While a small section of India’s populace enjoys top privileges, for the bottom 50% sustainability of life is still a challenge
AsiaTimes
APRIL 11, 2023
India still is home to the world’s highest number of poor people.
Photo: Wikimedia Commons / Varun Chatterji
The deliberation and discourse on India’s inequality have been mostly concentrated on two key points: First, all highlights are on the top-1% “billionaire class” and its exponential growth over the period; second, on those surviving below poverty line. However, the most important question resides in the space occupied in between: What are the inequality dynamics, and how severe is this inequality trap?
Growing inequality is one of the biggest concerns, as a recent report says that in India, 5% own more than 60% of the country’s wealth. Data from the Forbes Rich List confirm this trend of concentration of wealth at the very top of the income distribution in India.
The net worth of Indian billionaires increased substantially, from 2% of GDP in 2000 to 20% in 2020. The concentration of assets in few people’s hands implies that the growth process is not inclusive.
At US$719 billion, India’s 142 billionaires are now worth more than the poorest 555 million Indians – more than half a billion people.
India’s billionaires saw their combined fortunes more than double during the Covid-19 pandemic and the number of Indian billionaires shot up by almost 40% since 2020 (data used here are from the Forbes billionaires list released every March). Ironically, while rich people were getting richer, the income of 84% of Indian households declined in 2021.
While a small section of India’s populace enjoys top privileges, for the bottom 50% sustainability of life is still a challenge. This is due to a variety of factors, including but not limited to loss of job opportunities, an erratic unorganized sector, rising poverty and inflation.
Between 2017 and 2022, the overall labor participation rate dropped from 46% to 40%. Among women, the data are even starker. About 21 million disappeared from the workforce, leaving only 9% of the eligible population employed or looking for positions.
Now, more than half of the 900 million Indians of legal working age – roughly the population of the US and Russia combined – don’t want a job, as most of them are not finding suitable jobs, matching to their education and skill.
More proof of growing inequality in India is surfacing from government income-tax data. The number of middle-income taxpayers in India has declined dramatically after 2018-19. It fell 17% in following years, from 49.8 million to 41.1 million. In the same period, the number of high-income taxpayers rose 15%.
India still is home to the world’s highest number of poor people, at 228.9 million. This poverty is hopelessly entrenched, more so because in an era of unbridled food and fuel inflation and the gravest health crisis in a century, the poor are even more vulnerable to rising food and energy prices and to catastrophic health expenditures.
The National Crime Records Bureau (NCRB) reports that, on an average, 115 daily wage workers died by suicide every day in 2021.
Lessons from abroad
Rising inequality is linked to slower economic growth. Given that the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are among the most equal in the world on a variety of criteria, it makes sense to look to them for guidance on how to create a more equal society.
Nordic countries have attained high levels of welfare and equality. This is due to strong focus on social solidarity, taxation and higher spending on education and health care. Unlike most other nations, these countries offer free higher education to their citizens.
Evidence suggests that expenditure on health care, education, and social safety reduces inequality. For example, if a government invests in free and high-quality public services, poor people would not have to spend on them, allowing them to save money.
Income transfers to the poorest segment of society are the most direct way to keep inequality in check and reduce poverty. These taxes, if used to fund public services, can further reduce inequality. Providing tax benefits to companies that share more of the profits with their employees can also help in mitigating the disparity.
In other words, when income inequality is low, people’s position in income distribution is not so dependent on their circumstances at birth. Alternatively, in countries where income inequality is high, people’s position in the economic ladder is largely predetermined by their circumstances at birth.
People starting in disadvantaged positions are trapped in those positions. This means that someone born in the bottom economic class may have a slim chance of moving up to a better economic situation than their parents. This means that they are affected by more severe inequality traps, their inequalities in opportunities are reproduced over time and across generations.
In societies with low equality of opportunity, talented individuals may not reach their full potential because they are constrained by circumstances rather than by their lack of effort. Rural and urban linkages are also required to correct the structural wrongs in the system.
There is inequality in access to education and skill development across genders, scheduled caste/scheduled tribe populations and the minority communities, which needs to be addressed.
