Is the inequality debate in India justified?


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NO economic inequality is NOT repeat NOT being blown out of proportion. Inequality is a very serious matter and while India is not yet as badly off as some of the more ‘developed’ countries, we will get there soon and that will be terrible. Making it a big deal NOW would be a really good idea.

Economic inequality has, for a long time, been measured in terms of the Gini coefficient. This co-efficient is a number between 0 and 1 where 0 means complete equality with everyone receiving the same income and 1 means all income is in hands of one person and the rest earn nothing. For those who want to dive a bit more into inequality, a newish index called the Palma is gaining traction. Read On inequality, let’s do the Palma (because the Gini is so last century) to get an idea of what it is.

How is India doing? On the Palma, see map below [1], not bad

It is useful to reflect on two types of equality. One which can be seen because everyone is poor (like Socialist India) and one because everyone is rich but no one is obscenely so (like the Scandinavian countries). India falls in neither category. However, India is seemingly equal only because it is just emerging from 5 decades of socialism and poverty.

Let us see the trends for India

The worrying parts in this chart are

  1. the Gini coefficient is steadily going up (for most part) from 1994.
  2. The share of the top 0.1% & 1% of the wealthiest is also going up.

The second part, is more worrying than the first. This is because one a small group starts getting more and more rich, they start getting more powerful. Then they try and ensure that their power base is never threatened. This they do by not allowing challengers to come up and / or fixing legislative frameworks that ensure that they benefit disproportionately. Think to how easy much easier it is for government to announce tax breaks for industry as compared to an Income Guarantee Scheme for the poorest.

Britain is a developed country where 1% of the wealthiest have as much wealth as 55% of the poorest. Similar figures for the USA and these have been worsening since the 1980s and advent of Reagan (USA) and Thatcher (UK).

If India want to learn from history, inclusive growth (not allowing inequality to go out of control) is critical.

So, if you ask me “Is the problem of economic inequality in India being blown out of proportion?”, I would say “Not really. not as much as it SHOULD BE, if we want to avoid being in deep trouble a couple of decades from now”