Inequality Challenge for India @ 75

During the period 1950-51 to 2019-20, for which evidence is available, in real terms, the growth in GDP was 4.9% per annum while the growth in GDP per capita was 2.9% per annum. Thus, over seven decades, GDP only multiplied by 29, doubling every 14 years, while GDP per capita nearly multiplied by 8, doubling every 24 years. This provides a sharp contrast with the period 1900-01 to 1946-47 during the colonial period, when national income growth was 1% per annum and per capita income growth was 0.2% per annum. At these growth rates the national income would have doubled in 70 years, while the per capita income would have doubled in 350 years! Political independence, which restored economic autonomy and enabled India to pursue its national development objectives, made change possible.

Compared to other countries during the post-colonial era, this performance was not as good as in East or Southeast Asia, and it was not as bad as Africa. It was average. The comparison between three Asian giants—India, China and Indonesia—at similar levels of development when they gained political independence in the late 1940s, is instructive. Between 1970 and 2019, using national accounts data compiled by the United Nations, per capita income in industrialized countries increased from 4.3% to 5.2% in India, from 4.6% to 25% in China, and from 3.4% to 10%. In Indonesia, while their per capita income as a proportion of the world economy increased from 12% to 18% for India, from 13% to 87% for China, and from 10% to 35% for Indonesia.

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Economic development in India is associated with unequal outcomes which have created divisions among regions, regions and people. The country’s west and south have moved forward, while east and north have lagged, widening the gap between rich and poor states. In the period from 1950-51 to 2019-20, the share of agriculture sector in GDP fell from 58% to 15%, while the share of rural population (directly or indirectly dependent on agriculture) in our total population from 85% reduced to 65. %, so that the ratio of GDP per capita in the agricultural sector to the non-agricultural sector decreased from one-half to one-tenth, leading to a massive rural-urban divide. The modest increase during 1950–1980 was associated with a steady decline in economic inequality among people. But rapid growth since 1980 has been associated with a dramatic increase in economic inequalities. For India, the World Inequality Report estimates that in 2021, the top 1% accounted for 21.7% of national income and the top 10% accounted for 57.1%, while the bottom 50% accounted for only 13%. Similarly, the top 1% held 33% of the total assets and the top 10% held 65% of the total assets, while the bottom 50% held only 6% of the total assets. This vast rich-poor divide places India among the world’s highest-disparity countries.

Rapid economic growth in India since 1980 has led to a significant reduction in absolute poverty. Still, the scale of absolute poverty that remains is striking. The reduction in poverty could have been too much to make up for the increasing inequality. The livelihoods lost during the Covid pandemic may have compounded the problem. Although the poverty line and poverty estimates are always a source of controversy, the number of poor people in India in 2022, perhaps 20-25% of our population, may be close to the total population of India in 1947.

Economic development can be converted into meaningful development only when it improves the standard of living of the people. His daily life is a struggle for the poor. Malnutrition – especially among children and women – persists, hunger and deprivation are common, child labor is a necessity for many, shelter is temporary or absent, access to educational opportunities is scarce, and health care is neither available. Nor is it cheap. And sustainable livelihood for the poor is a distant dream.

A major failure of the development process in India since independence is that economic growth has not resulted in employment generation. The number of jobs created in any given year is not enough to absorb the growth in the workforce, let alone a growing backlog of unemployed. Unemployment has always existed. Open unemployment is on the rise. Unemployment, especially among the educated youth, is worrying. The problem is more of the treadmill than the time bomb. Nevertheless, it is necessary to acknowledge that employment is not only a source of growth, but also a means of mobilizing our most abundant resource-people, for development. Equally important, employment is the only sustainable means of eradicating poverty and reducing inequality.

As we celebrate the last 75 years, unfurling the national flag in every home, let us also think of those people whose lives have changed little, with a resolve to ensure that poverty and illiteracy are eradicated 25 from now. Years later does not exist. Celebrate the first century of our independence from colonial rule.

Deepak Nayar is Emeritus Professor of Economics at Jawaharlal Nehru University.

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