The World Inequality Report (WIR), 2022, while detailing the rising levels of income and wealth inequality across countries, has termed India as a poor and very unequal country. It pointed out that along with income and wealth disparity, gander and carbon inequality are also present in the country. WIR reveals that India’s top one per cent hold 22 per cent of total national income. The figure goes up to 57 per cent when the top 10 per cent is considered, while the share of bottom 50 per cent in national income is just 13 per cent. Moreover, Indian share in female income is just 18 per cent which is slightly higher than Middle Eastern countries where it is only 15 per cent. In this regard, India is well below the Asian average which stands at 21 per cent (excluding China).
As usual these alarming findings have started a war of words amongst experts. While one section is of the view that inequality in India has increased since the introduction of the new economic policy in place of a conservative regime, others argue that policies should not be blamed as it ensured speedy economic development which is evident from higher GDP growth rates. One group believes that to prevent the inequality gap from widening further, India should revert back to older policies when the country had a lower inequality percentage, while the other group counters that the newer policies have helped countries bridge the gap between rich and poor, which is evident in the WIR report. As experts are divided over the policies to be adopted to remove inequality, all eyes are on the government as they decide the path to be adopted to ensure inclusive growth.
According to several economists, the most effective tool to bridging the widening gap is to have an efficient tax and transfer system. The tax system will be such that wealthier persons and multinational companies will have to pay more tax and the extra tax revenue will be spent on creating infrastructure or financing upcoming projects. It may be mentioned here that the Keynesian model of economics strongly supports the idea of taxing the top one per cent at a higher rate than the people in the bottom half. The model is considered to be an ideal tool for even distribution of wealth in welfare states. The model was discarded in the early 80s when neo liberal economic policy started dominating the world economy. Apart from taxing the rich, India should focus on increasing skills and knowledge of its citizens and at the same time make efforts to create quality jobs that enhance career and investment possibilities. Policy makers should also focus on removing barriers to female employment and career progression. If left unaddressed, this toxic economic state could lead to greater demands for redistribution and social unrest.