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Monday, July 16, 2018

Why a new report agrees with Piketty on inequality, blames policy

The report pointed out that the path of inequality has changed in India — from being stagnant in the 1980s, to increasing since 1991, and to a subsequent and continued surge up to the present.

By: Express News Service | New Delhi | Updated: February 23, 2018 6:15:57 am
income gap, pay parity, salary, Thomas Piketty, oxfam india report, caste based inequality, policy flaws, religion bias, gdp, indian express (Express Illustration)

A few months after a research paper co-authored by French economist Thomas Piketty estimated that the share of the top 1% in India’s income pie is higher than ever before, a report released by Oxfam India on Thursday revealed that inequality in the country has been on the rise for the last three decades due to “lopsided” policies of successive governments.

The report, The Widening Gaps: India Inequality Report 2018, alleges that the wealthiest individuals in India (it pegs the total wealth of Indian billionaires at 15% of the GDP, having risen from 10% only five years ago) have cornered a large share of their wealth through “crony capitalism” and inheritance, while people at the bottom have been seeing their share reduced further. In 2017, India had as many as 101 billionaires.

“Though the Indian planning process, at least in theory, tried to bridge the gap between different states, the outcome has not been as expected with inequality across states increasing over time,” the report states. “Within the country, the rise in inequality is partly a result of growing divergence of incomes between the states and increasing inequality within these states. Such regional divergence between states have existed since independence and they have increased over the years,” it added.

Oxfam India CEO Nisha Agrawal said, “These inequalities are the result of a package of reforms adopted during the big bang liberalisation of 1991 and the subsequent policies adopted.” She added that the only way to reverse this trend is to increase tax collection through progressive direct taxation as such as introducing wealth and inheritance taxes, and spending them on health, education and nutrition for the underprivileged, focusing especially on the early childhood development of the poor.

The report pointed out that the path of inequality has changed in India — from being stagnant in the 1980s, to increasing since 1991, and to a subsequent and continued surge up to the present.

Regarding regional inequalities, the report states, “The resulting Gini coefficient for per capita income weighted by state population also shows that inequality which remained stagnant until the 1980s has seen a rapid rise since 1991.”

Extending this to the various social groups in India, the Oxfam report notes that “SC are among the disadvantaged castes followed by the OBC.” Further, “The SC and ST groups continue to have lower shares in income and consumption compared to their population shares. The OBC group has relatively higher shares in consumption and income but still less than their population share.” Meanwhile, “the forward castes have higher shares in income/consumption relative to their population shares. The consumption data also reports a decline in income shares for the ST group, with a corresponding increase in the share of others.”

“Religious identities too play a role in the individual’s access to basic services. They affect the individual’s mobility and human development outcomes. Religious affiliation may also lead to isolation and exclusion, and stereotyping of communities, which have a further impact on access to employment and livelihood,” the report states.

“Smaller minorities such as Christians have a larger share of income/consumption than their population share, but this is not the case with Muslims. The situation of Muslims is relatively better in rural areas but they fare worse than SC or ST households in urban areas. The Muslims have also seen their share in national income, compared to their population share, decline over a period of time. This decline is seen in case of rural as well as urban areas,” the report says.

According to the author of the report, it is clear that “the richest in India have made their money through crony capitalism rather than through innovation or the fair rules of the market.” Further, “Specific policy choices which favoured capital rather than labour, and favoured skilled rather than unskilled labour, are part of the structure of the growth trajectory in India,” the report said.

Relying on various sources of data, both secondary and primary surveys, the report describes how the path of inequality has changed over the years.

“What is particularly worrying in India’s case is that economic inequality is being added to a society that is already fractured along the lines of caste, religion, region and gender. Apart from being a moral concern, reducing inequality is central to the functioning of India’s democracy,” said Professor Himanshu, the author of the report, who is an associate professor at the Centre for Economic Studies and Planning in the School of Social Sciences, Jawaharlal Nehru University.

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