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[Burning Issue] Inequality in India

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Context

Ahead of the World Economic Forum’s Davos Agenda, Oxfam International presented its annual global Inequality Report titled ‘Inequality Kills’ which presented the quantum growth in wealth of a minuscule few, and the simultaneous impoverishment of millions of working people. The findings of the report remain dismal for India as well.

The report discussed India’s governance structures that promote wealth accumulation by a few and fail to provide safety nets to the rest of the population.

What is the “Inequality Kills” Report?

  • “Inequality Kills: The unparalleled action needed to combat unprecedented inequality in the wake of COVID-19” is a report released in January 2022 by Oxfam, a U.K.-based consortium.
  • The report argues for sustained and immediate action to end the pandemic, address global inequality and initiate concerted measures to tackle the climate emergency.
  • The central argument of the report is that inequality is a death sentence for people that are marginalized by social and economic structures and removed from political decision-making.
Constitutional Provisions to Tackle Inequality
There is a constitutional mandate in India to reduce inequality – Articles 38 and 39 of the Directive Principles of State Policy (DPSP) mandate a policy path.
Article 38(1): “The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of national life.”
Article 39 (c): The State shall, in particular, direct its policy towards ensuring that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

What are the key highlights of the report?

  • Inequality: a death sentence: The central argument of the report is that inequality is a death sentence for people that are marginalised by social and economic structures and removed from political decision making.
  • A new billionaire created every 26 hours since the pandemic began: The world’s 10 richest men have doubled their fortunes, while over 160 million people are projected to have been pushed into poverty.
    • Meanwhile, an estimated 17 million people have died from COVID-19—a scale of loss not seen since the Second World War.
  • Covid-19 effect: The wealth of the 10 richest men has doubled, while the incomes of 99% of humanity are worse off, because of COVID-19.
    • The 10 richest men in the world own more than the bottom 3.1 billion people. If the 10 richest men spent a million dollars each a day, it would take them 414 years to spend their combined wealth.
  • Vaccine Apartheid: It identifies “vaccine apartheid” (unequal access to vaccines between countries) and the lack of universal vaccination programs in many countries as a cause of the emergence of multiple new strains of the coronavirus that has led to the continuation of the pandemic.
  • Government expenditure resulting into inflation: It also demonstrates how emergency government expenditure (estimated at $16 trillion) that was meant to keep economies afloat during this crisis, inflated stock prices.
    • This resulted in billionaires’ collective wealth increasing by $5 trillion during the pandemic.
  • A 99% windfall tax on the COVID-19 wealth gains of the 10 richest men could pay to make enough vaccines for the entire world and fill financing gaps in climate measures, universal health and social protection, etc.

What Does The Report Say About India?

  • Inequality of Wealth: During the Covid-19 pandemic, the report reveals –
    • more than half the world’s new poor are from India,
    • 84% Indian households have suffered a loss of income,
    • with 4.6 crore people falling into extreme poverty
  • In this period, the richest 142 people have more than doubled their wealth to more than ₹53 lakh-crore.
  • And India’s top 10 per cent had around 45 per cent of the country’s total national wealth in 2020. Imposing tax on the rich in India can take care of vital public services like health and education.
  • Decline in Social Security Expenditure: As Covid continued to ravage India, the country’s healthcare budget saw a 10% decline from RE (Revised Estimates) of 2020-21.
    • The budgetary allocation for social security schemes declined from 1.5% of the total Union budget to 0.6%.
  • Increasing Fiscal Deficit: Lowering corporate taxes from 30% to 22% to attract investment last year (2020) resulted in a loss of Rs 1.5 lakh crore, which contributed to the increase in India’s fiscal deficit.
  • Imposing a 4 per cent tax on 98 wealthiest families in the country can look after –
    • the Ministry of Health and Family Welfare for more than two years,
    • the Mid-Day Meal Programme for 17 years or
    • the Samagra Shiksha Abhiyan for six years
  • The report also revealed that one-third of respondents with a ration was were not able to buy ration at a PDS outlet.

