INCOME INEQUALITY 

• Inequality refers to the unequal distribution of resources, opportunities, rights, and privileges among individuals or groups within a society or between different societies.
• It can manifest in various forms, such as economic inequality (disparities in income, wealth, and access to resources), social inequality (unequal treatment based on factors like race, gender, ethnicity, religion, or disability), and political inequality (unequal access to political power and decision-making processes).
• Inequality can have significant social, economic, and political implications. It can lead to social unrest, hinder economic growth, limit opportunities for social mobility, and perpetuate cycles of poverty and exclusion.
• Addressing inequality often involves policies and actions aimed at promoting equal opportunities, reducing disparities, and ensuring fairness and justice in various aspects of society.

3. About Income Inequality

• Income inequality refers to the unequal distribution of income among individuals or households within a society or geographic area.
• It is often measured using statistical tools such as the Gini coefficient, which quantifies the extent of income inequality within a population.
• Income inequality can manifest in different ways, including variations in wages, salaries, bonuses, investment income, and other sources of earnings.
• Key factors contributing to income inequality include differences in education, skills, employment opportunities, discrimination, technological advancements, globalization, tax policies, and social welfare programs.
• These factors can create disparities in income levels between different socioeconomic groups, such as high-income earners, middle-income earners, and low-income earners.
• Income inequality can have wide-ranging social and economic consequences. It can lead to disparities in living standards, access to education and healthcare, social mobility, and overall quality of life.
• Excessive income inequality may also contribute to social tensions, political instability, and reduced economic growth potential.
• Governments, policymakers, and organizations often implement various strategies to address income inequality, such as progressive taxation, minimum wage laws, social safety nets, education and training programs, labour market reforms, and initiatives to promote inclusive economic growth.
• These efforts aim to create a more equitable distribution of income and improve overall societal well-being.

4. How to measure income inequality?

Income inequality can be measured using several statistical methods and indices. 

• Gini Coefficient: The Gini coefficient is a widely used measure of income inequality. It ranges from 0 to 1, where 0 represents perfect equality (everyone has the same income) and 1 represents perfect inequality (one person has all the income). A higher Gini coefficient indicates greater income inequality. The Gini coefficient is calculated based on the Lorenz curve, which plots the cumulative income distribution against the cumulative population.
• Income Quintile Ratios: This measure compares the income of households in the highest income quintile (top 20%) to the income of households in the lowest income quintile (bottom 20%). A higher ratio indicates greater income inequality between the top and bottom income groups.
• Palma Ratio: The Palma ratio compares the income share of the top 10% of the population to the income share of the bottom 40%. It focuses on the relative income concentration at the top and bottom ends of the income distribution.
• Theil Index: The Theil index is another measure of income inequality that considers both within-group inequality and between-group inequality. It is based on the concept of entropy from information theory and can be decomposed into two components: the inequality within groups and the inequality between groups.
• Percentile Ratios: Percentile ratios compare the income of households at different percentiles of the income distribution. For example, the ratio of the 90th percentile income to the 10th percentile income can provide insights into the income gap between higher and lower earners.
• Decomposition Analysis: This method breaks down income inequality into various components, such as differences in earnings, capital income, government transfers, and taxes. It helps identify the factors contributing to income inequality within a population.

5. India’s inequality trends

India's inequality trends are concerning, with a widening gap between rich and poor. 

Rising Inequality

• Decades of decline in inequality post-independence reversed in the 1980s.
• Since then, the share of income and wealth going to the top 1% has been steadily increasing, reaching record highs in recent years.
• The World Inequality Lab reports that by 2022-23, the top 1% held a staggering 22.6% of national income, among the highest in the world. 

Extreme Concentration

• The wealthiest 10% of the population controls a massive portion of the national wealth, estimated at around 77%.
• This means the bottom 50% of the population struggles to scrape together just a tiny fraction (around 4%) of the wealth.

Limited Mobility

• While some economic mobility exists, many who escape poverty remain vulnerable.
• Intergenerational mobility, meaning the ability of children to achieve a higher economic status than their parents, is also low, suggesting limited opportunities for many.

These trends have serious implications for social justice, economic stability, and overall development.

6. The causes of rising inequality in India

The rising inequality in India can be attributed to a combination of economic, social, and policy factors. 

