Inequality in India

Inequality in India

The elimination of poverty and inequality are at the core of all the development objectives. Development requires a higher GNP and a faster growth. The basic issue is not only how to make GNP grow but also who would make it grow, the few or the many. If it were the rich, it wold be appropriated by them, and poverty and inequality would continue to worsen. But if it were generated by the many they would be its principal benefiters.

                 Although our main focus is on economic poverty and inequalities in the distribution of incomes and assets, it is important to keep in mind that this is only a small part of the broader inequality problem in the developing world. Off parallel or even greater importance are inequalities of power, prestige, status, gender, job satisfaction, conditions of work, degree of participation, freedom of choice, access to services and amenities and many other dimensions of the problem that relate more to self esteem and freedom to choose. But we cannot 5really separate the economic from the non economic manifestations of inequality. Each reinforces the other in a complex and often interrelated process of causes and effect. 

                     Economic inequality is the fundamental disparity that permits one individual certain material choices, while denying another individual the very same choices. There are two reasons to be interested in the inequality of income and wealth distribution. First there are philosophical and ethical grounds for aversion to inequality per se. Second, inequality will be important not for its own sake, but because it has an impact on other economic variables. Suppose you care about overall growth, but find that inequality in income and wealth somehow reduce the possibilities of overall growth. This is the fictional impact of inequality.

 In India there is no official organization to compile data on income distribution. However, the National Council of Applied Economic Research (NCAER) and some individual researchers have examined the pattern of income distribution in India at different points of time.

Income inequality during the first three decades of the planning period

During the 50s

The broad picture that emerged from the income inequality estimates of Lydall, Lyengar, Mukherjee, the RBI and the NCAER is that the top 10% of the households received around 30% of income. These estimates susses that the bottom 205 of the people received about 85 to 9% of income. The distribution of personal income in the urban sector was more unequal than in the rural sector.

During 60s

Almost all the estimates were strikingly similar and suggested that the bottom 20% of the population had a share of 7.5% of the total income and the top 20% had a share of about 47% and the Lorenz ratio was between .35 and .39.The estimated average income of the topmost docile was about 18 times that of the lowest decline in urban sector, while for the rural sector it was about 10 times.

During 70s

 The World Bank and the ILO estimates in 1975-76 showed that the lowest 20% households (rural and urban companied) accounted for 7% of the household while the highest 20% accounted for 49.4%.

During 80s

In 1983 the top 20% of the households had accounted for 41.4% of the expenditure remained almost the expenditure same. However the share of the lowest 20% of the households rose from 8.1% in 1983 to 8.8% in 1989-90.

Reform Period

This was a period of increase in inequality. According for the consumer household expenditure estimates, between1989-90 and 1994 there seems to be some improvement in the household expenditure. The share of the richest 20% population rose from 39.3% in 1994 to 45.5% in 2004-05 while the share of the bottom 20% declines from 9.2% to 8.1%.

Causes of Income Inequality

Ø  Inequality in land ownership and concentration of a tangible wealth in the rural sector.

On account of the Zamindari system there was concentration of landed property in India. In 2000-01 62.3% of total operational holdings were marginal holdings (less than one hector in size0 but area operated under them was just 18.7%. This implies a very high concentration of landed property in the hands of few peoples resulting in an increase in inequality.

Ø  Concentration of assets in the private corporate sector. There is an extreme concentration of economic power and wealth in the hands of the large industrialists and that they have succeeded in acquiring massive assets over time. During the reform period too this trend continued. In 2008 the largest private sector company, Reliance industries alone had assets worth RS 1, 74,544 Core.

Ø  Inequalities in professional education and training. There is a strong bias in education and training in favour of elite’s class. This result in further inequality in earnings and thus the initial inequality is perpetuated and widened.

Ø  Inflation. In India we experiences long period of inflation. This economic malady too favours the rich and taxes the poor. This is another reason for inequality.

Ø  Inequality in credit facilities. Access to credit is quite limited fir the poor. But the rich better placed in this regard.

Ø  The urban Bias in Investment. Most of the invest able resources are flowing to the urban area contributing to less employment generation and high inequality.

Ø  The Role of the Government. In a no-liberal administration mechanism the role of the government is limited and the policies favor the rich. This is norther significant factor which supplement the existing inequity.

Measures to reduce Inequality

·         Land reforms and redistribution of agricultural land

·         Control of monopolies

·         Employment and wage policies

·         Special security measures

·         Minimum needs programme

·         Special programme for the poor.

