October 18, 2017   
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Growth With Equity


By Dr S Saraswathi

(Former Director, ICSSR, New Delhi)

“India’s dynamics are striking. It is the country with the highest gap between the growth of top1 per cent and the growth of total population”. This finding of French economists published in newspapers show that conditions are not changing with regard to inequalities of income despite overall l growth.

The share of national income accruing to the top 1 per cent of income earners is estimated to be about 22 per cent of total income which is said to be the highest level since the adoption of the Indian income tax 1922.

The IMF has been warning South Asian countries about increasing inequalities in the past two and half decades which weaken their capacity to combat poverty. India and China are particularly facing acute problem of redistribution of incomes as high growth rates have not reduced inequalities. However, income inequality is a global phenomenon.

A report released by Oxfam is on the same lines. It reveals a contrasting picture presented by   China, India, Indonesia, Laos, Bangladesh, and Sri Lanka, where over the last two decades, the share of income increased by more than 15 per cent for the richest 10 per cent of the population,   and declined by more than 15 per cent for the poorest 10 per cent of the population.

Surprisingly, one super power, the US, is one of the most unequal countries in the world based on Gini Index which measures the extent to which distribution of income varies from perfect equality. It ranks far worse than Portugal which is at the bottom among West European countries.

A study on inequalities in the US shows that in 24 States, top 1 per cent captured at least half of all income growth between 2009 and 2013. New York and Connecticut show highest inequality followed by eight States including California and New Jersey. Worsening inequality is considered to be one of the most serious issues in American politics.

There are 25 countries in the world with least inequality. Based on distribution of income,   Belgium is on top. Income, consumption, and wealth are indicators of financial inequality.

Sustainable Development Goals adopted by UN  Member-States in 2015 aim at ending poverty, fighting inequality and injustice, and tackling climate change by 2030. Inclusive development — the over-all aim of the Goals — specifically covers equitable quality education and gender equality. Goal No.10 is to “reduce inequality within and among countries”.

Human Development Index (HDI) is created by the UNDP to highlight that people and their capabilities should be the criteria for assessing the development of a country and not economic growth alone. Inequality Adjusted HDI introduced in 2014 indicates how a nation’s achievements on three dimensions – health, education, and income – are distributed. States in India are classified on the basis of HDI as High, Medium, and Low.

Generally, worst inequality is found in bigger cities in any country. Posh colonies in the vicinity of slum areas are common in Indian cities. Glaring income inequality can be seen between households in the same locality. Both billionaires and destitute pensioners and recipients of welfare schemes reside in city centres. Approach roads to malls are dotted with roadside tea shops and platform vendors. A report of the status of Canada reveals that income inequality is “almost exclusive” to major cities and the rest of the country is “surprisingly equal”.

State intervention is needed to bridge developmental gap between States and regions. The gap is due to varied causes like differences in per capita income, ratio of population below poverty line, percentage of people employed in agriculture indicating excessive pressure on land which is a cause of poverty, percentage of people under-employed or in seasonal employment.

Unequal level of infrastructure leads to unequal level of production, quality of services, etc.  They are reflected in differential life expectation, infant mortality rate, literacy and educational level, etc., within the country. Inequalities are also spatial, gender-based, and age-based.

Much of the disparities in India are between rural and urban areas because of inequality in infrastructure and opportunities. The country needs to widen access to health and education to reach interior villages.

Inequalities between generations are growing fast in middle and lower income families. They are less visible in rich families in India, at least in economic terms because of strong legal and conventional inheritance rights. The rich grow richer with efflux of time and their families for generations reap the benefits.

Generational gap arising from income, education, and employment is growing in middle classes.  Enormous increase in pay packets in some sectors and in self-employment in recent years has introduced economic gap not only between employees in different sectors, but also between generations within families. The gap is bound to grow and make life miserable for the elderly in the absence of social security for the aged. Net and mobile phones have introduced a new inter-generational divide.

A striking contrast is presented by Japan which has on the whole lower level of inequality than other developed nations. High income tax and inheritance tax rates work against accumulation of wealth for posterity. It is said that the richest families lose their wealth within three generations.

Gender-based inequality — a universal phenomenon — varies in intensity depending on educational and environmental factors. The Global Wage Report of the ILO for 2016-17 States that India suffers huge gender gap in pay and is among countries with worst levels of wage disparity. It points out that in India, women form 60 per cent of the lowest paid wage labourers, but only 15 per cent of highest paid wage-labourers. Equal pay for equal work is accepted in principle, but not universally practiced.

Reducing inequality requires a policy package comprising inclusive development, employment, investment in education and skill training, universal healthcare, and effective redistributive tax system. Universal basic income scheme can help eliminate acute poverty, but cannot obliterate inequalities.

There are certain other forms of inequalities in India that have settled themselves by long practice. The most disgusting among these are what has come to be termed as “VIP culture” and privileges enjoyed by power holders and celebrities. Some of these privileges are granted by law and regulations and some are assumed without sanction. Review of these is required in the interest of removing unearned benefits.

All said and done, equality is a political ideal to be promoted with political authority. Political parties that promise schemes towards equality often end up in lowering the top rather than uplifting the bottom. The entire politics over Reservation Policy is around correcting inequalities.   The policy has widened opportunities but nowhere near achieving an end to inequalities.

Federal States face an additional problem of unequal development between provinces/States. In India, the Union Government is promoting competition among States for construction of hospitals and educational institutions, infrastructure projects and for hosting national events.  This may promote healthy competition among States that are near equal and provide incentives for others to develop basic facilities necessary for projects.

Regional and local actors, who have the knowledge of local conditions, have an important role to play in erasing the impression that growth with equity is a far-fetched ideal in India. —INFA

(Copyright, India News & Feature Alliance)