Warning against the widening income disparities in many countries, the International Monetary Fund has turned the spotlight on India, stating that the wealth of the country’s billionaire community has shot up by an astounding 12-fold in just a matter of 15 years.
IMF Managing Director Christine lagarde indeed believes that the net worth of the Indian billionaires is large enough to eliminate the country’s absolute poverty twice over.
The situation is no less glaring in the United States where, she said, the richest 1 per cent captured 95 of all income gains since 2009, while the bottom 90 per cent got poorer.
The IMF chief drew attention to the problem while delivering the Richard Dimbleby lecture in london on Monday, noting that income inequality has been rising in most countries of the world.
“Seven out of ten people in the world today live in countries where inequality has increased over the past three decades,” she said and cited some “stunning” numbers from Oxfam that “the richest 85 people in the world own the same amount of wealth as the bottom half of the world’s population”.
lagarde apparently cited the situation in the United States and India to drive home the fact that the problem is turning acute in both the developed and developing countries.
“In the US, inequality is back to where it was before the Great Depression, and the richest 1 percent captured 95 percent of all income gains since 2009, while the bottom 90 percent got poorer. In India, the net worth of the billionaire community increased twelvefold in 15 years, enough to eliminate absolute poverty in this country twice over,” she said.
Stating that disparities had emerged as the third disturbing long-term trend, after demographics and degradation of the environment, lagarde said: “let me be frank: in the past, economists have underestimated the importance of inequality. They have focused on economic growth, on the size of the pie rather than its distribution. Today, we are more keenly aware of the damage done by inequality.”
“Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential,” she said.
Noting that the fiscal system can help to reduce inequality through careful design of tax and spending policies, lagarde mooted adoption of a more progressive taxation policy, along with improving access to health and education, and putting in place effective and targeted social programmes.
These policies may be hard to design because of resistance, she said, noting: “Nevertheless, we need to get to grips with it, and make sure that ‘inclusion’ is given as much weight as ‘growth’ in the design of policies. Yes, we need inclusive growth.”
“More inclusion and opportunity in the economic life also means less cronyism and corruption. This must also rise to the top of the policy agenda,” the IMF chief said.