Context

Addressing income inequality is a significant global challenge that requires a nuanced and multifaceted approach. Tackling this issue involves exploring, testing, and implementing a variety of strategies to cultivate a more equitable society.

Overview

• Income inequality: According to the World Inequality Report 2022, India is among the most unequal countries in the world, with the top 10% and top 1% of the population holding 57% and 22% of the total national income respectively. The share of the bottom 50% has gone down to 13%.
• Wealth Inequality: India is one of the most unequal countries in the world, with the top 10% of the population holding 77% of the total national wealth. The richest 1% of the Indian population owns 53% of the country’s wealth, while the poorer half jostles for a mere 4.1% of national wealth.

Causes of Income inequality

In India  it is influenced by several interconnected factors:

• Historical Legacy: The legacy of colonial rule and socio-economic disparities created over centuries have had a lasting impact on inequality. Historical factors like land distribution and social stratification have contributed to persistent inequality.
• Educational Disparities: Access to quality education is uneven across different regions and socio-economic groups. This disparity limits opportunities for marginalized communities and exacerbates income inequality.
• Employment and Wage Gaps: There are significant disparities in employment opportunities and wages between different sectors, regions, and skill levels. Informal sector workers and those in low-wage jobs face precarious conditions compared to those in formal, high-paying sectors.
• Regional Disparities: Economic development is uneven across India's states and regions. Prosperous states with better infrastructure and resources tend to attract more investment, while less developed regions lag behind.
• Land Ownership and Agriculture: Concentration of land ownership among a few individuals or families and inefficiencies in the agricultural sector contribute to rural poverty and inequality.
• Economic Policies: Certain economic policies and reforms may benefit wealthier individuals and corporations more than the broader population, exacerbating income inequality. For instance, tax policies, subsidies, and economic liberalization can have uneven effects.
• Social Stratification: Caste-based and gender-based discrimination continues to affect access to resources and opportunities, reinforcing economic disparities among different social groups.
• Wealth Concentration: The accumulation of wealth among a small segment of the population, including the super-rich, contributes to growing income inequality. High levels of wealth concentration limit economic mobility for the majority.
• Access to Healthcare and Social Services: Inequitable access to healthcare, social services, and welfare programs affects the quality of life and economic opportunities for poorer segments of society.
• Globalization and Technological Change: While globalization and technological advancements have created opportunities for growth, they have also led to job displacement and wage polarization, affecting income distribution.

Key areas to address:

• Progressive Taxation: Implement progressive tax policies to redistribute wealth from the affluent to marginalized communities. This approach is about using tax revenue to improve public services such as health, education, skill development, and job creation, rather than simply transferring wealth.
• Education and Skill Development: Ensure access to quality education and skill development programs. Lifelong learning opportunities are crucial for enhancing employability and increasing earning potential.
• Fair Labour Laws: Enforce labour rights, establish minimum wages, ensure workplace safety and security, eliminate child labour, protect against exploitation, and support collective bargaining to ensure that all workers benefit from economic growth.
• Investment in Infrastructure: Invest in infrastructure to reduce regional disparities, promote inclusion, and ensure sustainability. Focus areas include environmental infrastructure, water and sanitation, forests, energy, climate change, housing, and transportation.
• Contribution of the Super Rich: Encourage the super-rich to contribute to public welfare through initiatives like the ‘Giving Pledge,’ where wealthy individuals commit to donating a significant portion of their wealth. As of 2023, over 235 ultra-wealthy individuals in 28 countries have pledged $600 billion for public good. Additionally, consider implementing inheritance taxes for large asset transfers, as seen in countries like Japan, South Korea, France, and the United States.

Inclusion and Equity

• Focus on Resource Allocation: The aim is not to increase or introduce new taxes for the middle class, the rich, or the super-rich. Instead, it is about finding resources to lift millions out of poverty and joblessness through value addition, production efficiency, quality, and inclusive practices.
• Need for Thoughtful Analysis: Discussions should be based on thorough analysis and debate rather than spreading misconceptions. India has made progress in poverty reduction, but more bold and innovative actions are needed beyond existing solutions.
• Shift in Economic Focus: Transition from “economies of scope and scale” to an “economy of purpose” with a focus on inclusion, equity, and sustainability to effectively address poverty.
• Exploring Strategies for Resilience: India needs a reflective policy framework that ensures growth with justice and hope. This involves examining global experiences and leveraging India's creativity and innovation.
• Globalization and Market Liberalization: Recognize that globalization and market liberalization are not panaceas but require vigilant management and adaptability, given their inherent risks highlighted by past global market turmoil, the COVID-19 pandemic, and geopolitical conflicts.
• Gandhian Model of Development: Embrace decentralization and focus on local needs, talents, and resources. Investing in small and medium-sized enterprises (SMEs) and local innovations can drive local employment and prosperity.
• Challenges in Financial Services: Banks tend to favour large loans for big companies over small loans for SMEs. This needs to be addressed with advancements in digital technology for financial services.
• Leveraging Local Resources: Utilize India’s 800 districts, each with unique climates, resources, and talents, to develop local production centres and digital platforms. This will facilitate supply chains, logistics, markets, and distribution, promoting localized growth and global market integration.

Future Directions

• Emerging Job Sectors: Future job opportunities, even in an AI-driven world, will be centered around sectors such as food, education, healthcare, tourism, and manufacturing.
• Global Workforce: India's young talent represents a significant portion of the global workforce, highlighting the country's potential in these key areas.
• Assessing Progress: Evaluate progress based on advancements in human and technological development, and the adoption of a new economic model focused on decentralization and digital platforms.
• New Economic Model: The future economic model should emphasize decentralization, digital connectivity, and changes in consumption patterns to promote inclusion, meet basic human needs, and support sustainability.
• Tech and Economic Transformation: The future lies in adopting a new technological and economic approach that prioritizes inclusion, conservation, and non-violence.
• Lifestyle Change: Embrace a shift in lifestyle that values “sharing and caring” over the “vulgarity of conspicuous consumption,” focusing on happiness and well-being rather than material excess.

Conclusion

Addressing income inequality requires a multifaceted approach that tackles the root causes of disparity and promotes equitable growth. It involves implementing progressive taxation, ensuring access to quality education and skill development, enforcing fair labour laws, investing in infrastructure, and encouraging contributions from the wealthiest individuals. Beyond these measures, fostering a new economic model centered on inclusion, sustainability, and the well-being of all citizens is crucial. By focusing on both immediate interventions and long-term systemic changes, societies can work towards reducing income inequality and creating a more just and equitable future for everyone.

Source: THE HINDU