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The cold truth about India’s income inequality


The latest edition of the World Inequality Report has confirmed that the world continues to sprint down the path of inequality. Click Here to read more about World Inequality Report 2022, increasing inequality in India, Challenges and Way forward.


GS-II: Social Justice and Governance (Issues Related to Poverty and Hunger), GS-I: Indian Society (Poverty and Developmental issues)

Dimensions of the Article:

  1. Stark reality about Inequality
  2. Change in policies and their impact on Inequality
  3. Understanding the Socio-Economic Inequality in India
  4. Example for linkage between social structure and economic inequality
  5. Way Forward

Stark reality about Inequality

  • Global multimillionaires have captured a disproportionate share of global wealth growth over the past several decades: the top 1% took 38% of all additional wealth accumulated since the mid-1990s, whereas the bottom 50% captured just 2% of it.
  • The gap between the top 1% and the bottom 50% is widest for India among the major economies in the world such as United States, the United Kingdom, China, Russia and France.
  • According to the World Inequality Report 2022 India stands out as a “poor and very unequal country, with an affluent elite”, where the top 10 per cent holds 57% of the total national income while the bottom 50%’s share is just 13% in 2021.
  • Since the onset of the pandemic, there has been a decline in labour force participation in India, specially among the women labour-force. Covid has led to a worsening of education inequalities, induced labour market scarring, and exacerbated income inequality which in turn, is quite likely to depress social mobility.

Change in policies and their impact on Inequality

  • The “socialist-inspired Five-Year plans” in the early decades after Independence contributed to reducing the share of income of the top 10% of the wealthiest people from 50% to around 35%-40%.
  • However, since the mid-1980s, deregulation and liberalisation policies have led to “one of the most extreme increases in income and wealth inequality observed in the world”.
  • While the top 1% has majorly profited from economic reforms, growth among low- and middle-income groups has been relatively slow, and poverty has persisted.
  • Post 2014, India seems to have got into a phase of an even greater reliance on big business and privatisation to fix economics and the result has been to beget even more inequality.
  • The income of the bottom 50% in India since 1951 grew at the rate of 2.2% per year between 1951 and 1981 – But since then it can be said that “the growth rate remained exactly the same” for 40 years till 2021. That inequality in terms of the immobility of those at the bottom (at least one half of India) stood, irrespective of the economic policies adopted, is a fact.

Understanding the Socio-Economic Inequality in India

  • By and large, the discourse on inequality in India tends to centre around disparities in consumption, income, and wealth. However, the country is also marked by high levels of inequalities in “opportunities”.
  • An individual’s class of origin, his/her household of birth, who his/her parents are, tend to have a significant bearing on his/her educational attainment, employment and income prospects, and as a consequence, his/her class of destination.
  • Characterised by low levels of social mobility across generations, children born in disadvantaged households have a lower chance of moving up the income ladder.
  • If, irrespective of the economic policies adopted, the state of the bottom half of India has not improved – then it is because of the social conditions and constraints in India (i.e., social structure that underpinned India, encouraged and fanned this inequality).
  • In the Nehruvian years — and after that too — a bid was made to battle the basic absence of social democracy in India, but it remained confined to States and regions.
  • Therefore, one sees slightly improved mobility and well-being in States such as Tamil Nadu and Kerala. Parts of Karnataka and Andhra also recorded attempts at smashing social structures that had pushed those at the bottom to a life in perpetual poverty and deprivation, and those attempts showed in better economic prospects.
  • Therefore, without fail, the linkages between our social structures and income inequality and poverty must be faced and dealt with appropriately.

Example for linkage between social structure and economic inequality

  • Globally, the economic transformation of people and particularly the lessening of inequality has never happened unless socially regressive mores have been challenged.
  • Research across 106 countries to measure of the importance of religion spanning the entire 20th century (1900 to 2000) found “that secularisation precedes economic development”.
  • The findings also show that secularisation only predicts future economic development when it is accompanied by a respect and tolerance for individual rights – i.e., a society must able to see all shades of humans, of varying castes, creeds, faith, colour, gender and choices as equal.
  • The central aspect of secularisation is delinking of religion from public life – leading to respect for each citizen irrespective of their faith and for science and rationalism.

Way Forward

  • B.R. Ambedkar had issued a grim warning in 1949 that if we continue to deny social and economic inequality for long, we could “blow up the structure of political democracy”.
  • Given the growing inequality in India, the direction that public policy should now take is evident; there is a need to spread health and education far more widely amidst the population rather than focusing or “One size nation” solutions.
  • There is a need to remove barriers to inclusion in the economy, including through access to the labor market, property rights and targeted credit and investments, for the various socially vulnerable sections of the society.
  • It is clear that Covid-19 pandemic has more severely affected the vulnerable section of the society, especially in terms of employment and education. Concerted efforts are required, for ensuring enabling conditions for these sections to be educated and employed along with social security provisions, to provide them a level playing field in the labour market.

-Source: The Hindu

February 2024