• Economic Reforms and Globalization: The economic reforms initiated in the early 1990s, which opened up the Indian economy to globalization and liberalization, led to rapid economic growth. However, this growth was not evenly distributed across sectors and regions, resulting in widening income gaps between different segments of society.
• Urban-Rural Divide: There exists a significant disparity between urban and rural areas in terms of income, opportunities, infrastructure, and access to basic services. Urban areas, especially metropolitan cities and industrial hubs tend to attract more investment and offer higher-paying jobs, leading to a widening urban-rural income gap.
• Sectoral Disparities: Certain sectors of the economy, such as information technology, finance, and services, have experienced robust growth and generated wealth for a relatively small segment of the population, contributing to income concentration. Meanwhile, sectors like agriculture, which employ a large portion of the workforce, have faced challenges such as low productivity, inadequate infrastructure, and income volatility.
• Education and Skills Gap: Disparities in education and skills development contribute to income inequality. Individuals with higher levels of education, specialized skills, and access to quality education opportunities are more likely to secure well-paying jobs and participate in sectors with higher growth prospects.
• Gender Inequality: Gender disparities in education, employment, and wages contribute significantly to income inequality. Women often face barriers to accessing education and employment opportunities, receive lower wages for similar work compared to men, and are underrepresented in leadership positions and high-paying sectors.
• Informal Economy: A significant portion of India's workforce is engaged in the informal economy, which includes activities such as agriculture, small-scale enterprises, and informal labour. Informal workers often lack job security, social protection, and access to formal financial services, leading to income instability and vulnerability.
• Wealth Concentration and Corruption: The concentration of wealth among a small elite, including wealthy individuals, corporate entities, and influential groups, contributes to income inequality. Issues such as corruption, crony capitalism, and rent-seeking behaviour can exacerbate wealth disparities and hinder equitable economic opportunities for all segments of society.
• Social and Caste Factors: India's social structure, including caste-based discrimination and inequalities, also plays a role in income disparities. Historically marginalized communities, such as Scheduled Castes (Dalits) and Scheduled Tribes (Adivasis), often face socio-economic barriers that limit their access to education, employment, and resources.

7. The poor and rich gap in India

The wealth gap between rich and poor in India is vast and has been growing wider in recent years.

Wealth Concentration

• The richest 1% of the population controls a staggering share of the wealth, estimated to be around 40%.
• In contrast, the bottom 50% of the population owns a minuscule portion, around 3% of the total wealth.

Income Distribution

• The top 10% of earners corner a significant share of the national income, around 77%.
• This means a large portion of the population struggles to make ends meet with a much smaller share.
• Reports suggest the top 1% hold a concerningly high share of income, reaching over 22% in recent years.

8. Inclusive growth

• Inclusive growth refers to a type of economic development that aims to ensure that the benefits of growth and prosperity are widely shared across different segments of society, particularly targeting marginalized and vulnerable groups.
• It emphasizes creating opportunities for all individuals to participate in and benefit from economic progress, regardless of their background, social status, or location.
• Inclusive growth goes beyond mere economic expansion and focuses on reducing disparities, promoting social inclusion, and enhancing overall well-being and quality of life for everyone.

The steps are taken to Promote inclusive growth in India

Promoting inclusive growth in India requires a comprehensive approach involving various policies, programs, and initiatives across different sectors. 

• Social Welfare Programs: The Indian government has implemented several social welfare programs aimed at providing support and assistance to vulnerable and marginalized populations. Examples include the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) for rural employment generation, the National Food Security Act for food distribution to low-income households, and various housing schemes for the homeless and economically weaker sections.
• Financial Inclusion: Initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) have been launched to promote financial inclusion by providing access to banking services, savings accounts, insurance, and credit facilities to individuals in rural and urban areas who were previously excluded from the formal financial system.
• Education and Skill Development: Programs like the Sarva Shiksha Abhiyan (SSA) and the Skill India initiative aim to improve access to quality education and vocational training, especially for disadvantaged groups and rural communities. These initiatives focus on enhancing employability and fostering entrepreneurship among youth and adults.
• Healthcare Reforms: The government has prioritized healthcare reforms to improve access to affordable and quality healthcare services, especially in rural and underserved areas. Initiatives such as the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) provide health insurance coverage to economically vulnerable families for hospitalization expenses.
• Rural Development: Schemes like the Pradhan Mantri Gram Sadak Yojana (PMGSY) aim to improve rural connectivity by constructing and upgrading roads, bridges, and transport infrastructure, which facilitates access to markets, education, healthcare, and employment opportunities in rural areas.
• Affordable Housing: The government has launched schemes like the Pradhan Mantri Awas Yojana (PMAY) to promote affordable housing for economically weaker sections, lower-income groups, and rural households. These initiatives aim to address housing shortages and improve living conditions for marginalized communities.
• Entrepreneurship and Small Business Support: Programs such as Startup India and the Stand-Up India scheme focus on promoting entrepreneurship among women, SC/ST (Scheduled Castes/Scheduled Tribes) entrepreneurs, and individuals from backward regions by providing financial assistance, mentorship, training, and market access.
• Digital Inclusion: Initiatives like Digital India aim to bridge the digital divide by promoting digital literacy, expanding internet connectivity, and leveraging technology for delivering government services, financial transactions, education, healthcare, and e-commerce opportunities to remote and rural areas.
• Environmental Sustainability: Efforts are being made to integrate environmental sustainability into development policies and practices, including renewable energy initiatives, sustainable agriculture practices, conservation of natural resources, and climate change mitigation and adaptation strategies.