·         Progressive taxation

In spite of the conscious effort on the part of the government the problems of poverty and inequality are increase day by day. Therefore it is high time to effect some radical change in our strategies of poverty amelioration and reduction of inequality 

Economic Development

Economic Development

Economic growth and economic developments are two distinct terms quite often used as synonyms, to imply some positive changes that occur in the economy. But a closer and detailed analysis of these two concepts reveals to us that they are neither the same nor synonyms. Economic growth, in simple terms, can be defined as the sustained increase in national income or per capita income over a long period of time. It should be noted here that a short term increase in per capita income or National income will not continue economic growth because such hikes may be due to temporary or irregular disturbances in economy, such as temporary upswings of the business cycle, or the like. Economic growth is thus, under stood as a quantitative notion.

Economic development is much border concepts than economic growth. It is qualitative notion which encompasses social, structural, and organisational and institutional changes. It can be defend as, in the words of Prof. Gunnar Myrdall, “an upward movement of the entire social system.” C.E. Black defines economic development as “the attainment of a number of ideals of modernization such as a rise in productivity, social and economic equalization, modern knowledge, improved institutions and attitudes and a rational co-ordinated system of policy measures that can remove a host of undesirable  conditions in the social system that have perpetuated a state of underdevelopment.” (The dynamics of modernisation, C.E. Black)

The process of economic development is a highly intricate phenomenon, influenced by a myriad of distinct factors such as social, economic, political, cultural, psychological etc. According to Prof. Ragnar Nurkse. “Economic development has much to do with human endowment social attitudes, political and social conditions and historical accidents. “Economic development, thus obviously results in the enhancement of resources utilisation, and subsequent improvements in national product, employment, income and standard of living.

To Sum up, Economic development can be termed as a long termed as a long term process resulting in rise in the availability of capital inputs, improvement in labour efficiency and productivity, better entrepreneurial abilities, better transports and communication facilities, urbanisation, growth of financial intuitions, reduction of poverty, increase in mass consumption, improvement in educational and health standards, improvement in life expectancy, reduction in population and infant mortality, widening of the mental horizon of the people and above all the attainment of economic welfare.

Development of Under Development

Though the term ‘under developed economy’ is a widely used one, it is a bit difficult task to define it. Generally poverty is the main factor that incites us to term a country as an undeveloped one, but it can by no means be considered adequate. According to Eugene Stanley, “an undeveloped country is a country characterised by (1) mass poverty which is chronic and not the result of some temporary misfortune, and (2) Obsolete methods of production and social organisation, which means that the poverty is not entirely due to poor natural resources and hence could presumably be lessened by methods already proved in other countries.”

In the words of Prof. Jacob Viner, “A more useful definition of an under-developed country is that it is a country with good potential prospects for using more capital or more labour or more available natural resources, or all of these to support its present population on a higher level of living.”

From the above definitions, an underdeveloped country can be explained a one with the following features.

a)      Lower per capita income

b)      Underutilized natural and human recourses due to lack of economic development.

c)      There exists potential for growth of national income and per capita income by efficient employment of its natural and human recourses.

The above mentioned features, though are the features of under developed countries, are not comprehensive or adequate to define the under-developed state of a country. There are a vast number of factors that bogs a country into a state of underdevelopment. Hence, it is quite a herculean task to bring all the features of an underdevelopment country, into a single and lucid definition.

Characters off under developed countries

v Shortage of Capital

v Excessive Dependence on Agriculture

v Disparities of Income and Wealth

v Dualistic Economy

v Lack of Entrepreneurial ability and technology

v Inadequacy  of infra Structure

v Rapid population growth

v Under Utilization of Natural resources

v Poor Consumption Pattern

v Foreign Trade Orientation

v Demographic Features and Social Characteristics

           Stages of Development

Economic development is neither spontaneous nor an abrupt phenomenon. It is a continuous and gradual process involving many stages. By identifying these stages, according to certain features, a country can be deemed to have attained a certain stages of development. There are many theories, explaining this transitional process of economies. The simplest sage theory is Fisher-Clarke’s sector thesis. This theory envisages development on the basis of primary, secondary or tertiary production. Countries are assumed to begin as primary producers, then, as the basic necessities of life are met, the resources are shifted to secondary or industrial sector. After some stage, with the increase in income, resources sift to service or tertiary sector. Thus according to this theory, the developing countries are identified as primary producing economies; the more developing countries with the production of manufactured goods are mature developed economies with a sizable chunk of their resources in the service sector. This shift in resources between sectors is due to the difference in income elasticity of demand for commodities. .

Another important theory elucidating the stages of economic growth was propounded by Rostow.  The most important point of Rostow’s Theory is that it is possible to identify stages of development and to classify societies according to those stages. He distinguished 5 such stages. They are (1) traditional (2) transitional (3) take-off (4) maturity and (5) high mass consumption.