INEQUALITY CAN NO LONGER BE IGNORED

THR CONTEXT: The Congress party’s Nyaya Patra election manifesto has sparked a significant debate on inequality and wealth concentration in India. This discussion has been further fueled by Prime Minister Narendra Modi’s remarks about the manifesto’s content, particularly wealth redistribution. The debate is set against rising inequality in India, where the top 1% of the population now holds a disproportionately large share of the nation’s wealth and income.

ISSUES:

• Evidence of Increasing Inequality: The World Inequality Database has highlighted a stark increase in income and wealth inequality in India. In 2022-23, the top 1% of the population received 22.6% of the national income, the highest proportion since 1922. Furthermore, this same demographic holds 40.1% of the nation’s wealth.
• Economic Growth vs. Inequality: The prevailing economic model, which emphasizes growth with the expectation that benefits will trickle down, has repeatedly failed to distribute wealth equitably. This model has been criticized for prioritizing economic growth over addressing the widening wealth gap, a trend not unique to India but observed globally.
• Taxation and Redistribution: India’s tax-GDP ratio stands at 17%, lower than that of other middle-income countries like Brazil, which has a 25% ratio. The tax structure is regressive, with indirect taxes making up two-thirds of tax revenue. Even direct taxes are not progressive, with lower effective tax rates for highly profitable companies than those with smaller profits.
• Welfare Spending Deficiencies: India’s public spending on welfare and social sectors is low. Health spending is around 1.3% of GDP, falling short of the National Health Policy’s target of 2.5% by 2025. Other critical areas, such as employment guarantee schemes, education, and children’s budgets, have also seen a decline in allocation relative to total government expenditure or GDP.
• Job Creation and Employment Quality: Recent economic growth in India has been accompanied by joblessness, with a decline in employment elasticity of output. Profit shares have increased, and real wages have stagnated. The focus should be on creating decent jobs with fair remuneration. Government programs like NREGA and the Public Distribution System and cash transfer schemes like the Mahalakshmi scheme proposed by Congress can help address this issue.
• Addressing Inequality Through Employment-Centered Growth: An employment-centered growth model would involve government policies that support labor-intensive small and medium enterprises, promote skill training, and improve overall human capital. Measures to enable women’s participation in the labor market, such as maternity entitlements, childcare, transportation, and safe accommodation, are also crucial. This approach can help tackle both inequality and employment issues.

The way forward:

• Progressive Taxation: Implementing a more progressive tax system where wealthier individuals and profitable corporations pay a higher rate could help redistribute wealth more effectively.
• Increase Public Spending: Significantly increase public health, education, and welfare investment to improve living standards and support economic equality.
• Direct Job Creation: Fill existing vacancies in public services and create new positions to address the employment gap. Improve the quality of jobs and working conditions for frontline workers.
• Support for SMEs and Labor-Intensive Industries: Promote policies that support small and medium enterprises and other labor-intensive sectors to create more jobs.
• Enhance Social Security Measures: Implement schemes like the proposed Mahalakshmi scheme for direct cash transfers to support the poor and vulnerable, alongside other social security measures.

THE CONCLUSION:

Addressing inequality in India requires a multifaceted approach that includes redistribution through progressive taxation, enhanced public spending, and a reorientation of economic policies towards inclusive growth and employment generation. The discussion around these issues, especially in the context of the upcoming elections, is a positive step towards acknowledging and tackling the deep-seated economic disparities in the country.

UPSC PAST YEAR QUESTIONS:

Q.1 Development and welfare schemes for the vulnerable, by its nature, are discriminatory in approach. Do you agree? Give reasons for your answer. 2023

Q.2 Skill development programs have succeeded in increasing human resources supply to various sectors. In the context of the statement, analyze the linkages between education, skill, and employment. 2023

Q.3 Do the government’s schemes for uplifting vulnerable and backward communities by protecting required social resources for them lead to their exclusion in establishing businesses in urban economics? 2014

MAINS PRACTICE QUESTION:

Q.1 Critically analyze the implications of rising income and wealth inequality in India on the nation’s socio-economic fabric. Considering the recent debates triggered by political manifestos and government policies, discuss the effectiveness of direct redistribution measures in addressing these inequalities.

SOURCE:

https://www.thehindu.com/opinion/op-ed/inequality-can-no-longer-be-ignored/article68118448.ece