Income Inequality: Inequality in India

India has a wide variety of inequalities that are multidimensional and intersecting in nature. Although multidimensional poverty is a field of study for development economics in the early 2000s, multidimensional inequality is a fairly new perspective. This approach focuses on the interrelationships between different variables such as income, labor, education, health and family status to emphasize the degree of deprivation. The interconnectedness is such that families are deprived in other cases as well. This deprivation has both social and economic roots that reinforce the oppressive structure that limits the power and independence of an individual (and, in extension, society as a whole). Economic factors such as job losses, job informalities that deprive workers of benefits, low incomes and lack of wealth or resources limit their mobility in social life and trap families in a vicious cycle of deprivation and inequality.

Reaching a single definition of disadvantaged family or vulnerability is challenging, but we can assume that a family is deprived of the necessary means of survival or has no purchasing power to access life-saving or livelihood services. More important, the notion of multidimensional inequality in the family, outside of systematic intervention, offers structural solutions to inequality. These solutions range from the inclusion of disadvantaged households in the labor market so that sources of growth and opportunities are not excluded to increase their social security.

Economic variables such as income and labor and socio-economic variables such as health, education and family status are highlighted because these variables together improve the quality of life. It can be observed that the correlation between income, health and education is such that low income or income loss leads to unavailability and inadequacy of services in health and education sector. In India, periodic labor force surveys for the years 2017-18, 2018-19 and 2019-20 show that the top 10% earn approximately equal to the bottom 64%. Top 10 accounts for one third of earned income.

Although income inequality is not the only cause of poverty, it boldly outlines the daily experience of inequality and inequality. Basic needs become luxuries, spread in the form of wealth, inaccessible. Income profiles highlight a huge pay gap between men and women, drawing attention to gender-based inequalities in the labor market that further marginalize women and reduce their participation in the labor force.

While it is difficult to trace the movement from one income class to another due to the absence of a class definition, the share held by the top 1% is only increasing, further marginalizing the poor. In this context, low income needs to be seen in the context of multidimensional deprivation. Similarly, positive changes in the labor market, such as the expansion of the working population, have created a huge potential for utilizing population dividends to increase the economic productivity of the country.

However, this potential depends on important interventions such as the creation of new jobs, the integration of the informal sector with the formal sector, and the empowerment of the female workforce to increase their participation. The latter also depends on the changing mentality of society to view women as secondary “bread-makers”.

The affordability and accessibility of the health and education sectors is a major concern under a multidimensional scope, with an emphasis on enabling structural changes in the nature of inequality. In addition to the 4th and 5th rounds of the NFHS, data from a number of government sources, such as UDISE +, revealed that India has performed well on a number of indicators, including improved sanitation facilities, household electrification and clean fuel for cooking. These improvements can be credited to various social security schemes and initiatives – the most notable of which is JAM.

– Jan Dhan Aadhaar and Mobile – which focuses on deep technological integration in the society. It also increases the penetration of social sector schemes as the schemes become more efficient for the beneficiaries.

As a means of ensuring welfare for the most vulnerable populations and as a means of correcting existing social and economic inequalities in society, social protection schemes serve as a mechanism to increase the resilience of marginalized populations for socio-economic shocks. In a world where any volatile situation can push a large section of society into poverty, emphasis should be placed on social protection schemes.

India’s strong and multidimensional social security system has become an inspiration to the rest of the world. At the heart of these schemes is welfare, which focuses on providing essential services at affordable cost, creating opportunities and sustainable living, ensuring universal increase in quality of life. Emphasis on the interaction between the social and economic aspects of inequality helps us to drive policy action as a whole through our social security framework. It raises relevant issues related to ease of living and sectoral outcomes.

Amit Kapoor, Chairman, Institute for Competitiveness, India; Visiting Scholar and Lecturer, Stanford University. Jessica Duggal is a researcher at the Institute for Competitiveness, India.

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