30th January 2024 (9 Topics)
Economic Growth and Inequality
Context:
The link between economic growth and rising inequality in India is a concern. The same has been reflected in the concerns voiced by global investors regarding the country's economic outlook. Hence, it is pertinent to emphasize on the need to evaluate the impact of growth policies on income distribution and social cohesion.
- Unequal Growth and Divergent Economic Outcomes:
- Predictions on India's Economic Size: Various leaders, including PM Narendra Modi, aim for ambitious economic targets, with recent statements at the World Economic Forum suggesting India as a $10 trillion economy in the making.
- Economic Agenda Dominated by Growth: The unprecedented focus on economic growth in democracies, with leaders prioritizing growth goals over other aspects of development.
- Growth Plus Rising Inequality: Recent economic growth in India has been accompanied by increasing inequality, dating back to the 1980s and intensifying in subsequent decades. Despite overall economic growth, the rising tide of growth appears insufficient to improve the income levels of the poorest sections of society.
- Social Pathologies and Collective Action: Unequal societies experience social pathologies, including violence and mental health disorders. It suggests that inequality hinders collective action by lowering trust between groups, impacting initiatives like the Swachh Bharat Mission.
- Impact of Unequal Growth on Rural Wage Rates:
- Inequality in Agricultural and Non-Agricultural Sectors: The analysis of rural wage rates reveals that real wages for non-agricultural and construction workers have decreased, indicating disparities in economic benefits.
- Stagnant Per Capita Income at the Bottom: While the economy has grown, per capita income at the bottom of the pyramid, especially for 35% of India's workforce, has not seen significant improvement.
- Democratic Principles: The reduction of inequality is framed not only as a means to address challenges but as an essential aspect of democratic principles, emphasizing the historical neglect of economic policy regarding gross inequality of opportunity.
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