How much income inequality is in India?

India Nov 25, 2020

Income inequality in India refers to the unequal distribution of wealth and income among its citizens. According to the CIA World Factbook, the Gini Index of India (a measure of income distribution inequality) was 35.2 in 2011. Wealth distribution is also uneven estimating that 54% of the nation’s wealth is in the hands of the millionaires. The richest people in India (only 1%) hold their own 58.4% of the wealth. The richest 10% of Indians own 80% of the wealth. This data clearly shows the situation of the distribution of the nation’s wealth. Year by year, this data is getting worse as the rich are getting richer and the poor do not get any better if not worse. N. C. Saxena, a member of the National Advisory Council, suggested that the widening income disparity can be accounted for by India's badly shaped agricultural and rural safety nets. In fact, due to many reasons, India is among the top three most unequal countries of the world. Many say that technology and industrialization are the cause for high economic disparity as the demand for high-skilled workers is increasing. But this is not true as technology is only helping both the high-skilled and low-skilled or unskilled workers for the better. Then what is the cause behind such a huge gap between the rich and the poor? Mainly, it is the inefficient working of the unskilled workforce and disguised unemployment. Consider agriculture. It employs almost 57% of the working population but it contributes only 17% to the GDP. The remedy to this intricacy would be to allow labour movement to the sectors which require more labour. In India’s case, it would be to transfer the excess labour from agriculture and shifting them to the industries. Alongside with the shift, the labourers should also be incentivized and labour protection should be reinforced. There are certain other factors such as increasing unemployment, inflationary rise in prices, credit policies of banks and financial institutions do not provide with appropriate policies for the poor, licensing policy of the government neglects the interests of small scale industrialists, and although India had adopted the progressive taxation form the beginning, evasion of taxes, peculiarly direct taxes such as - income tax, wealth tax, gift tax, etc. are quite rampant in India. The growing menace of the parallel economy is also a crucial factor contributing to disparity.

Technology should not be scrutinized as an amenable factor but should be used for the welfare of the society and in turn, diminishing the inequality. Technology penetration could do wonders for the nation.

Even though the scenario is worsening every year, there still is hope for improvement which can be achieved by shifting labour to sectors which demand it more, providing labour protection, focusing on inclusive growth, skill development campaigns and dispensing equal opportunities for all.

This article has been written by Suhani Nowal for The Paradigm

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