We need a fresh dialogue on inequality in India

Also, rapid economic growth needs to continue beyond 2022-23. Also, this growth needs to be spread more evenly among different sections of the population than in the 1991 economic reforms. According to the latest World Inequality Report, from 1950 to 1991, the income Indians of the bottom 50% accounted for roughly one-fifth of the country’s total income. After 1991 it started declining and in 2021 it came down to 13.1%.

When it comes to the top 10% of the population, their incomes accounted for about 36% of total income between 1950 and 1991, up from between 30% and 40% in individual years. This changed after 1991 and the share of the top 10% is increasing. It was 57.1% in 2021.

This has had an impact on the property’s share. The World Inequality Report has data starting in 1995. In 1995, the top 10% of the population held 54.4% of the country’s wealth. This had increased to 64.6% by 2021. For the bottom 50%, their share fell from 8.4% to 5.9%.

It means many things. One, the top 10% of our population have benefited more from economic reforms than the population as a whole. This is a point that some professional economists have reluctantly begun to make over the years. But even with him, there is not enough conversation around this distortion.

Two, the gap between the affluent and the not-so-rich has automatically become stronger. As Ray Dalio writes in Principles for Dealing with a Changing World Order: Why Nations Succeed and Fail: “The wealth gaps are self-reinforcing as the rich use more of their resources to expand their powers. They They also influence the political system to their advantage and give their children more privileges – such as better education – creating a gap in values, politics, and giving the rich an opportunity to grow between the ‘rich’ and the poor.

Obviously, the economic machinery has not created opportunities for all. This can be seen in the fact that our labor force participation rate, or the proportion of people in the working age group who are working or looking for a job, has been falling over the years. This means that many individuals who do not find a job when entering the workforce or otherwise simply stop looking for one.

Furthermore, this dynamic seems to have affected women more than men. Data from the Center for Monitoring Indian Economy shows that the female labor participation rate (FLPR) was 9.3% as of November 2021. Recently the FLPR has been very low due to the negative economic effects of the pandemic, but the rate is falling. Year. Data from the World Bank show a similar trend. Therefore, to reduce inequality, at least at the household level, more women need to work and get paid for it.

Interestingly, the inequality of income and wealth is already having political implications. This includes a demand by land-owning castes across the country to be classified under the Other Backward Class (OBC) category so that they are eligible for reservation in government jobs and educational institutions. State governments have been entertaining the idea.

Also, in 2019, the central government introduced 10% reservation in government jobs for the economically weaker sections. In 2019, the Center also decided to provide income support to land-owning farming families by paying 6,000 annually under the Pradhan Mantri Kisan Samman Nidhi Yojana.

While politicians in power do not like to acknowledge rising inequality, their manifest preferences or the actions they take (or want to take) tell us a different story.

Of course, in the long term, the best way to reduce inequality is by policymakers to create an environment where more enterprises can thrive and create jobs. This is likely to eventually reduce inequality, at least at the household level, with more women working. The trouble is, it’s not going to happen overnight, because it hasn’t happened in the last three decades.

Therefore, governments may resort to direct support of the population through income support schemes or subsidies. Such measures will have to be funded in some way, and that means both direct and indirect taxes are likely to remain high or possibly go up.

This will not go down well with the capitalists and free marketers. As Dalio writes: “Capitalists are usually obsessed with financial support for those who lack productivity and profitability. For them, making money = being productive = getting what they deserve… One can also overlook the fact that most people’s way of making a profit is suboptimal when it comes to achieving their goals. Dalio is no left-wing ideologue. He runs Bridgewater Associates, the world’s largest hedge Fund.

To conclude, while our free-market enthusiasts may believe what they do, politicians’ incentives are different. They have elections to fight.

Vivek Kaul is the author of ‘Bad Money’.