State of Inequality in India

A report, titled “The State of Inequality in India” has been released by the Economic Advisory Council to the Prime Minister (EAC-PM).

Details –

• The report was commissioned by the EAC-PM and prepared by the Institute for Competitiveness.
• It presents a holistic analysis of the depth and nature of inequality in India.
• This report cuts across the intersections of class, gender, and region and highlights how inequality affects the society.

Highlights of the report –

1. Move beyond wealth concentration as a metric of inequality –

• The report presents the case for moving beyond wealth concentration as a metric of inequality.
• Instead, emphasis should be given to dynamic variables like income distribution that determine capital flow and measure the purchasing power of the households.

2. Earnings have risen over the years, benefits remain concentrated –

The report concedes that while earnings have risen over the years, the benefits of that growth have largely remained concentrated. This has marginalised the poor further.

3. Progress has been made in various indicators –

The report noted that the progress has been made in various indicators: From improved labour participation (pre-Covid), health infrastructure and enrolment ratio of students to child mortality.

4. Wealth concentration has worsened –

• The report also noted that wealth concentration has worsened.
• 4% wealth concentration in the highest quintile in urban areas is contrasted with a meagre 7.1% concentration that in rural India.
• The share of the top 1% accounts for 6-7% of the total incomes earned, while the top 10% accounts for one-third of all incomes earned.

5. Unemployment rate & different employment categories –

• In 2019-20, among different employment categories:
  • • the highest percentage was of self-employed workers (45.78%),
    • followed by regular salaried workers (33.5%) and
    • casual workers (20.71%).
• The share of self-employed workers also happens to be the highest in the lowest income categories.
• The country’s unemployment rate is 4.8% (2019-20), and the worker population ratio is 46.8%.
• The gender disparity in the labour market continues to be stark over the three years in 2019-20.
• The female LFPR was at 30%, in contrast the male LFPR is recorded at 76.8%.

6. Nutrition profile among children has improved compared to 2015-16 (NFHS 4) –

• As per the report, stunting in children has gone down from 38.4% and wasting from 21%, and 7.7% are severely wasted.
• Additionally, 32.1% of children (under five years) were reported to be underweight.
• There has been a considerable improvement in increasing the infrastructural capacity with a targeted focus on rural areas.

7. Education and household conditions have improved enormously –

• According to the report, education and household conditions have improved enormously due to targeted efforts.
• It is emphasised that education and cognitive development from the foundational years is a long-term corrective measure for inequality.
• The Gross Enrolment Ratio has also increased between 2018-19 and 2019-20 at the primary, upper primary, secondary and higher secondary.
• In 2019-20, the Gender Parity Index was more than 1 across all levels of education at the all-India level.
• This index reflects the representation of females in schools in relation to the population of girls in the corresponding age group.
• In terms of improvement in household conditions, emphasis on providing access to sanitation and safe drinking water has meant leading a dignified life for most households.
• According to NFHS-5 (2019-21), 97% of households have electricity access, 70% have improved access to sanitation, and 96% have access to safe drinking water.

Recommendations –

1. Demand-based guaranteed employment scheme for the urban unemployed –

• The report has suggested that the Government should launch a guaranteed employment programme for the urban unemployed.
• This demand-based guaranteed employment scheme should be launched on the lines of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
• This will help in rehabilitation of the surplus-labour.
• This step was recommended after analysing the difference between the labour force participation rate in rural and urban areas.

2. Roll out a universal basic income (UBI) scheme –

• It also suggested to roll out a universal basic income (UBI) scheme to reduce income gaps.
• UBI is a government program in which every adult citizen receives a set amount of money regularly.
• The goals of a basic income system are to alleviate poverty and replace other need-based social programs that potentially require greater bureaucratic involvement.
• In India, the idea of UBI was endorsed by former chief economic advisor Arvind Subramanian in the Economic Survey for FY17 in place of subsidy transfer.
• IMF, In October 2017, endorsed the idea of India launching a fiscally-neutral UBI scheme by eliminating food and fuel subsidies.
• The report mentions that this step can reduce income gap and ensure equal distribution of earnings in the labour market.

3. More expenditure towards social services and the social sector –

• The report said that the Government must allocate more percentage of the expenditure towards social services and the social sector.
• This will make the most vulnerable population resilient to sudden shocks and stop their descent into poverty.
• The report also gave recommendations like:
  • creating income slabs that provide class information,
  • creating jobs, especially among the higher levels of education and
  • increasing the budget for social protection schemes.