Inequality needs urgent attention

By: |
October 15, 2021 6:00 AM

Growing the economy meaningfully is key, as is driving the fruits of this growth down the income pyramid.

How this is to be done while keeping India competitive as a business destination will be the tricky part, but is not impossible to figure out.How this is to be done while keeping India competitive as a business destination will be the tricky part, but is not impossible to figure out.

Classifying households by prosperity-levels, CSDS Lokniti’s Manjesh Rana rightly points out in an article in The Indian Express, is a tricky exercise. Using asset ownership as a proxy for prosperity—the assets being a car, an AC, a TV, a refrigerator, and a desktop/laptop computer—Lokniti found just 1 in 33 Indian households (a mere 3%) owned all the five assets. Household wealth is manifest in many forms, from livestock ownership to house/land ownership, and the five consumer durables considered here may represent a simple dipstick. Nevertheless, asset ownership gaps, as listed in Rana’s analysis, suggest entrenched stratification of inequality.

General category Hindu households were seven times more likely to own all five assets compared to scheduled caste (SC) households while three scheduled tribe households in a thousand were likely to own these. Against one in five general category Hindu households, only one in twenty SC households owned a car. While Sikhs have wider prosperity than other communities, the Muslim community has seen a decline—while two Muslim families in every 100 owned all five assets in 2014, by 2019, this was true for just one in every 100.

The concentration of the wealthy is, predictably, in the urban areas—in cities, every 14 of 100 households had all five assets vis-a-vis just one in hundred in the villages. Even relative urbanisation correlated with higher prosperity—every five in 100 households in the towns owned all five assets.

The pandemic has made upward mobility a lot harder than even a few years ago, and this especially true for those who at the bottom of the wealth pyramid. How do we drive up asset ownership, in a more inclusive manner? The obvious answer is by growing the economy, and enabling households to benefit from this. But, it will also need tackling the wide inequality that exists in the country. Oxfam estimates that the top 10% (by wealth) of the Indian population holds 77% of the total national wealth. The Hurun India Rich List 2021 pegs the number of Indians with wealth of more than `1,000 crore at 1,007, with 179 joining this list only this year.

This is not to begrudge the wealthy their wealth, but to illustrate how flawed policies probably are to have let such wide gulfs exist, and even grow. This inequality has serious future costs—63 millions Indians teeter on the verge of poverty because of limited capacity to access quality healthcare. While 93% of households in the top 20% have access to proper sanitation, only 6% in the bottom 20% have this, and when it comes to institutional deliveries (which increases chances of safe delivery and brings down chances of maternal and neonatal mortality), there is a 35% gap between the poorest and richest 20%.

Fixing these gaps will need both higher generation of national wealth and driving more of this wealth down the pyramid. To that end, this newspaper has called for increasing tax rates for corporations, even if temporarily, given the need to assist MSME recovery and generate jobs. How this is to be done while keeping India competitive as a business destination will be the tricky part, but is not impossible to figure out.

Meanwhile, India’s rich can be exhorted be more philanthropic—though we have had shining examples in the likes of Azim Premji, the Tatas, and others, Bain estimates that, of the private philanthropy in India in 2020 (totalling Rs 64,000 crore), a mere 19% came from the rich; the bulk was from foreign aid and mandatory CSR.

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