Viewpoint: Dealing with rising inequality

11 JUL,2021 | MEDC


  • Socioeconomic stratification still remains relatively rigid in India and the extent of stickiness in incomes across generations is higher than in most other developing economies. Covid sharpened this trend. The pandemic-induced school lockdown will probably ensure that children from deprived backgrounds fall back even further vis-à-vis their more affluent peers. No doubt, there are signs of economic revival. But continuing demand and supply mismatches, employment-related issues, a lingering health-threat etc. are all creating unique problems in the recovery process and feeding inflation. RBI is handling the evolving situation to the best of its ability, but if the transitory shocks of supply and demand mismatches, labour issues and market issues persist, it may influence inflationary expectations in the economy. That couldrisk further widening the already unacceptable inequality in India.
  • For many families, the ability of the breadwinner(s)to work from home was key to survival during the pandemic. A recent IMF study shows that this ability is lower for low-income workers than for high-income earners. Naturally, sectors with activities more likely to be performed from home, saw a smaller reduction in employment during Covid. These two facts combined show that lower-income workers were less likely to be able to work from home and more likely to lose their jobs as a result of Covid. This would have a further detrimental impact on income inequality.
  • Headlines often hide more than they reveal. Even if the surveyed jobless rate has eased, the adverse impact on migrant workers and those employed in MSMEs is probably notadequately captured by official statistics. Thus, social assistance in the form of conditional cash transfers, food stamps, and nutrition and medical benefits for low-income households should continue for as long as possible. Developing policies to prevent decades of hard-won gains from being lost to Covid will be critical to ensuring an equitable and prosperous future long after the pandemic.
  • A way out is to invest in retraining and reskilling programmes that could boost reemployment prospects for adaptable workers whose job profiles could see long-term changes as a result of the pandemic. Covid has forced digitalization upon us at an unprecedented pace. Thus, expanding broadband access and promoting financial inclusion will be important for an increasingly digital world of work.
  • It is ultimately the track record of India’s economic policymakers that enabled them to proceed boldly during Covid without undermining market confidence. That matters, and this mutual trust needs to continue. Within the country, divergent recoveries in different regions reflect differences in state-level economic positions and policy responses.
  • Despite bearing the brunt of the national impact of Covid (both in terms of total infections and casualties), Maharashtra fared relatively well. At the outset, the state government made its citizens aware of the scale of the impendingsocioeconomic issues and impressed upon them the need to safeguard themselves and their families. In terms of the total number of people vaccinated, Maharashtra is again on top. However, vaccination is only a first step. Financial market volatility against a backdrop of fluctuating interest rates must be deftly managed, especially in an industrial state like Maharashtra, and particularly for the benefit of MSMEs. And wisely mobilizing political and social support remains central to implementing some difficult structural reformsfor ushering in a more egalitarian system. 

*Photo Credit: Google


Featured Posts

Recent Posts


Tourism and its contribution to the Economy

Interactive Meeting with Mr. Jaykumar Rawal Hon'ble Minister for Tourism & Employment Guarantee Scheme Govt. of Maharashtra

De-coding skills-based pro-bono


Food Inflation in India: An Assessment


© Copyright 2019 MEDC, All rights reserved
Website Design and Develop By: SCI Knowledge Interlinks