Increased inquality, the price of economic growth in India

In India the official VNR's main point is that rapid economic growth has sharply reduced poverty. A 2018 study backs this claim saying extreme poverty is declining in India at rate of 44 people per minute as a result of which, since May 2018, India claims to no longer have the largest number of poor people. Despite this dramatic poverty reduction, over 73 million Indians still live below the international poverty line. Most of these people subsisting on less than US$1.90 a day are in rural areas. Even as the absolute numbers of poor fall there is rapid rise in inequality. A 2018 Oxfam report says India’s richest one percent garnered 73 percent of national wealth generated in 2017.

Fairer taxation and public spending policies can help reduce inequality. In 2017 the finance minister accepted that India’s tax policy was not socially just and made assurances that the tax net would be widened. There has been some success as direct tax receipts rose 19 percent in a year, mostly from increased personal income tax collection. However, corporate income tax cuts continue, leading to an estimated revenue loss of US$ 1.1 billion (Rs 7,000 crore) for 2018-2019.

Meanwhile, the Mahatma Gandhi National Rural Employment Guarantee Scheme that has lifted millions out of poverty since 2005 has seen slowing budgetary support, with allocations unchanged between 2017-2018 and 2018-2019, a fall in real terms. This has resulted in delays in wage payments, non-payment of compensation for these delays, rationing of available work (to levels far lower than the guaranteed 100 days paid work), and non-payment of minimum wages. The magnitude of this denial of entitlements to India’s poorest can be gauged from the fact that accumulated unpaid wages alone add up to around US$ 700 million (Rs 4,786 crore) as of January 2018.

Rising inequality in India not only causes poverty of income or assets but also leads to unequal access to basic needs - food, livelihood, water and sanitation, health and education. These disparities disproportionately affect historically marginalized groups such as Dalits, tribals and Muslims, with women in each group worse off.

By Jagadananda and Navjot Bir Singh; Centre for Youth and Social Development (CYSD).

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Source: Report Spotlight on Sustainable Development 2019.