What are the factors of inequality?

  • Budgetary Decline: India is one of the few countries in the world where during the Covid pandemic the health Budget has declined — and that too by a huge 10% in 2021.
  • Social security expenditure has declined from an already low 1.5% in 2020-21 to 0.6% of the Union Budget in 2021-22. People are deprived of the most basic services and entitlements and are unable to survive.
  • Inequality in Salaries and Allowances: Social security pensions, for the elderly, for the disabled, and widows have been frozen at ₹200-₹300 a month for almost 15 years. However, in contrast, there has been an increment in the salaries and pensions of the policymakers.
  • The increase for one crore central government employees and pensioners has cost the exchequer more than the total social security pension budget for 3.3 crore beneficiaries.
  • Unavailability of Subsidized Food grain: The priority list of households under the National Food Security Act (NFSA) has been frozen in absolute numbers, based on a percentage determined from the 2011 Census.
    • In the last 11 years, population increases amounting to approximately 10 crore eligible beneficiaries have been kept out.
    • Therefore, approximately 12% legally entitled people — even children of existing “priority households” — cannot get subsidized foodgrain.
  • Unequal Access to Education: The pandemic has also produced a generation of children who have forgotten what formal education is. Many teenagers from poor households have already joined the workforce.
    • In this period, there has been a 6% cut in the education Budget. Relying on online teaching, accompanied by Budget cuts, amounts to the institutionalization of endemic multidimensional poverty.

How does the report propose to rectify global inequality?

The “Inequality Kills” report proposes far-reaching changes to structures of government, economy, and policymaking to fight inequality.

  • It urgently asks for “vaccine recipes” to be made open source so that every qualified vaccine manufacturer can manufacture them.
    • In doing so the report asks for monopolies over vaccines held by pharmaceutical giants and anchored in place through the World Trade Organisation, to end.
  • The report then asks for governments to “claw” back the wealth from billionaires by administering solidarity taxes higher than 90% especially on the billionaires that have profited during and because of the pandemic.
  • In addition to this, the report asks for permanent cancellation of tax havens, progressive taxation on corporations and an end to tax dodging by corporations.
  • The report then suggests that all of this regained wealth be redirected towards building income safety nets, universalising healthcare for everyone, investing in green technologies and democratising them, and, investing in protecting women from violence.
  • Finally, the report advocates for redistributing power along with wealth by strengthening workers’ unions, boosting political representation of marginalised groups, and asserting human rights.
  • Change rules and shift power in the economy and society: Governments must rewrite the rules within their economies that create such colossal divides, and act to pre-distribute income, change laws, and redistribute power in decision-making and power in the economy.
  • That includes ending sexist laws, including those which mean that nearly 3 billion women are legally prevented from having the same choice of jobs as men.
  • It must include tackling the barriers to representation for women, racialized groups, and working-class people. Women still make up only 25.5% of parliamentarians globally.

Implications of inequality

  • Crime and violence: The report identifies higher inequality with more crime and violence and less social trust.
  • Impact on marginalized: The brunt of inequality and the violence is borne, for instance, by women across the world, Dalits in India, Black, Native American and Latin persons in the US and indigenous groups in many countries.
  • Victimization of women: Pointing to the example of women, the problem runs a lot deeper as 13 million women have not returned to the workforce and 20 million girls are at risk of losing access to education.
  • Inequality causes a wide range of health and social problems, from reduced life expectancy and higher infant mortality to poor educational attainment, lower social mobility and increased levels of violence and mental illness.
  • Societal breakdown: It further leads to a societal breakdown in trust, solidarity and social cohesion, reducing people’s willingness to act for the common good.
    • For instance, social conflict among the social groups in India, like Patidar unrest and Jaat Andolan.
  • Denial of basic services: Due to the prevailing inequality in digital access, the digital solutions offered for providing basic services such as health and education face failure.
  • Environmental degradation: Greater inequality can lead to more rapid environmental degradation because low incomes lead to low investment in physical capital and education
  • The gap between the top 1% and the bottom 50% is wider for India than the United States, the United Kingdom, China, Russia and France.

