Economic inequality in India
Economic inequality is a hindrance to the process of growth and development in India. Even though there is an economic growth in India, it is not able to reduce the growing inequalities of the Indian society. Our development strategies failed to reduce the extent of regional and sectoral inequalities. Domestic and foreign investments are not directed to backward regions of the country. Already developed states are found to be preferred destination of investment.
Meaning of Economic Inequality
In India four forms of inequalities are found.
- Inequality of income,
- Inequality of consumption expenditure,
- Inequality of asset holding, and
- Regional inequality.
Inequality of the distribution of wealth and income refers to a situation in which small section of society share large part of nation income whereas large sections of society are devoid of income. There is an unequal distribution of income.
Inequality in consumption expenditure refers to a situation in which a large percentage of total consumption expenditure is incurred by a small percentage of population. Inequality of consumption expenditure shows that a large percentage of bottom population has to struggle to survive, whereas a small percentage of top population enjoys a lavish lifestyle.
Regional inequality refers to inequality of growth process across various states in the country and different regions with in a single state. Some states or regions are far more prosperous than the others.
Nature and Extent of Economic Inequality in India
In India inequality of income is calculated based on the data on consumption distribution (provided by NSSO) and income tax data. To examine the distribution of income in India, a Committee was appointed by the Government under the chairmanship of Prof. P.C. Mahalanobis. The committee submitted the report in 1964. Besides this Committee, National Council of Applied Economic Research (NCAER), Reserve Bank of India, World Bank and many economists have undertaken important research studies relating to distribution of income. However, these studies relate to different periods of time, and are based on different methodologies. The results of these studies are not strictly comparable. Higher Lorenz ratio or Gini-coefficient points to a greater degree of inequality. Gini index in India was 33.4 in 2011-12 which points to an alarming magnitude of inequality in India.
Rural and Urban Breakup
In India there are inequalities of income are found in rural and urban areas as well. Per capita income in rural areas is less than the per capita income in urban areas. However the inequality levels in rural areas are less than the inequality at urban areas.
Causes of Inequality of Income and Wealth in India
Causes of Inequality of Income in India:
- Inequality in the ownership of assets,
- Laws of inheritance,
- Cost of professional training,
- Inflation,
- Unemployment,
- Tax evasion,
- Corruption and smuggling,
- Greater Burden of indirect taxation or regressive tax structure.
Government Policy to Reduce Inequalities of Income and Wealth
Ever since independence, Government has been focussed on reduction of inequalities of income and wealth in the country.
Land Reforms
Land reforms have been introduced to remove inequality in the ownership of land. Land in excess of the ceiling limit has been distributed among the tenant farmers, and among the small and marginal holders.
Expansion of Public Sector
Government pursued a policy of assigning a ‘flagship-role’ to the Public Sector. Many commercial banks were nationalised in 1966-68. However, since 1991, there has been reversal of the government policy. Privatisation has become the centrestage of growth-strategy. This is because public sector has only yielded inefficiency and bankruptcy.
Encouraging Small Scale Industry
The Government is providing support to develop small scale industry.
Monopolies and Restrictive Trade Practices Act
Monopolies and Restrictive Trade Practices Act, 1969 was passed to put a check on concentration of economic power.
Poverty Alleviation Programmes
Government should frame poverty alleviation programmes particularly those which provide gainful employment to the economically weaker section of the society.
Pricing Policies
Government should design the pricing and distribution policies to reduce the inequalities present in the society. Government should provide the basic amenities at lower price to the weaker sections of the society.
Measures to Correct Regional Imbalances
Following measures have been taken to remove regional imbalances: (i) Greater share of central pool of funds should be allocated to backward states. (ii) Provision of Grant-in-aid by the Central Government to the backward states. (iii) Launching of Special Area Programmes like Desert Development Programme, Drought Prone Area Programme, etc. (iv) Propagation and use of improved dry farming technology. (v) Provision of infrastructural facilities in backward districts. (vi) Development of forward and backward linkages in those backward regions.
Economic Inequalities and Five Year Plans
Economic growth with social justice has been one of the most important objectives of five year plans in India. Growth must be inclusive of all segments of the society rather than exclusive of larger sections of the society. Keeping in mind the goal of social equality, Planning Commission of India adopted different strategies during different five year plans to achieve this goal. During the initial period of planning (up to third plan), the objective of equitable distribution was not given any centrestage priority. However, in subsequent plans, equality received its due focus. Abolition of zamindari System, ceiling on landholding, subsidy for use of HYV technology are important measures taken in the five year plans. But the plans are not able to succeed fully as the inequalities are not removed fully.
