Introduction:
India has witnessed remarkable economic growth over the past two decades, marked by robust GDP expansion, a burgeoning middle class, and increased per capita GDP. Despite these achievements, the nation faces persistent challenges in the form of low wages and income inequality, underscoring the need for inclusive growth that ensures equitable benefits.
Body:
India’s Economic Progress: Over the last two decades, India has experienced a significant increase in its real GDP growth rate, averaging around 6.1% since the 2000s. The country’s per capita GDP has grown at a Compound Annual Growth Rate (CAGR) of 6% since 2000, a notable improvement over the 3% CAGR seen during 1980-2000. Real wages in India nearly doubled over the 18-year period from 1902-03 to 2022-23, coinciding with a four-fold growth in GDP.
Low Pay and Wage Inequality:
Low Pay as a Barrier:
- Purchasing Power: In 2022, the average per capita income in India was approximately ₹1,26,406, limiting individuals’ purchasing power. This affects overall demand in the economy, hindering economic growth.
- Living tandards: National Sample Survey Office (NSSO) data indicates that many in India face challenges in accessing basic amenities, compromising living standards and quality of life.
- Savings and Investment: With gross national savings at around 30% of GDP in 2022, low pay limits individuals’ capacity to save or invest in education and skill development.
- Economic Disparities: Income disparities have increased, with top earners capturing a significant portion of economic gains, contributing to overall economic disparities.
- Social Mobility: The lack of economic resources due to low wages hinders social mobility, making it difficult for individuals to escape poverty and improve their circumstances.
Income Inequality as a Barrier:
- Regional Disparities: Significant regional disparities exist in income, with states like Maharashtra and Delhi experiencing higher incomes than northeastern and central states, limiting economic opportunities in lower-income regions.
- Gender Gap: The gender pay gap in India is estimated at around 35%, limiting economic empowerment and opportunities for women’s economic participation.
- Sectoral Differences: Income inequality varies across economic sectors, with some offering better-paying jobs, while the informal sector provides lower wages, perpetuating disparities.
- Access to Opportunities: Income inequality limits access to education and healthcare, perpetuating social and economic disparities across income groups.
- Economic Mobility: High-income inequality hinders economic mobility, particularly for lower-income segments of the population, while top earners have seen significant income growth.
Reasons for Low Pay and Wage Inequality:
- The services sector, which has been a significant source of employment over the last two decades, is less labor-intensive and more productive compared to the primary and secondary sectors.
- The IT and IT-enabled services sub-sectors created only around three million direct jobs by 2022. India’s minimum wage system is highly complex, and there is substantial spatial variation in minimum wage rates.
- Only 66% of workers are covered by the Minimum Wage Act, leaving the remaining 34% outside the law’s scope.
- Around 93% of the working population is engaged in the informal sector, characterized by high levels of segmentation and informality.
Impact on Inclusive Growth:
- Poverty Alleviation: The World Bank estimates that approximately 16% of India’s population lived below the international poverty line of $1.90 per day in 2023. Low pay and income inequality hinder efforts to reduce poverty, as a substantial portion of the population struggles to meet basic needs.
- Education and Human Development: According to the Annual Status of Education Report (ASER) 2023, around 5.5% of rural children in the age group of 6 to 16 years were out of school. Low income and inequality limit access to quality education and skill development, impacting human capital development.
- Healthcare Access: The National Family Health Survey-5 indicates variations in healthcare access, with disparities in immunization rates and antenatal care. Income inequality affects access to healthcare services, leading to health disparities and reduced well-being.
- Employment Opportunities: The International Labour Organization (ILO) reported that India’s unemployment rate was approximately 6.1% in 2023. Low pay and income inequality result in limited job opportunities, especially for marginalized groups, hindering economic participation.
- Social Mobility: The Gini coefficient, which measures income inequality, was 0.35 in India in 2023, indicating a significant level of inequality. High-income inequality hinders social mobility, making it challenging for individuals to move out of poverty and improve their living standards.
- Entrepreneurship and Innovation: India’s Global Innovation Index (GII) rank was 40th out of 132 countries in 2023. Income inequality limits access to resources and opportunities for entrepreneurship and innovation, hindering economic growth.
- Infrastructure Development: The World Economic Forum’s Global Competitiveness Index ranked India 40th out of 141 countries in 2023. Low income and inequality impact infrastructure development and the quality of life in various regions.
Government Initiatives:
- Pradhan Mantri Kaushal Vikas Yojana (PMKVY): This skill development program aims to empower a large number of Indian youth through skill training, enabling a better livelihood.
- Pradhan Mantri Jan Dhan Yojana (PMJDY): This financial inclusion program focuses on bringing unbanked individuals into the formal financial system, promoting savings and access to credit.
- Make in India: This initiative promotes investment in the manufacturing sector, which can potentially lead to higher-paying jobs and inclusive growth.
- National Rural Employment Guarantee Act (NREGA): NREGA guarantees a minimum number of days of employment in rural areas, providing a safety net for those in low-pay sectors.
- Start-Up India: Encouraging entrepreneurship and innovation, this initiative aims to create job opportunities and reduce income inequality.
- Atal Pension Yojana: This program focuses on providing pension benefits to individuals working in the unorganized sector, improving their financial security.
Conclusion:
While India’s economic progress is undeniable, the persistence of low pay and income inequality poses formidable challenges to achieving inclusive growth. By prioritizing these measures, India can move closer to realizing its vision of inclusive growth, where every citizen enjoys the benefits of the nation’s economic success.
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