Income Inequality In India [UPSC Notes for GS I]

This article will describe in detail India’s rising income inequality and unemployment figures.

These UPSC Notes on income inequality in India and related problems are aligned with the UPSC Syllabus and aspirants should prepare this topic for General Studies Paper I.

The figures of income disparity and unemployment are increasing in the country. These have many ramifications and are frequently seen in the news; hence the topic is relevant for the UPSC Mains.

IAS Exam aspirants can find more notes for UPSC Mains General Studies topics from the links given at the end of the article.

Income Inequality In India

Context

• Income inequality is at an all-time high and is growing unabated. 
• Rising inequality and unemployment are creating ruptures in the fragile fabric of our society. 

Background

• In the global level where 82% of the wealth generated last year worldwide went to the 1%, while 3.7 billion people that account for the poorest half of the population saw no increase in their wealth, the survey said. Also, Billionaire wealth has risen by an average of 13% a year since 2010 – six times faster than the wages of ordinary workers, which have increased by a yearly average of just 2%. 
• India’s richest 1% acquired 73% of the total wealth created in the country in 2017, as per a new survey by international rights group Oxfam. 
• 67 crore Indians, which comprises the population’s poorest half, saw their wealth hike by only 1% in 2017 according to the same report. 
• World Inequality Lab report 2020,  both India and China, income inequality substantially grew after the economic liberalisation of the 1980s.
• In India, the top 10% income share grew from 30% in the 1980s to over 56% in 2019, while in China, the top 10% share grew from 28% in 1980 to 41% in 2019
• In India, this is also more problematic due to the prevalence of caste system and regional imbalances. 
• A study jointly conducted by a few Indian universities found that Only 22.3 per cent of the upper caste Hindus own 41 per cent of the country’s total wealth and form the richest group, whereas 7.8 per cent of Hindu Scheduled Tribes own the lowest share of the country’s assets at 3.7 per cent. 
• The study also highlighted that five states — Maharashtra, Uttar Pradesh, Kerala, Tamil Nadu and Haryana — owned about 50 per cent of the country’s total wealth. 

Aspirants can refer the UPSC Mains Syllabus at the linked article.

Reasons for Income Inequality

• There a many reasons for the rise in income equality in India some of them are as follows:
• The rise of a rentier class that seeks to maximise its leverage in fixed assets such as lands and property to extract as much as income as possible
• With a 2019 study by the Reserve Bank confirming that housing affordability has significantly deteriorated over the last four years, it is unsurprising how millennials now choose to rent rather than bear the increasingly unaffordable burden of high EMIs.
• Unemployment is also a major reason for the low productivity of labour which can push many into poverty. It is a fact that inequality, poverty and unemployment are related to each other. The lack of sufficient employment not being created in time is the reason why there is an income gap today between classes.
• During inflation, less profit is made and wage earners are the ones who bear the losses. While profits are on the rise, the wages have remained more or less the same. Also, while money income rises, real income falls, leading to a decrease in the overall standard of living.
• High tax rates are re­sponsible for inequality in the distribution of in­come and wealth. This is due to undue concentra­tion of incomes in a few hands caused by large- scale tax evasion.

Consequences of Income Inequality

• This goes against constitutional ideas of equality of status and opportunity and the equitable distribution of wealth. 

• Regional imbalances will pose a serious threat to cooperative federalism. 

• The government must promote inclusive growth by promoting measures like land reform, social security pensions, scholarships and skill training for vulnerable communities.

• It must also explore introducing inheritance tax for the super-rich. 
• Private sector investment is also a necessity and that has to be encouraged by improving the business environment, discouraging tax-terrorism, and promoting pro-enterprise policies. 
• According to Oxfam erosion of workers’ rights; excessive influence of big business over government policymaking and the relentless corporate drive to minimise costs to maximise returns to shareholders are major causes of income inequality. 

Way Forward

• Government has to ensure that its policies address these causes and ensure the creation of a free and fair market. 

• Quality of public services like health and education is also a great leveller and the government must also focus in this regard. 

• The Central government and NITI Aayog should evolve policies to correct inequalities between states and bring out cooperative federalism in its true form. 
• A comprehensive plan to promote inclusive growth is the only solution to address the income inequality problem in India.

Income Inequality In India (UPSC Notes – GS 1) – Download PDF Here

Aspirants can check BYJU’S UPSC Notes page for free GS1, GS2, and GS 3 notes.

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