Tuesday, June, 18,2024


Economic inequality is the unequal distribution of income and opportunity between different groups in society or between different nations. It is a concern in almost all countries around the world and often people are trapped in poverty with little chance to climb up the social ladder. Income and wealth inequality has risen practically in all major advanced economies over the past two to three decades. Income distribution trends are more mixed in emerging economies but many of them including China and India have experienced rising inequality. Rising inequality has hampered economic growth by dampening aggregate demand and slowing productivity and stirred social discontent, political polarization, and populist nationalism. The pandemic has revealed vulnerability of societal and economic fragility. People across all income categories feel that economic inequality is a global challenge. The challenges are well expressed by UN Chief António Guterres when he states that “Income disparities and a lack of opportunities” are creating a vicious cycle of inequality, frustration and discontent across generations.

The mega trends that have mainly impacted modern day economy and inequality are: Technology, Climate change, Urbanisation and International Migration. Whilst technological innovations have supported economic growth, offering new possibilities in fields such as health care, education, communication and productivity, there is also evidence to show that it has led to increased wage inequality, and displaced workers. Climate change, according to the World Social Report, is making the world’s poorest countries even poorer, and could reverse progress made in reducing inequality among countries. It is noteworthy that today more people live in urban areas than rural areas, a trend that is expected to continue over the coming years. Although cities drive economic growth, they are more unequal than rural areas. The fourth megatrend, international migration, is described as both a “powerful symbol of global inequality”, and “a force for equality under the right conditions”.

Effects of Inequality. Higher rates of health, social problems and reduced population-wide satisfaction and happiness. Drag on economic growth, Unstable economies and fosters political dysfunction, Unequal distribution of resources fostering conflict, war and displacement, Creates vicious cycles of poverty that reinforce vulnerabilities and negatively affect those in greatest need, Leads to a societal breakdown in trust, solidarity and social cohesion, and Rapid environmental degradation.

Reasons for Divergences in Income. Political instability, Low levels of education and skills, Quality of work culture, Savings and investment habits of people, State of tax collection by government, Levels of corruption and criminality, State of social and economic welfare, Primary product dependency, and Geographical location.

Indian Scenario. India is a developing nation with large number of affluent elite but has a poor record on economic equality. While the top 1% hold 22% of total national income, the bottom 50% share has gone down to 13%. India’s middle class is relatively poor, with an average wealth of just 29.5% of the total national income. India has noticeable social inequality with huge differential access to wealth, power, and prestige. Social inequality exists on grounds of gender, race, age, ethnicity, religion, and kinship basis. Multi-dimensional Poverty Index (MPI) prepared by the NITI Aayog highlighted that one in every four people in the country are multi dimensionally poor. The factors that act complementary to the rise and sustenance of inequality in India are:- Labour intensive manufacturing with poor performance, lesser jobs despite growing economy, regional and interstate disparities, poor skill development, prevalence of caste system, tax evasion- undue concentration of incomes in a few hands, unemployment and underemployment, corruption, administrative bottlenecks, heavy dependence on agriculture sector and inadequate public infrastructure. India has to use the new technology to increase productivity and wages to reduce income inequality. Implement reforms that redistribute money and power, level the playing field, prioritise interests of lower strata of society and review present system of taxation and social spending.

Levy a modest progressive wealth tax on multimillionaires for redistribution to reduce income inequality.

Harness the potential of technological transformation to foster more inclusive economic growth, broaden capital ownership and reform corporate governance to reflect wider stakeholder interests.

Investment in education, advance technology, R&D and infrastructure must be boosted, with stronger programs for worker up skilling, reskilling, and lifelong learning that respond to shifts in the demand for skills.

Frame policies that directly reduce income inequality and pursue inclusive, equitable, and sustainable growth, ensuring a balance among economic, social, and environmental dimensions of sustainable development.

Rationalise patterns of taxation and ownership and provision of public goods, such as health care and education.

Globally, debt forgiveness and reform of trade agreements benefitting the underdeveloped countries that in turn can reduce income and other forms of inequality.

The pandemic has severely affected the poor and hurt the middle class in terms of loss of accumulated wealth and savings. The rising inequality is linked to slower economic growth. The five Nordic countries - Denmark, Finland, Iceland, Norway, and Sweden - are among the most equal in the world on a variety of criteria, and they have attained high levels of welfare and equality. This is due to strong focus on social solidarity, taxation and higher spending on education and healthcare. They are a role model for all nations emulate with due modifications as per their own situations and conditions.


COL RAJESH BHUKAR The author has been Head Security Rajasthan Operations of Cairn Energy and DGM HR in Jindal Saw Ltd [email protected]

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