[In-depth] Inequality in India – Causes, Consequences and Way Forward

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As per the latest Sustainable Development Goals Index (SDG) 2020-21 of the NITI Aayog, India reported fewer poor and more fed people, but it is nearly as unequal as last year it was. Inequality in India is not new and it is noticed on various fronts. The Covid-19 pandemic has shown us the inequality prevailing in India through various instances whether it is increased income of the richer people or inequality in accessibility to vaccines. The pandemic has also shown widespread gender inequality across various sectors. There has been an alarming rise in inequality in India despite government efforts. It is high time that the causes and consequences of inequality are paid attention to and a suitable way forward is looked into.

Inequality-in-India mindmap

Inequality: Meaning

The United Nations (UN) describes inequality as the state of not being equal, especially in status, rights, and opportunities. It refers to the phenomenon of unequal and/or unjust distribution of resources and opportunities among members of a given society. The term inequality may mean different things to different people and in different contexts.

Types of inequality

Inequality can be of different types yet the most prominent types of inequality noticed in India are:

  • Social inequality – Social inequality means exclusion. Patterns of unequal access to social resources are commonly called social inequality. This includes:
    • Inequality based on caste – It refers to the unequal treatment of people and their unequal access to opportunities based on caste.
    • Inequality based on gender – It refers to the unequal treatment of people and their unequal access to opportunities based on gender.
    • Inequality based on education – This refers to unequal access to education based on other dimensions such as caste, gender and income.
    • Others – Inequality in access to social goods and services in society, access to opportunities, access to health care, quality housing, travelling, transportation, vacationing etc.
  • Economic inequality – Economic inequality refers to disparities among individuals’ incomes and wealth. This includes:
    • Income inequality – Income inequality is the extent to which income is distributed unevenly in a group of people.
    • Wealth inequality – Wealth inequality refers to the unequal distribution of assets in a group of people.
    • Pay inequality – Pay inequality describes the difference between people’s pay.

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Causes of inequality

  • Social structure – The structure of society based on different roles for different caste, class or gender not only causes but also aggravates inequality. Indian society is one such example where there are numerous instances of such discriminations prevailing based on identity.
  • Unemployment – Since there are no sufficient employment opportunities available to people, it leads people to fall into the trap of poverty. Poverty and unemployment are leading to rising inequality in society.
  • Economic policies – The agricultural policies, the new economic policies, regressive taxation measures and inflation are some leading causes of rising inequality in India. There is inter-connectedness among all the causes which further aggravate inequality.
  • Rising population – Increasing population pressure and scarce resources have been a major cause of increasing inequality. As the number of people is rising, there is an uneven distribution of scarce resources among people leading to inequality in society.
  • Low levels of education and skills – These limit people’s ability to access decent jobs to develop themselves and participate fully in society; thus leading to low levels of income which further leads to income inequality.

Consequences

  • Economic – High levels of income inequality increase instability, debt and inflation which are damaging for an economy in long term. Pay inequalities affect employees’ productivity and make them less committed. Market distortions occur due to the increased power of those at the top of the income spectrum, and their ability to influence the political debate through lobbying and ownership of media outlets. The Gini (inequality in income distribution) coefficient points to increasing inequality in India. India’s scores were 47.9 per cent in 2018. India is only second to Russia in the world in terms of inequality.
  • Social mobility and education – There is a very strong relationship between high levels of income inequality and low levels of social mobility. Children of highly paid individuals are more likely to be highly paid and children of low paid individuals are more likely to be low earners. Countries with higher levels of income inequality have lower levels of social mobility. India has been ranked very low at 76th place out of 82 countries on Global Social Mobility Index 2020 compiled by the World Economic Forum.
  • Crime – Inequality increases property crime and violent crime. Rates of violence are higher in more unequal societies. Inequality may stimulate social competition and so encourage violence or may curtail opportunities for some, giving rise to a sense of hopelessness that incites fear, violence and killings. Showing a 1.6% annual increase in the registration of cases (50.7 lakh cases), the crime rate per 100,000 population has increased from 383.5 in 2018 to 385.5 in 2019 in India.
  • Health – Living in an unequal society causes stress and status anxiety, which may damage one’s health. In more equal societies people live longer, are less likely to be mentally ill or obese and there are lower rates of infant mortality. According to the WHO estimates, 56 million Indians suffer from depression and another 38 million Indians suffer from anxiety disorders.
  • Trust, Participation, Attitudes and Happiness – Inequality changes the way people interact with other members of their society and engage in society itself. Unequal societies have lower rates of both social and civic participation. There is a substantial and robust body of research suggesting that countries with higher levels of inequality have lower levels of trust, happiness and self-confidence. India has been ranked 139 out of 149 countries in the list of UN World Happiness Report 2021.

