A shadow on India's Growth : Rise of Inequality

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India has become the fifth largest economy this year surpassing its former colonizer, with a gross domestic product of roughly 3.5 trillion USD. Further, it ranks third in the world following China and USA in PPP. India is estimated to surpass Japan and Germany to become the third largest economy by 2027 with the 5 trillion milestones. The upcoming trade agreements with the UK, UAE, Australia, and Middle East; engaging G7 nations in Indo - Pacific (with Canada being the latest addition); being the intersection of BRICS, SCO, QUAD, and I2U2; exhibiting military drills with China, Russia (Vostok) and with USA (YudhAbhyas); presidency of G20 in 2023, exhibits India's growing soft power and economic - military hard power.

This all looks gloomy when India is one of the worst performers on the global inequality index. In fact, the overall inequality index is improved when India is excluded*. The following heat maps indicate the severity of the problem when India aligns with African, and Latin American nations performing significantly worst than its neighboring nations.

(* WIR_2022_FullReport.pdf (wid.world) - Page 47)
   

                                    (source: WIR_2022_FullReport)

The top 1.4 crore people of India hold more wealth than the bottom 70 crore. According to an Oxfam report, 73 % of the wealth generated in 2017 went to the top 1% of people. The situation is even worse in the post-covid world.

Government Efforts :

The government's effort is the saddest part. India joins the list of countries with no minimum wage in 2020. Other companions on the list are - Bahrain, Cambodia, Ethiopia, Jordan, Lebanon, and South Sudan. According to the Commitment to Reducing Inequality report, India features the fifth lowest in Healthcare spending and Public services.

Approach :

One of the tools for fighting inequality is progressive taxation. Sadly, the rise in global inequality since the 1980s is fuelled by regressive taxes all over the world. A country like India reduced its top income tax bracket significantly from 55% to 30% and effective corporate tax to 30%. Increasing the top income tax bracket and levying off taxes on income slabs up to 5 lakh INR is expected in the upcoming union budget. Along with that, effective tools of corporate taxes need to be incorporated so that people can't hide under corporations. This would ensure the redistribution of wealth. According to a study, a one percent wealth tax on the 98 richest billionaire families could finance India's flagship public health insurance scheme for 7 years. This suggests how effective this tool could be. 

References :

1. Report_on_State_of_Inequality-in_India_Web_Version.pdf (competitiveness.in)

2. WIR_2022_FullReport.pdf (wid.world)

3. SDR-2022-india.pdf (sdgindex.org)

4. 0098-21_WIL_RIM_RAPPORT_A4.pdf (wid.world)

5. 03_Analysing_the_effectiveness_of_targeting_under_PMJAY_in_India_2_2d1e276ae3.pdf (abdm.gov.in)

6. echap04_vol1.pdf (indiabudget.gov.in)

7. The Commitment to Reducing Inequality Index 2022 

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