The Political Economy of Inclusion: How Institutional Barriers Deflect the Benefits of Economic Expansion in India
Abstract
India's post-1991 economic expansion has generated sustained GDP growth and substantial poverty reduction, but its benefits remain unevenly distributed. This paper examines how institutional barriers in labour, credit, land, human capital, and regulatory systems limit inclusive participation in growth. Using institutional economics, resource-misallocation theory, and dual-economy frameworks, the study employs a non-econometric analysis of official statistics, World Bank data, World Inequality Lab estimates, and peer-reviewed evidence. The findings indicate a persistent gap between output and employment transformation, with services contributing 54.7 per cent of GVA while over 45 per cent of workers remain in agriculture. High income and wealth concentration further indicate unequal access to economic opportunities. These institutional constraints misallocate labour, capital, and entrepreneurial talent, reducing productivity and employment intensity. The paper argues that inclusive institutional reforms can simultaneously improve efficiency, productivity, and income distribution. Strengthening financial access, labour formalization, human capital, land markets, and state capacity is therefore essential for achieving broad-based and sustainable economic growth in India.