The Government must eliminate tax exemptions and not further reduce corporate tax rates. It must support organisations that benefit their workers and society rather than just their shareholders
India has been ranked 60th among 79 developing economies, below neighbouring China and Pakistan, in the ‘Inclusive Growth and Development Report 2017’ of the World Economic Forum (WEF). It said that most countries were missing important opportunities to raise economic growth and reduce inequality at the same time because the growth model and measurement tools that have guided policymakers for decades require significant readjustment.
The Inclusive Development Index (IDI) is based on 12 performance indicators. In order to provide a more complete measure of economic development than GDP growth alone, the index has three pillars — Growth & Development, Inclusion & Intergenerational Equity, and Inclusiveness & Sustainability. lithuania tops the list of 79 developing economies that also features Azerbaijan and Hungary at second and third positions, respectively.
While India is placed at the 60th spot, many of the neighbouring nations are ahead in the rankings. China is ranked at the 15th position, Nepal (27th), Bangladesh (36th) and Pakistan (52nd). Two Brics (Brazil, Russia, India, China and South Africa) nations, Russia and Brazil, are at 13th and 30th places, respectively. Others in the top 10 are Poland (4th), Romania (5th), Uruguay (6th), latvia (7th), Panama (8th), Costa Rica (9th) and Chile (10th).
IDI scores are based on a scale of 1-7. India, with a score of only 3.38, ranks 60th among the 79 developing economies on the IDI index, despite the fact that its growth in GDP per capita is among the top 10 and labour productivity growth has been strong. “Poverty has also been falling, albeit from a high level”, the report said. However, it noted that the country’s debt-to-GDP ratio is high, raising some questions about the sustainability of Government spending.
Among the advanced economies, Norway is at the top, followed by luxembourg (2nd), Switzerland (3th), Iceland (4th) and Denmark (5th). Other nations in the top 10 advanced economies are Sweden (6th), Netherlands (7th), Australia (8th), New Zealand (9th) and Austria (10th). Advanced and developing economy IDI scores are not strictly comparable due to different definitions of poverty.
According to the report, annual median incomes declined by 2.4 per cent or $284 per capita across 26 advanced economies between 2008 and 2013. Developing countries fared much better, with median incomes rising by an average of 10.7 per cent or $165.
“However, 23 per cent of them experienced a decline in median per capita income of nine per cent, as compared to 54 per cent of advanced countries experiencing a decline of an average eight per cent or $1,044 per person, equivalent to $2,505 per average household”, it said.
Richard Samans, member of the WEF’s Managing Board, said there was a global consensus on inclusive growth, but it has been far more directional than practical. To respond more effectively to social concerns, economic policy needs a new compass setting, broad-based progress in living standards, and a new mental map in which structural reform is re-imagined and re-applied to this task, he added.
As per the report, while unemployment in India is not as high as in some other countries, the labour force participation rate is low, the informal economy is large, and many workers are in vulnerable employment situations with little room for social mobility.
The report also noted that a more progressive tax system in India would help raise capital for expenditure on infrastructure, healthcare, basic services and education. India scores well in terms of access to finance for business development and real economy investment. However, new business creation continues to be held back by corruption, underdeveloped infrastructure, and the large administrative burden involved in starting and running companies.
In signs of rising income inequality, India’s richest one per cent now holds a huge 58 per cent of the country’s total wealth — higher than the global figure of about 50 per cent, a new study has showed recently.
The study informed that just 57 billionaires in India now have same wealth ($216 billion) as that of the bottom 70 per cent population of the country. Globally, just eight billionaires have the same amount of wealth as the poorest 50 per cent of the world population.
The study said there are 84 billionaires in India, with a collective wealth of $248 billion, led by Mukesh Ambani ($19.3 billion), Dilip Shanghvi ($16.7 billion) and Azim Premji ($15 billion). However, the total Indian wealth in the country stood at $3.1 trillion.
The total global wealth in the year was $255.7 trillion, of which about $6.5 trillion was held by billionaires, led by Bill Gates ($75 billion), Amancio Ortega ($67 billion) and Warren Buffett
($60.8 billion).
The study’s findings showed that the poorest half of the world has less wealth than had been previously thought while over the last two decades, the richest 10 per cent of the population in China, Indonesia, laos, India, Bangladesh and Sri lanka have seen their share of income increase by more than 15 per cent. On the other hand, the poorest 10 per cent have seen their share of income fall by more than 15 per cent.
In India, women form 60 per cent of the lowest paid wage labour, but only 15 per cent of the highest wage earners. It means that in India, women are not only poorly represented in the top bracket of wage earners, but the also experience wide gender pay gap at the bottom.
It also said that more than 40 per cent of the 400 million women who live in rural India are involved in agriculture and related activities. However, as women are not recognised as farmers and do not own land, they have limited access to Government schemes and credit, restricting their agricultural productivity.
It asked the Government to end the extreme concentration of wealth to tackle poverty, introduce inheritance tax and increase the wealth tax, as the proportion of this tax in the total tax revenue is among the lowest in India.
The Indian Government must eliminate tax exemptions and not further reduce corporate tax rates. The Government must support companies that benefit their workers and society rather than just their shareholders.
The Government must crack down on tax-dodging by corporates and rich individuals to end the era of tax havens. It should generate funds needed to invest in healthcare and education. The government must increase its public expenditure on health from 1 per cent GDP to three per cent of GDP and on education from three per cent of GDP to six per cent.
(The writer is a retired professor of international trade)