26 MAR,2024 | MEDC
According to a recent study by the World Inequality Lab, India’s richest now have a larger share of the national income than in over a century. The top 1% of Indians earn 22.6% of the national income (with the corresponding figures for the US, Brazil, South Africa, China, France, and UK being 20.9%, 19.7%, 19.3%, 15.7%, 12.7%, and 10.2% respectively) compared to 15% earned by the bottom 50% of the population. The study also noted that wealth, which can broadly be interpreted as a measure of assets held as opposed to income earned, is unequally distributed. The top 1% of Indians owned 39.5% of the national wealth in 2023 compared to 6.5% held by the bottom 50% of the country. Data for wealth inequality is available from 1961. This is close to the highest share since then.
Such severe economic imbalances do not bode well for social stability as they are likely to facilitate disproportional influence on public policy. This is even more so in societies with relatively weak institutional structures, such as India. Rectifying them calls for a long-run policy focus on education and healthcare, and a short-run emphasis on altering tax policies to ensure better redistribution of national resources. It is too important to be left to chance.
But even though the proportion of people worldwide falling short on life’s essentials, such as food, water, healthcare and political freedom of expression is rising, we cannot afford to depend on solutions compromising the earth’s life-sustaining systems such as a stable climate, a healthy blue economy, and a protective ozone layer, on which all of our wellbeing (indeed, survival) fundamentally depends.
Policy should not wait for economic growth to sort things out, because it won’t. It needs to be distributive by design. The lower redistributive impact of fiscal policy in developing economies is a key factor behind their high levels of inequality. Rising social spending can be used to combat inequality. A fair and equitable distribution of income should be a prerequisite of the social contract. This could begin with integrating social safety nets into adjustment programmes, and safeguarding access to basic public services in healthcare and education. An important point to note is that with the right systemic design, government tax and spending policies can help achieve both stronger and more sustainable growth as well as greater equality of outcomes and opportunities.
Inequality has become the topic of our times, even though just two decades ago it was politically correct to keep it off the agenda. But it is now the gorilla in the room – too big to be ignored. To transform this dismal landscape, we need to create economies that are distributive by design – ones that share commercial value more equitably amongst all those who help to generate it. But thanks to the emergence of modern technologies, particularly in digital communication and renewable energy generation, we now have a higher chance of achieving this noble objective than any preceding generation.
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Interactive Meeting with Mr. Jaykumar Rawal Hon'ble Minister for Tourism & Employment Guarantee Scheme Govt. of Maharashtra