Prevalence of inequality in India

  • While India is one of the fastest-growing economies in the world, it is also one of the most unequal countries.
  • Inequality has been rising sharply for the last three decades.
  • The richer are getting richer at a much faster pace while the poor are still struggling to earn a minimum wage and access quality education and healthcare services, which continue to suffer from chronic under-investment.
  • As per World Inequality Database, the share of the top 10% of India’s national income was about 56%, much higher than comparable countries like Indonesia (41%), Vietnam (42%), and even China (41%).
  • India has the third-highest number of billionaires in the world after the US and China. Yet, India’s share of the world’s extreme poor is higher than its population share.
  • India accounts for 139 million of the total 689 million people (20.17 per cent) living in extreme poverty in 2017, according to World Bank estimates, while its population is 17.8 per cent of the world population.
  • In terms of wealth inequality, the share of the top 1 per cent of total wealth since 1991, the year of liberalisation, has steadily increased and reached 42.5 per cent in 2020.
  • Compared with other major economies, India has a relatively large gap between the top 1 per cent and bottom 50 per cent on wealth inequality.
  • In terms of income inequality, the share of the top 1 per cent in total income was 21.7 per cent in 2019. The share of the bottom 50 per cent in total income was 14.7 per cent in 2019.
  • The share of the middle 40 per cent shows a similar pattern—it fell from 42.6 per cent in 1961 to 30 per cent in 2020.
  • In terms of the gap between the top 1 per cent and the bottom 50 per cent, India stands apart among major economies—it is higher, for example than the US, China, Russia, France, and the UK on income inequality.
  • In the past decade, while Indian GDP has grown by around 6%, there has been a large decline in female labour force participation from 34% to 27%.
  • The male-female wage gap has been stagnant at 50%.
  • India’s education landscape is extremely unequal. These inequalities manifest themselves in the form of differences based on caste, class and, in some cases, gender.
  • As per a nationally representative survey conducted by the National Statistical Office (NSO) in 2017-18, those at the bottom of the socio-economic ladder are more likely to be studying humanities than a professional course. They are also much less likely to have access to English medium education.
  • On the health front, decent healthcare is a luxury only available to those who have the money to pay for it. While the country is a top destination for medical tourism, the poorest Indian states have infant mortality rates higher than those in sub-Saharan Africa.
  • India accounts for 17% of global maternal deaths, and 21% of deaths among children below five years.
  • These make India one of the unequal countries in the world and people on lower strata, women and children, the weakest members of Indian society.

India’s efforts towards reducing inequality

  • Constitutional provisions
    • The right to equality has been included as a fundamental right in the Indian constitution granting equality before the law (Article 14|), prohibiting discrimination on the grounds of religion, race, caste, sex, place of birth or any of them (Article 15), equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State(Article 16), abolition of untouchability (Article 17) etc.
    • The Indian Constitution recognized the principle of ‘Equal Pay for Equal Work’ for both men and women, and ‘Right to Work’ through Article 39(d) and 41. These Articles are inserted as Directive Principles of State Policy(DPSP).
    • Under Part IV of the Indian Constitution, Article 45 and Article 39(f) of DPSP, had a provision for state-funded as well as equitable and accessible education. The 86th amendment to the constitution of India in 2002, provided the Right to Education as a fundamental right in Part-III of the Constitution.
    • Reservation for Scheduled Castes, Scheduled Tribes and Socially and Educationally Backward Classes to bring them at par with the mainstream society are other such efforts.
  • Government measures
    • Women empowerment measures
    • Employment generation schemes
    • Poverty alleviation measures
    • Schemes for minorities for social inclusion
  • Economic policies
    • Reforms in agriculture – Land reforms, crop insurance schemes, Minimum Support Price (MSP) and others.
    • Social security schemes
    • Progressive taxation measures

Recommendations

  • Investment in public infrastructure (especially social infrastructure) and education.
  • Progressive taxation.
  • Better labour laws.
  • Increasing employment opportunities.
  • Ensuring equitable access to public goods and services.
  • Inclusion of socially backward sections of society into the mainstream society.
  • Proper implementation of constitutional provisions and government schemes.

Conclusion

Although India has made considerable progress in reducing inequality, the recent pandemic has worsened the existing situation. It is time to introspect to know the shortcomings which drive inequality in India and make plans accordingly. India as a society needs a resource flow from rich to poor through a smooth process and ensure social and economic mobilisation of its population.

Practise Question

  1. Write a note on prevailing inequalities in India and why are they a cause for concern?
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