World Inequality Report And Inequality In India: Welfarism Declines And Inequality Abounds

Vivek Kumar Srivastava

World Inequality Report 2018 has been released by World Inequality Lab with which Paris based economists Piketty and Chancel are related. The report has analyzed the inequality in India in depth. The first major conclusion of the report is that in India after independence the inequality was not so much prevalent; the major factor was socialist policies but since the 7th Five Year Plan during 1985-1990 the deregulation started to take place and the relaxations in the economy were initiated.

Thereafter since 1991 to 2000 and then during the second generation reforms went quite rapidly and the result was that inequality which was so limited during 1970s was now a lethal reality of the Indian society. By 2014 the inequality was openly in existence and only few were in position to control the huge wealth. The deregulation of the economy allowed emergence of new rich class in major economies and this is true for India too.

The deregulation was a continuous affair as the report highlights the fact that- pro-market reforms were prolonged after 2000, under the 10th and subsequent five-year plans. The plans ended government fixation of petrol, sugar and fertilizer prices and led to further privatizations, in the agricultural sector in particular. Inequality trends continued on an upward trajectory throughout the 2000s and by 2014 the richest 10% of the adult population shared around 56% of the national income. This left the middle 40% with 32% of total income and the bottom 50%, with around half of that, at just over 16%.

Thus shift from socialism to capitalism and neoliberal policies have caused the huge imbalances in the equal distribution of the wealth in the Indian society.

The report also highlights the role of the tax system which in usual terms is progressive taxation in the country that rich will be taxed more than the poor. According to report this system became weakened after some time and after 1980s there were shifts and the taxation burden on the rich were being reduced than before as a consequence the accumulation of wealth was quite faster being transferred in the hands of the capitalist class. After the assumption of the NDA government the corporate taxes have been reduced and rich class is more benefited due to its capacity to diversify its businesses and the capacity to invest in the new sectors. Those who have more wealth have capacity to invest in the equity markets which is ballooned and the wealth of the rich class is continuously on increase.

In order to reduce the inequality it is necessary that effective progressive taxation system be implemented in the countries like India where phase of neoliberal economic policies have placed the burden most on the already starving classes. As after the implementation of the GST several medicines including the Insulin for the Diabetes patients have become costlier usually used by the middle class but what about those ones who abound around 80 crores in the country and are already hungry and living with the malnutrition also-how can these treat themselves for diabetes? They are bound to die.

In this respect not only the progressive tax system but also the provision of social welfare schemes and policies can play a crucial role in allowing the unequal Indians to survive in the cut throat social structure. Unfortunately Indian performance on this policy framework is quite alarming. Though government has implemented several schemes but due to improper implementation, leakages the schemes have not benefited to the target group. It is more saddening that governments never cared in effective manner to make these policies full of success. Take the case of Rashtriya Suraksha Bima Yojana (RSBY) which provide health insurance coverage of 30,000 Rs. To BPL families and other 11 new categories but most people are either unaware or find it hard to go for such social security products. In last nine years it is yet to gain recognition among the target groups.

In the social security areas Indian condition is critical. According to ‘Index Tracking Commitment to Reducing Income Inequality’ India stands at 132 out of 152 countries. Sweden stands at position 1st and Nigeria is located at the lowest position. The index studies the expenditures on the social welfare programmes, wage inequality etc. according to this report India spends less in the social welfare sectors.

In the background of these realities the inequality is likely to take more severe form in the country. As a large amount of the poor is lost in the health maintenance due to out of pocket expenses for which they have to bear health cost themselves due to costly insurance policies and weak government provided health infrastructure. The poor is more burdened when personal income is spent on the health and it becomes more critical and lethal on the existence and survival of this section of society who is already reeling under the unequal economic system.

As long as the inequality is address by more progressive taxation and more social welfare spending by the governments, this evil of the neoliberal economic system will plague the poor and finally will decimate them. The revelations of the World Inequality Report therefore needs to be taken into account along with the Index Tracking Commitment to Reducing Income Inequality for better policy making by the Indian government for the people who are highly distressed due to neoliberal phase of the country.