Why in news?
Recent World Bank estimates claimed India to be among the least unequal countries, contradicting independent studies that show deepening income and wealth disparities. The debate has renewed focus on how inequality is measured and addressed.
Understanding inequality
- Consumption versus income: Household consumption surveys often understate inequality because richer households under‑report spending, while income data (from tax filings) reveal larger gaps.
- Wealth concentration: A tiny fraction of Indians owns a majority of assets—land, capital and financial investments—yet wealth surveys are infrequent.
- Measurement limitations: The Gini coefficient, widely used to summarise inequality, masks intra‑state variations and ignores wealth distribution; the absence of a regular wealth census and under‑reporting limits accuracy.
Implications of high inequality
- Reduced social mobility: When wealth and opportunities are concentrated among a few, upward mobility declines, reinforcing caste and class barriers.
- Weak domestic demand: Concentrated wealth restricts purchasing power for the majority, slowing economic growth and job creation.
- Policy distortion: Political influence of wealthy elites can skew public spending and subsidies toward privileged sectors.
- Social tensions: Rising disparities may fuel unrest, mistrust in institutions and identity‑based conflicts.
Policy context and way forward
- Constitutional mandate: Articles 38(2) and 39(c) direct the state to minimise inequalities and ensure equitable distribution of material resources.
- Existing schemes: Welfare programmes like MGNREGA, the Public Distribution System, Ayushman Bharat and PM KISAN seek to reduce income gaps, but coverage and funding gaps persist.
- Progressive taxation: Introducing inheritance and wealth taxes, rationalising GST slabs and broadening income‑tax coverage can mobilise resources for redistribution.
- Universal public services: Investments in public health, education and social housing offer a level playing field and reduce out‑of‑pocket expenditure.
- Access to credit and land: Formal financial inclusion, land reforms and women’s property rights can empower marginalised groups.
- Better data: Conducting periodic wealth censuses, integrating tax and survey data and capturing gender‑disaggregated information will improve policy design.