THE CONTEXT: Recent reports, including the Human Development Report 2023-24 and a study by the World Inequality Lab, highlight critical aspects of India’s progress and the challenges it faces in human development and income inequality. These insights are crucial for shaping the strategies of the next government to enhance overall welfare and human capabilities.
ISSUES:
- Human Development Index (HDI) Performance: India’s HDI value increased marginally from 0.633 in 2021 to 0.644 in 2022, moving India up one rank to 134 out of 193 countries. Despite this improvement, India remains behind its regional neighbors such as Bhutan, Bangladesh, Sri Lanka, and China, and is categorized under the medium human development category.
- Gender Inequality: India has shown some progress in the Gender Inequality Index, improving its rank from 122 in 2021 to 108 in 2022. However, the country still faces a significant gender gap in labor force participation, with a 47.8% difference between women (28.3%) and men (76.1%).
- Rising Inequality and Economic Concentration: The report highlights a growing inequality, with substantial economic concentration where almost 40% of global trade in goods is concentrated in three or fewer countries. The top 1% in India earn 23 times the average income, significantly impacting human development and agency, which increases with income for the bottom 50% of the population.
- Income Distribution: The World Inequality Lab study reveals that the bottom 50% of India’s population earns only 15% of the national income, while the top 1% earns significantly more, indicating a stark income inequality. This disparity affects aggregate demand, consumption, and overall human welfare.
- Household Debt and Savings: Household debt in India reached a record high of 40% of GDP by December 2023, with net financial savings dropping to 5.2% of GDP. The rapid growth in unsecured personal loans and other forms of debt highlights the financial vulnerabilities faced by Indian households.
- Need for a New Growth Strategy: Given the challenges of low human development, high inequality, and increasing household debt, a new growth strategy that prioritizes human development is critical. This approach requires political will and a shift from focusing on short-term electoral gains to long-term sustainable development.
THE WAY FORWARD:
- Investment in Education and Healthcare: Enhanced investment in education and healthcare has been proven to raise human development indices by improving literacy rates and health outcomes. Countries like Finland and South Korea have successfully improved their human development standings by focusing on high-quality education systems and accessible healthcare.
- Gender Equality Initiatives: India has a significant gender gap in labor force participation, with a 47.8% difference between women and men. Implementing policies that promote gender equality in the workforce, such as equal pay, maternity and paternity leave, and anti-discrimination laws, like those in Sweden and Norway, can help close this gap.
- Redistribution Policies: The top 1% in India earn 23 times the average income, indicating severe income inequality. Progressive taxation and social security systems, as seen in Denmark and Germany, can redistribute income and reduce inequality.
- Strengthening Social Protection Systems: The bottom 50% in India earns only 15% of the national income, highlighting the need for stronger social safety nets. Expanding social protection programs, including unemployment benefits, pensions, and healthcare subsidies, as practiced in Canada and Australia, can provide a safety net for the lower income brackets.
- Promoting Inclusive Economic Growth: Economic growth in India has been uneven, with the top decile experiencing significantly higher growth rates. Policies that foster small and medium enterprises (SMEs) support rural development and invest in technology and infrastructure to ensure inclusive growth are crucial. Examples include the inclusive growth strategies of South Korea and Taiwan.
- Addressing Household Debt and Financial Inclusion: Household debt in India reached 40% of GDP by December 2023, with a significant portion being unsecured personal loans. Financial literacy programs, access to affordable credit, and regulation of predatory lending practices, like those in Japan and Singapore, can help manage and reduce household debt.
THE CONCLUSION:
India’s journey towards improved human development is fraught with challenges such as low HDI rankings, rising income inequality, and high household debt levels. These issues demand a strategic overhaul that prioritizes long-term human development over short-term political gains.
UPSC PAST YEAR QUESTIONS:
Q.1 The crucial aspect of the development process has been the inadequate attention paid to Human Resource Development in India. Suggest measures that can address this inadequacy. 2023
Q.2 Besides the welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the underprivileged sections of society. Discuss. 2022
Q.3 Hunger and Poverty are the biggest challenges for good governance in India still today. Evaluate how far successive governments have progressed in dealing with these humongous problems. Suggest measures for improvement. 2017
Q.4 Despite Consistent experience of High growth, India still goes with the lowest indicators of human development. Examine the issues that make balanced and inclusive development elusive. 2019
Q.5 It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement. 2019
MAINS PRACTICE QUESTION:
Q.1 Discuss the implications of the Human Development Report 2023-24 and the World Inequality Lab’s findings on India’s socio-economic landscape. Evaluate the need for a revised development strategy that prioritizes human development to address the challenges of inequality and low human development index rankings.
SOURCE: https://www.thehindu.com/opinion/op-ed/giving-primacy-to-human-development/article68153385.ece
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