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SANSAD TV: THE GLOBAL DEBATE- REDUCING ECONOMIC INEQUALITIES

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Reducing inequalities:

  • Reducing inequalities and ensuring no one is left behind are integral to achieving the Sustainable Development Goals.
  • Inequality within and among countries is a persistent cause for concern. Despite some positive signs toward reducing inequality in some dimensions, such as reducing relative income inequality in some countries and preferential trade status benefiting lower-income countries, inequality still persists.
  • COVID-19 has deepened existing inequalities, hitting the poorest and most vulnerable communities the hardest. It has put a spotlight on economic inequalities and fragile social safety nets that leave vulnerable communities to bear the brunt of the crisis.  At the same time, social, political and economic inequalities have amplified the impacts of the pandemic.
  • On the economic front, the COVID-19 pandemic has significantly increased global unemployment and dramatically slashed workers’ incomes.
  • COVID-19 also puts at risk the limited progress that has been made on gender equality and women’s rights over the past decades. Across every sphere, from health to the economy, security to social protection, the impacts of COVID-19 are exacerbated for women and girls simply by virtue of their sex.
  • Inequalities are also deepening for vulnerable populations in countries with weaker health systems and those facing existing humanitarian crises. Refugees and migrants, as well as indigenous peoples, older persons, people with disabilities and children are particularly at risk of being left behind. And hate speech targeting vulnerable groups is rising.

Facts:

  • The latest edition of the World Inequality Report has confirmed that the world continues to sprint down the path of inequality.
  • Global multimillionaires have captured a disproportionate share of global wealth growth over the past several decades: the top 1% took 38% of all additional wealth accumulated since the mid-1990s, whereas the bottom 50% captured just 2% of it.
  • India’s case is particularly stark. This means that the gap between the top 1% and the bottom 50% is widest for India among the major economies in the world. The gap is wider in India than the United States, the United Kingdom, China, Russia and France.

Growing inequality due to Covid-19

  • Inequalities were increasing earlier also but the pandemic has widened them further. For example, the share of wages declined as compared to that of profits. The big companies and a large part of the corporate sector could manage the pandemic.
  • But the informal sector and workers have suffered a lot with loss of incomes and employment in the last one year. In other words, the recovery is more k-shaped with rising inequalities.
  • A new survey carried out by People’s Research on India’s Consumer Economy (PRICE), a think tank, attempts to fill the void.
  • As reported in this paper, data gathered in the survey indicates that the annual income of the poorest 20 per cent of households in India declined by around 53 per cent in 2020-21 compared to levels observed in 2015-16.
  • In comparison, incomes of the top 20 per cent households grew by 39 per cent over the same period.
  • A consequence of this divergence is that the richest 20 per cent of households (the top quintile) accounted for 56.3 per cent of total household income in 2021, up from 50.2 per cent in 1995.
  • At the other end of the spectrum, the share of the bottom 20 per cent of households declined from 5.9 per cent to 3.3 per cent over the same period.
  • Women lost more jobs and many are out of the workforce. Inequalities have increased in health care and education.
  • In its latest report, Oxfam noted “The wealth of Indian billionaires increased by 35 per cent during the lockdown and by 90 per cent since 2009 to $422.9 billion ranking India sixth in the world after US, China, Germany, Russia and France,” in its report titled ‘The Inequality Virus’.
  • Multiple estimates by multilateral institutions show the COVID-19 pandemic will hit India the hardest by sending 40 million people into “extreme poverty”, worsen hunger and income inequality, and yet the government seems oblivious with no data, no estimation or policy response
  • The United Nations Development Programme (UNDP) estimates that 260 million people will be back in poverty by 2020 – almost as many as the 271 million who left between 2006 and 2016.

Measures to address the inequalities

A three-pronged approach for reducing inequalities. These are: focus on employment and wages; raising human development, and quasi universal basic income and other social safety nets.

  • First, creation of quality or productive employment is central to the inclusive growth approach. At the macro level, the investment rate which declined from 39% in 2011-12 to 31.7% in 2018-19 has to be improved. Investment in infrastructure including construction can create employment.
  • In labour market, correcting the mismatch between demand and supply of labour is needed (only3% of India’s workforce has formal skill training as compared to 96% in South Korea, 80% in Japan, and 52% in the United States).
  • Manufacturing should be the engine of growth. Here, labour-intensive exports are important and manufacturing and services are complementary.
  • Focusing on micro, small & medium enterprises and informal sectors including rights of migrants is important rather than providing 75% reservation to locals in private jobs.
  • Getting ready for automation and technology revolution such as IR 4.0. Workers need to be reskilled and up-skilled.
  • Social security and decent working conditions for all; raising real wages of rural and urban workers and guaranteeing minimum wages are key to reducing inequality.
  • Apart from spending on vaccines and other related measures, we need to move towards universal health care and spend 2%-3% of GDP on health. Education and health achievements are essential for reducing inequality of opportunities.

Way Forward

  • Enhancing tax and non-tax revenues of the government is needed to spend on the above priorities.
  • The tax/GDP ratio has to be raised, with a wider tax base. Richer sections have to pay more taxes.
  • Similarly, the inequalities between the Centre and States in finances should be reduced. State budgets must be strengthened to improve capital expenditures on physical infrastructure and spending on health, education and social safety nets.
  • Apart from economic factors, non-economic factors such as deepening democracy and decentralisation can help in reducing inequalities.
  • Unequal distribution of development is rooted in the inequalities of political, social and economic power. We have to find opportunities and spaces where the power can be challenged and redistributed.