Archives: News

Why in the News?

A recent study by Thomas Piketty and colleagues highlights a dramatic rise in wealth and income inequality in India over the past few decades, with a sharp increase particularly from 2014 to 2022.

The analysis from ” Gallup World Poll (GWP) Survey (2019-23)” for India  

• Income Inequality: The survey data indicates a significant rise in income inequality, with the top 1% controlling over 40% of total wealth in India, a stark increase from 12.5% in 1980.
  • The top 1% of income earners now receive 22.6% of the country’s total pre-tax income, up from 7.3% in 1980.
• Rent-Seeking Behavior: The persistence of rent-seeking behavior among wealthy investors, which diverts resources from productive uses to securing unwarranted gains from government entities.
• Judicial Trust and Corruption: Trust in the judiciary can play a significant role in curbing corruption. Higher trust correlates with lower perceived corruption levels.
• Mutual Fund vs Fixed deposits: Speculative investments, such as mutual funds, largely drive income inequality, while savings in fixed deposits and post offices help curb it.
• Inequality promotes corruption: The study finds that higher income inequality causes widespread corruption, while greater confidence in the judiciary helps reduce it.

What is our present methodology for counting inequality?

• Piketty’s Measure: Thomas Piketty’s measure compares the income share of the top 1% to that of the bottom 50%. This highlights the growing disparity in income distribution effectively.
• Consumption vs Income Inequality: Inequality is traditionally measured using consumption expenditure surveys by the National Sample Survey Office (NSSO). However, consumption inequality tends to be lower than income inequality.
• Use of Multiple Data Sources: Researchers often combine data from various sources, including national accounts, tax data, and recent surveys like the Periodic Labour Force Surveys (PLFS) and Consumer Pyramid Household Survey (CPHS).
• Gini Index and Other Metrics: The Gini index is frequently used to quantify inequality, but it has limitations, being less sensitive to changes at the income distribution extremes.

Issues Associated with measuring income inequality:

• Data quality and availability: There has been a noted decline in the reliability of household surveys since 2011-12, making it difficult to obtain accurate and comparable data. For example, The 55th NSS round showed a dramatic decline in poverty estimates, which many experts deemed misleading due to the survey’s methodological flaws.
• Underreporting of wealth: Surveys may underreport wealthier households’ consumption, leading to inaccurate inequality assessments. For example, the Household Consumption Expenditure Survey (HCES) 2022-23 reported a significant drop in rural and urban poverty levels. However, critics argue that these figures may not accurately reflect the reality of wealthier households
• Comparability with other countries: India’s reliance on consumption data rather than income data can result in mischaracterization as a low-inequality country in international comparisons.
• Focus on labor income: Some reports focus only on labor income, ignoring other income sources and skewing the understanding of overall inequality. For example, studies have shown that the income share of the top 10% in India has grown significantly, while labour income alone does not reflect this concentration adequately
• Complexity of income dynamics: Accurately assessing inequality is challenging due to the influence of economic policies, globalization, and market forces. For instance, Researchers have noted that the absence of comprehensive tax data beyond 2017-18 adds uncertainty to the analysis of income inequality trends

Way forward: 

• Improve Data Collection and Methodologies: There is an urgent need to enhance the quality and reliability of household surveys and other data sources.
• Broadening Income Metrics Beyond Labor Income: To better capture the full spectrum of income inequality, it’s essential to include non-labor income sources, such as capital gains, property income, and speculative investments.

Mains PYQ:

Q It is argued that the strategy of inclusive growth is intended to meet the objective of inclusiveness and sustainability together. Comment on this statement. (UPSC IAS/2019)

Why in the News?

Migrant workers from various parts of India are gradually becoming a noticeable presence in the agricultural fields of Tamil Nadu’s Cauvery delta, often called the granary of South India.

Migrants in Tamil Nadu’s Cauvery Delta

• Labour Shortage in Agriculture: The Cauvery Delta, known as the granary of South India, is experiencing a significant shortage of farmhands as the younger generation moves away from agriculture. This has led to a reliance on migrant workers, particularly from states like West Bengal and Bihar, who are skilled in paddy transplanting and harvesting.
• Economic Dynamics: Migrant labourers are filling the labour gap during agricultural seasons, working in groups and completing tasks more quickly than local labourers. They charge around ₹4,500 to ₹5,000 per acre, compared to local workers who earn ₹600 per day.
• Sociocultural Integration: While there hasn’t been significant tension between migrant workers and local labourers, the integration of migrants into the agricultural workforce is still evolving.
  • Local labour unions acknowledge the presence of migrant workers but do not see it as a widespread issue yet, partly due to the ongoing mechanization of agriculture and changing job preferences among the local youth.

Dependence on Migrant Workers in Kerala

• Shift in Labor Sources: Kerala has seen a growing dependence on migrant workers from northern and eastern states, including West Bengal and Bihar, to fill labour shortages in various sectors, including agriculture.
  • A recent study by the Gulati Institute of Finance and Taxation estimated the number of inter-state migrant workers in Kerala at 2.5 million, equivalent to 7% of the state’s population.
• Economic Factors: High wage differentials between Kerala and the migrants’ home states, along with a robust urban economy, have made Kerala an attractive destination for migrant labourers.

External Migration from Uttar Pradesh to Maharashtra

• High Migration Rate: Uttar Pradesh tops the list for inter-state job-related migration to Maharashtra, with over 5.7% of migrants moving for employment purposes between 2020 and 2021.
• Concentration of Migrants: Within Maharashtra, districts such as Mumbai and Thane have the highest concentrations of migrants from Uttar Pradesh.

Lack of Proper Data and Registration

• Historical Data Gaps: The last comprehensive survey on internal migration was conducted as part of the National Sample Survey in 2007-08, with the Census 2011 data only partially released in 2020.
• Absence of Real-Time Data: During the COVID-19 lockdown, the Indian government did not collect data on the deaths or job losses of internal migrants. The Ministry of Labour and Employment confirmed that it maintained no records of migrant workers who lost their jobs or lives during this period.

Way forward: 

• Promote Sustainable Employment and Skill Development in Source Regions: To reduce the over-reliance on migrant labour and address labour shortages in sectors like agriculture, the government should focus on creating sustainable employment opportunities in the migrants’ home states.
• Promote Sustainable Employment and Skill Development in Source Regions: The government should create a real-time migrant data system linked with Aadhaar, enabling targeted policies, social security, and effective crisis response for internal migrants.

Mains PYQ:

Q Discuss the changes in the trends of labour migration within and outside India in the last four decades. (UPSC IAS/2015)