Inequality is the unavoidable consequence of globalisation
RSS general secretary Dattatreya Hosabale recently highlighted economic inequality in the country as a major challenge and opposition parties took this opportunity to attack the Modi Government. Growing inequality is our economic reality and the World Inequality Report published by World Inequality Lab summarises that inequality has risen substantially from the 1980s onwards.
It reached the historical high in 2013 when share of national income accruing to India’s top 1 per cent of earners was 22 per cent, while the share of the top 10 per cent was around 56 per cent. Income inequality touched its inflexion point in 2003 when the top 1 per cent and bottom 50 per cent each were earning approximately 17 per cent of income. In other words, inequality rose sharply during the UPA era and the NDA regime has stopped it from further widening.
If we compare China’s performance, it reached the inflexion point in 2005 when the top 1 per cent and bottom 50 per cent each were earning approximately 14 per cent of income and thereafter both the groups are having almost equal share in income.
Deregulation and liberalisation of the economy has created wealth in our country but at the same time it has increased the gulf between rich and poor. Socialistic policies adopted after independence reduced income inequality. However, socialist policies had their perils; and, despite all its evils, globalisation has helped in improving the living standards of millions of people.
The State of Inequality in India Report was released in May 2022 by Bibek Debroy, Chairman, Economic Advisory Council to the Prime Minister, and apart from income distribution, this report also covered labour market dynamics, health, education and household characteristics. All these reports suggest that there is a growing disparity between rich and poor. We can raise concerns over the methodology followed by the research institution (e.g., the sample size and its skewness) but it is not prudent to outrightly reject all the findings in these reports. After all, these are the same institutions which improved our ranking on various parameters.
In a federal structure like ours, it is the shared responsibility of both the Centre and state governments to build the necessary infrastructure. A government is responsible for making policies which improve the lives of the last man standing in the row. Governments can’t do much on distribution of wealth but surely, they can do a lot in removing the inequality in health, education, etc. Those who are at the helm of affairs should take a stock of the initiatives taken over the period and its outcome.
This country has real problems to fix and there are pressing issues which need a discussion. The Covid pandemic shook the world order and new strategies are needed to cope with the economic challenges.
Stress on government finances compelled the government to increase the borrowing but it should be kept in mind that corporate profit kept soaring during the pandemic and it is supported by the increased profit/GDP ratio. Income tax rates for corporate assesses were reduced in 2019 and the government should have considered imposing a Covid specific tax on super-profits of large corporate entities but that was not done.
Despite the pandemic situation, the maximum marginal income tax rate for an individual assessee is higher than a corporate assesse, and it doesn’t hold well on the principles of equity. Our political leaders should understand that India can’t copy the models of other countries because we have to serve a large population and our per capita income is low.
RSS is often cited as the ideological mentor and force behind making BJP as a ‘party with a difference.’ Therefore, politicians are expected to pay heed to the message coming from the Sangh leadership.
(The author is a chartered accountant and public policy analyst)