Why India’s Time to Tackle Inequality is Now

A measure of the extent to which India has become unequal is that it is repeatedly cited in global indices of wealth and income inequality. The recently released World Inequality Report 2022 is just one instance. After all, the top 1% of Indians have more than five times the wealth of the bottom 50% of the population. In terms of income, the top 1% have close to double the income of the bottom 50%.

While inequalities plague the entire world, India has become one of the most unequal countries, an example of how not to run an economy. Yet it does not seem to shock our policymakers that inequalities are surging, and they persist with the policy framework and development model as the past three decades. Inequalities are even sharper today as a result of these flawed policies, especially over the last decade.

The ruling regime chooses to ignore the damage that inequalities cause and the benefits of policies that encourage equality. Focusing on the welfare of citizens is how India can close the gap between haves and have-nots. Instead, the pursuit of wealth for a few appears to be the priority in India. The policies pursued echo those of the United States, which is among the most resource-rich nations.

The United States has enjoyed the advantages of military and trade dominance as well, but it still has sparked greater inequalities in recent decades. The top 10% of the American population has grabbed 71% of the national wealth and 45% of annual income. High and growing inequality has relegated the bottom half of the population to 1.5% of the national wealth, which means half the country struggles to fund its basic needs. Still Indian policymakers are insistent on pursuing growth rates over development.

In 2018, the Urban Institute released its finding that in 2017, nearly 40% of non-elderly adults and their families in the United States struggled to afford at least one basic need, health care, housing, utilities or food. This was when the economic and employment conditions were relatively better than during the COVID-19 epidemic. In April 2020, after the pandemic, the Urban Institute reported in a new paper that 41% of adults in the United States reported a loss of at least one job in their family while 31% were forced to cut their spending on food. Nearly 26 million applied for unemployment insurance. It follows that the number of those who are struggling to meet basic needs went up during the Covid-19 crisis.

In 2020, it was reported that child poverty levels in the United States were 1.5 times higher than for adults. Despite social security, a large number of the elderly are also struggling to meet basic needs. The Gerontology Institute at the University of Massachusetts in Boston has prepared an Elderly Economic Security Standard Index according to which, in 2016, the majority of seniors “lacked the financial resources they needed…”. On average, there are 3.7 million evictions in a year in the United States, or seven per minute, with a rising trend of late.

What the American example amply demonstrates is that abundant natural resources, even military might that can secure access to other countries’ wealth on concessional terms, does not mean inequalities and the dominance of a few will remain in check. Both go hand-in-hand, and this is what Indian policymakers must realise.

India needs to make a strong push for equitable distribution of resources and wealth, or it cannot meet the basic needs of 1.4 billion people. This was always true, but even more so now, as climate change and the global economic conditions plague the world. Over time, there are bound to be newer restrictions or impositions on, for example, the use of fossil fuels which drive our economic growth. Therefore, the economic activities we have, and the growth they generate, need to be harnessed for the welfare of all.

Time and again, evidence of deprivation has come to light in India, such as the painfully slow improvements in crucial nutrition standards, especially among vulnerable sections. While stunting (low height-for-age) among children under five declined from 38% in NFHS-4 to 36% in the fifth round of the National Family Health Survey [2019-2021] among children aged between 6 to 59 months, and there are some other improvements, the incidence of anaemia has increased from 58.6% in 2015-2016 to 67.1%. Anaemia has also significantly increased among women [around 53% to 57%]. The decline in this important yardstick is a marker of the hardships caused by the pandemic and the flawed government policies.

The economist John Dreze recently described universal elementary education as “prime example” of a policy that can help achieve “economic progress” and “reduce social inequality”. Indeed, India has improved literacy rates, but that does not reveal the disparities that exist. For example, he wrote, 16 months into the pandemic, his house-to-house survey of four Dalit and Adivasi hamlets in Latehar, Jharkhand, showed that there was “no trace of online education, most children were unable to read a single word, and all parents were desperate to see the schools reopen.”

The rationale for equality may seem obvious, but it means nothing unless justice is the basis of development. The need for careful planning has increased because the factors to be taken into account are more complex now. Earlier a model based on resources and their exploitation may have been the norm—now one also has to think in terms of needs and the carbon space available to provide them.

However, precisely when the need for planning that involves complexities arose, the Modi-led regime decided to dismantle the Planning Commission. The end of planning meant the possibilities of integrating resources, basic needs and environmental space were shattered badly in one blow. Instead of improving planning—which India still needs—it was discarded. Unplanned spending has given crony capitalists and multinational companies more unchecked opportunities to plunder the resources of the country. This is the area that needs renewed focus and attention, for inequalities and development cannot walk together.

The writer is honorary convener, Campaign to Save Earth Now. His recent books include Protecting Earth for Children and Man Over Machine. The views are personal.