Economic inequality stands as a towering challenge within the complex socio-economic landscape of India, a nation characterized by its diversity in culture, geography, and economic development. With a population exceeding 1.3 billion people, India harbors a paradoxical economic narrative where rapid growth coexists with staggering inequality. While the country has witnessed remarkable progress in various sectors, including technology and finance, a substantial portion of its populace remains mired in poverty and deprivation. The chasm between the affluent and the marginalized persists, manifesting in stark contrasts in income, wealth distribution, and access to basic amenities. This pervasive economic inequality not only threatens social cohesion but also undermines the country’s potential for sustained and inclusive development. Understanding the multifaceted dimensions of economic inequality in India is crucial for formulating effective policy interventions aimed at fostering equitable growth and opportunity for all segments of society.
Economic Growth Trajectory of India
FY 2022/23: India’s real GDP expanded by an estimated 6.9%, driven by:
Robust domestic demand
- Increased investment in infrastructure encouraged by the government
- Strong private consumption, especially among higher-income earners
FY 2023/24:
- Real GDP growth estimated at 7.3%, up from 7.2% in 2022-23
- India ranked 5th in the world’s GDP rankings for 2024
- Economy reported at $3.7 trillion, up from $1.9 trillion a decade ago
Future Prospects:
- Indian economy projected to reach $7.3 trillion by 2030 and $10 trillion by 2035
- Indian government aims to transform India into a ‘developed country’ by 2047
What are the Inequality Trends in India?
Wealth Inequality:
- India exhibits staggering wealth inequality, with the top 10% of the population holding 77% of the total national wealth.
- The richest 1% owns 53% of the country’s wealth, leaving the poorer half with a mere 4.1%.
Income Inequality:
- According to the World Inequality Report 2022, India ranks among the most unequal countries globally, with the top 10% and top 1% holding 57% and 22% of the national income, respectively.
- Meanwhile, the share of the bottom 50% has decreased to 13%.
Tax Burden on the Poor:
- A disproportionate burden falls on the lower-income brackets, with approximately 64% of the total goods and services tax (GST) collected from the bottom 50%, compared to only 4% from the top 10%.
Healthcare Accessibility:
- Many ordinary Indians struggle to access necessary healthcare, with 63 million pushed into poverty annually due to healthcare costs.
Food Security and Nutrition:
- Around 74% of India’s population cannot afford a healthy diet, and 39% lack nutrient-adequate nutrition.
- India’s 2023 Global Hunger Index (GHI) score is 28.7, signaling a serious issue as per the GHI Severity of Hunger Scale.
- Notably, India’s child-wasting rate, at 18.7, is the highest recorded in the report.
Gender Inequality:
- India ranks 127th out of 146 countries in the Global Gender Gap Report 2023.
- The country faces the persistent challenge of “missing women” from the workforce, constituting a complex and ongoing issue.
Causes of Increasing Inequality Despite High Economic Growth in India
Wealth Accumulation:
- Concentration of Wealth: When wealth is concentrated in the hands of a few, it perpetuates inequality across generations as advantages are passed down to descendants.
- Inadequate Land Reforms: Insufficient land reforms leave a significant portion of the population landless or with insufficient land, increasing vulnerability to poverty and economic instability.
- Crony Capitalism: Corrupt practices and favoritism result in wealth accumulation among a select group, furthering inequality.
Lack of Inclusive Growth Policies:
- Skewed Distribution of Economic Gains: Economic growth may unevenly benefit specific sectors or income groups, exacerbating wealth disparities.
- Regressive Taxation Policies: Tax systems favoring the wealthy or lacking progressivity contribute to income inequality.
- Lack of Social Safety Nets: Insufficient social safety nets and welfare programs leave vulnerable populations without adequate support, widening the wealth gap.
Inadequate Labour Policies:
- Financialization of the Economy: Prioritizing financial markets over productive investments concentrates wealth in the financial sector.
- Wage Gaps: Disparities between skilled and unskilled workers, along with lower wages and fewer benefits in informal labor markets, exacerbate income inequality.
- Absence of Minimum Wages: Weak labor market policies, including inadequate minimum wage regulations and limited collective bargaining rights, contribute to income disparities.
Social Exclusion:
- Caste Discrimination: Social exclusion based on caste marginalizes certain groups, limiting their access to opportunities, resources, and benefits.
- Gender Inequality: Discrimination based on gender results in unequal access to employment opportunities and wage disparities.