The current trend of rising inequality in India, if not checked by the right policy measures, could exacerbate the existing poverty situation to the worst level.
The deliberation and discourse on India’s inequality have been mostly concentrated on two key points: First, all highlights are on the top-1% “billionaire class” and its exponential growth over the period; second, on those surviving below poverty line. However, the most important question resides in the space occupied in between: What are the inequality dynamics, and how severe is this inequality trap?
Growing inequality is one of the biggest concerns, as a recent report says that in India, 5% own more than 60% of the country’s wealth. Data from the Forbes Rich List confirm this trend of concentration of wealth at the very top of the income distribution in India.
The net worth of Indian billionaires increased substantially, from 2% of GDP in 2000 to 20% in 2020. The concentration of assets in few people’s hands implies that the growth process is not inclusive.
At US$719 billion, India’s 142 billionaires are now worth more than the poorest 555 million Indians – more than half a billion people.
India’s billionaires saw their combined fortunes more than double during the Covid-19 pandemic and the number of Indian billionaires shot up by almost 40% since 2020 (data used here are from the Forbes billionaires list released every March). Ironically, while rich people were getting richer, the income of 84% of Indian households declined in 2021.
While a small section of India’s populace enjoys top privileges, for the bottom 50% sustainability of life is still a challenge. This is due to a variety of factors, including but not limited to loss of job opportunities, an erratic unorganized sector, rising poverty and inflation.
Between 2017 and 2022, the overall labor participation rate dropped from 46% to 40%. Among women, the data are even starker. About 21 million disappeared from the workforce, leaving only 9% of the eligible population employed or looking for positions.
Now, more than half of the 900 million Indians of legal working age – roughly the population of the US and Russia combined – don’t want a job, as most of them are not finding suitable jobs, matching to their education and skill.
More proof of growing inequality in India is surfacing from government income-tax data. The number of middle-income taxpayers in India has declined dramatically after 2018-19. It fell 17% in following years, from 49.8 million to 41.1 million. In the same period, the number of high-income taxpayers rose 15%.
India still is home to the world’s highest number of poor people, at 228.9 million. This poverty is hopelessly entrenched, more so because in an era of unbridled food and fuel inflation and the gravest health crisis in a century, the poor are even more vulnerable to rising food and energy prices and to catastrophic health expenditures.
The National Crime Records Bureau (NCRB) reports that, on an average, 115 daily wage workers died by suicide every day in 2021.
Lessons from abroad
Rising inequality is linked to slower economic growth. Given that the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are among the most equal in the world on a variety of criteria, it makes sense to look to them for guidance on how to create a more equal society.
Nordic countries have attained high levels of welfare and equality. This is due to strong focus on social solidarity, taxation and higher spending on education and health care. Unlike most other nations, these countries offer free higher education to their citizens.
Evidence suggests that expenditure on health care, education, and social safety reduces inequality. For example, if a government invests in free and high-quality public services, poor people would not have to spend on them, allowing them to save money.
Income transfers to the poorest segment of society are the most direct way to keep inequality in check and reduce poverty. These taxes, if used to fund public services, can further reduce inequality. Providing tax benefits to companies that share more of the profits with their employees can also help in mitigating the disparity.
In other words, when income inequality is low, people’s position in income distribution is not so dependent on their circumstances at birth. Alternatively, in countries where income inequality is high, people’s position in the economic ladder is largely predetermined by their circumstances at birth.
People starting in disadvantaged positions are trapped in those positions. This means that someone born in the bottom economic class may have a slim chance of moving up to a better economic situation than their parents. This means that they are affected by more severe inequality traps, their inequalities in opportunities are reproduced over time and across generations.
In societies with low equality of opportunity, talented individuals may not reach their full potential because they are constrained by circumstances rather than by their lack of effort. Rural and urban linkages are also required to correct the structural wrongs in the system.
There is inequality in access to education and skill development across genders, scheduled caste/scheduled tribe populations and the minority communities, which needs to be addressed.
The current trend of rising inequality in India, if not checked by the right policy measures, could exacerbate the existing poverty situation to the worst level.
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