What is the pattern of inequality over the years?

  • During Independence– In the Nehruvian years and after that too, a bid was made to battle the basic absence of social democracy in India, but it remained confined to States and regions.
    • The Five Year plans contributed to reducing the share of the top 10% who had 50% of the income under colonial rule to 35%-40% in the early decades after Independence.
  • During economic reforms– Since the mid-1980s, deregulation and liberalisation policies have led to the top 1% majorly profiting from economic reforms whereas the growth among low- and middle-income groups has been relatively slow.
    • The income of the bottom 50% in India grew at the rate of 2.2% per year between 1951 and 1981, but that the growth rate remained exactly the same over the past 40 years.
  • Post-2014– India seems to have got into a phase of an even greater reliance on big business and privatisation to fix economics and the latest World Inequality Report concludes that the bottom 50% share has gone down to 13%.

What flaws can be attributed to this?

  • Moving away from secularisation-The Union government’s now-stated policy to prioritise members of one religion and one language, has severe economic consequences widening the income inequality.
  • Reverse modernisation– By choosing to reverse the idea of modernisation, linking religion firmly into the public sphere, trying to unmake the modernity, we may be setting ourselves on a narrow path that nations in the world have already arrived at.
  • One size nation– The quick descent into a one size nation does not fit its much diversity. The state is now fanning systems and principles to further inequalities.
  • Denial of equality– B.R. Ambedkar had issued a grim warning in 1949 that if we continue to deny social and economic inequality for long, we could blow up the structure of political democracy.

What are the different forms of inequality prevalent in India?

  • Income and wealth inequality, as mentioned above in the findings of the World Inequality Report.
  • Digital inequality: According to National Sample Survey (2017), only 6% of rural households and 25% of urban households have a computer. Only 17% in rural areas and 42% in urban areas have access to internet.
  • Social inequality: It is the differential access to wealth, power, and prestige. Social inequality may exist on gender, race, age, ethnicity, religion, and kinship. This form of inequality is widely prevalent in India.

What are the reasons behind high inequality in India?

  • The slow economic and GDP growth: GDP growth has been rather slow since the Global Financial Crisis of 2008 and has completely lost its momentum since the start of 2017. For a relatively poor country such as India, the most durable and dependable way to reduce inequality is to increase the size of GDP.
  • Lack of digital access: Poor households are not able to afford devices to ensure digital access for their children. Most of the rural students could not access online classes, due to lack of devices, shared devices, inability to buy “data packs”, etc.
  • Increased penetration of technology and industrialization: Some experts argue that as technology is skill biased, so those who are able to use technology experience an increase in productivity and wages compared to their less-skilled counterparts.
    • The increase in productivity leads to the spread of technology, which, in turn, creates a higher demand for skilled workers. This self-reinforcing cycle increases wealth and income inequality.
  • Large numbers of the labor force work in sectors with low productivity. Consider agriculture. It provides 53 per cent jobs, while contributing only 17% to the GDP

Way Forward

  • Multi-Pronged Approach to Tackle Inequality: Programs such as the National Food Security Act must receive the quantum of allocations needed.
    • Also, the People’s Action for Employment Guarantee (PAEG) has estimated that approximately ₹2,64,000 crore will be needed to guarantee 100 days work for currently active job cards.
  • The social security pensioners need to be protected from hunger, sickness and poverty. The election season offers an opportunity to fetch the basic rights of the unorganized and vulnerable people.
  • Gains from Tax: All the governments should immediately tax the gains made by the super-rich during this pandemic period.
  • Increasing the Reach of Basic Necessities: Given the growing inequality in India, the direction that public policy should now take is evident, there is a need to spread health and education far more widely amidst the population.
    • By ensuring universal access to public funded high quality services like Public health and education, social security benefits, employment guarantee schemes, inequality can be reduced to a great extent.
  • Employment Generation: The labor-intensive manufacturing sector of India has the potential to absorb millions of people who are leaving farming while the service sector tends to benefit the urban middle class.

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