is on a growth trajectory and one after another study is projecting India among leading economies of future. The role and significance of India in the global economy is continuously increasing. India offers enormous opportunities to both individuals and organizations. India is continuously improving on the world development indicators but at the same time India also provides numerous challenges. The challenges can be met and the best results can come when both the public and the private sector should work together, private sector could be of huge force and power with its creativity and solutions for delivering services to the people.
References:
http://www.bis.org/events/cbcd06b.pdf
http://www.gdrc.org/icm/micro/guy_sust-micro.pdf
http://www.bis.org/events/cbcd06b.pdf
http://www.undp.org/evaluation/documents/country-review/IndiaCR.pdf
http://www.odi.org.uk/work/programmes/business-development/details.asp?id=59&title=financial-sector-development
http://indiamicrofinance.com/business-in-india-and-development-statistics-and-data.html
http://www.norwayemb.org.in/News_and_events/Business/CSR-in-India/
Questions and Answers
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