- Lack of Access to Education: Unequal access to quality education restricts upward mobility opportunities, reinforcing existing disparities.
- Technological Deprivation: Automation and technological advancements lead to job displacement and wage stagnation for certain groups, worsening income inequality.
Steps should be taken to Achieve Inclusive Growth in India
Foster Inclusive Framework:
- Uphold Constitutional Provisions: Ensure strict adherence to the constitutional guarantee of equality enshrined in fundamental rights through effective policy enforcement.
- Progressive Taxation: Implementing progressive taxation can mitigate income inequality by requiring higher earners to contribute a larger share of their income towards taxes.
- Utilize Wealth Tax: Introduce a 1% wealth tax on Indian billionaires to fund initiatives like the National Health Mission, with a 2% tax proposed to support nutrition programs for India’s malnourished population over three years.
Inclusive Governance:
- Encourage Citizen Participation: Promote inclusive governance by fostering citizen engagement, transparency, and combating corruption.
- Empower Marginalized Communities: Empower local self-governments and involve marginalized communities in decision-making processes.
Private Sector Engagement:
- Corporate Social Responsibility: Encourage corporate social responsibility initiatives that prioritize inclusive development and support community projects.
- Social Sector Investment: Advocate for private sector investment in social sectors and community development endeavors.
Increase Reach of Basic Necessities:
- Universal Access to Public Services: Ensure universal access to high-quality public services such as healthcare, education, and social security benefits to diminish inequality.
- Employment Generation: Focus on labor-intensive manufacturing sectors to absorb rural migrants, alongside benefiting the urban middle class.
- Women Empowerment: Promote gender equality in education, employment, and entrepreneurship to enhance women’s economic and social empowerment.
Social and Financial Inclusion:
- Land Reforms: Implement comprehensive land reforms to address land ownership and tenancy issues, promoting fair distribution of land resources.
- Civil Society Promotion: Support civil society groups, including unions and associations, to amplify the voices of historically marginalized communities.
- Technology and Innovation: Embrace technological advancements to create opportunities for all, ensuring equitable distribution of benefits across society.
Conclusion
India has the potential to move towards a more equitable society by adopting inclusive policies that address the root causes of inequality. This transformative strategy is in line with the objectives of the United Nations’ Sustainable Development Goal 10.
FAQs
1. What causes economic inequality in India?
Economic inequality in India is primarily caused by a combination of factors including historical disparities, unequal access to education and healthcare, insufficient job opportunities, disparities in land ownership, and inadequate government policies. Historical factors such as the caste system and colonial exploitation have contributed to entrenched inequality. Additionally, rapid economic growth has not been inclusive, leading to a concentration of wealth in the hands of a few.
2. How does economic inequality impact society in India?
Economic inequality exacerbates social tensions and hinders overall development in India. It leads to unequal access to opportunities, perpetuates poverty cycles, and undermines social cohesion. Inadequate access to education and healthcare further entrenches inequality, limiting the potential for upward mobility. Moreover, economic inequality can lead to political instability and undermine democratic processes as the interests of the wealthy often dominate policy-making.
3. What measures are being taken to address economic inequality in India?
The Indian government has implemented various policies aimed at reducing economic inequality. These include affirmative action programs such as reservations in education and employment for marginalized communities, schemes to promote financial inclusion such as the Jan Dhan Yojana, and initiatives to enhance access to healthcare and education such as the National Health Mission and Sarva Shiksha Abhiyan. Additionally, efforts to promote inclusive growth through infrastructure development and rural employment programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are ongoing.
4. What role does taxation play in addressing economic inequality in India?
Taxation policies play a crucial role in addressing economic inequality in India. Progressive taxation, where higher income groups are taxed at a higher rate, can help redistribute wealth and reduce inequality. The Indian government has implemented measures such as the Goods and Services Tax (GST) and income tax reforms to increase revenue collection and fund social welfare programs. However, tax evasion and loopholes in the tax system remain challenges that need to be addressed to ensure a more equitable distribution of wealth.
5. How can civil society contribute to reducing economic inequality in India?
Civil society organizations play a significant role in advocating for policies and programs that address economic inequality. They can raise awareness about the impacts of inequality, mobilize communities to demand government action, and provide support services to marginalized groups. Additionally, civil society can engage in research and policy analysis to identify effective solutions and hold governments and corporations accountable for their actions. Grassroots movements and community-based initiatives can also empower individuals and communities to challenge systemic inequalities and promote social justice.
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