The real challenge is inequality

Development has become skewed in favour of the rich. The monstrous inequality is making a mockery of our so-called growth story

Published: 07th March 2018 04:00 AM  |   Last Updated: 07th March 2018 02:35 AM   |  A+A-

There are signs that the economy is picking up again, but the ugly underbelly of this growth is not being addressed or even acknowledged, going by the government’s insistence that selling pakodas amounts to gainful self-employment. I refer to the monstrous inequality that is making a mockery of our so-called growth story. The paradoxes in the Indian economy are getting more pronounced every day.

The economy has been growing at about 7 per cent for the last decade but unemployment continues to rise—according to one estimate the country has been losing 550 jobs every day for the last four years whereas 35,000 join the labour force daily; 10 per cent of youth between 18 and 25 years, numbering 51 million, are unemployed. India has the third highest number of billionaires but 80 per cent of the population earn less than $10 per day (200 million subsist on $2 per day); agriculture provides only 17.5 per cent of GDP but “employs” 50 per cent of the labour force.

Development has become skewed in favour of the rich and super-rich resulting in vast inequity, which is reflected in the social indicators. WEF’s Inclusive Development Index ranks India at 62 of 77 countries, below even Nepal, Bangladesh and Sri Lanka. This has a spin-off effect on our Human Development record, according to which index we are ranked 130 out of 188 countries. This, in turn, is a reflection of our pathetic performance in areas such as child mortality, child-sex ratio, maternal mortality, mean years of schooling, life expectancy, to mention just a few. Any improvement in ‘Ease of Doing Business’ certainly cannot compensate for this, though it may add another billionaire every two months to the existing list of 101.

The rich are getting richer. One per cent of Indians own 58 per cent of its wealth: they have appropriated one-third of the total revenue gains of the country since the 1980s and 73 per cent of the wealth generated in 2016. Apart from 101 dollar billionaires India also has 2,00,000 millionaires and 1,37,100 UHNIs i.e. those with a net worth of more than Rs 25 crore, growing at 30 per cent per annum. The poor, on the other hand, remain where they are, and the vaunted middle class is slowly disappearing: Some may rave about the business potential of a middle class it estimates at about 300 million, but according to the noted economist Thomas Picketty and the Paris School of Economics who analysed data generated by our own National Council of Applied Economic Research, the actual number is closer to just 78 million!

The country appears to have entered into a vicious cycle of inequity post 1991. As the rich aggregate more and more of the country’s wealth, the poor and lower middle classes (80 per cent of the population) become increasingly marginalised. This is extremely unsettling and even dangerous for a democracy. As the 2015 winner of the Nobel Prize for Economics, Angus Deaton, ominously observes: “…the rich capture more than their share of political power, so that the state stops serving the majority of the people.” We can see evidence of this every day in the manner in which governments are more concerned about the Sensex than rural distress, the doling out of tens of thousands of crores for smart cities but nothing for the 6,00,000 villages, the manipulation—if not loot—of the banking system by big capital resulting in NPAs of more than ten trillion rupees. This is the same money—the tax payers’ money—which, if distributed more equitably, could have uplifted the lives of tens of millions of families.

The sorry state of affairs today is the accumulated result of years of misdirected emphasis on financial capital, instead of human and natural capital, and neglect of the core social sectors—health, education, and agriculture. The health and education spend as a percentage of GDP have been stagnating below 3 per cent and 2 per cent, respectively, for decades: the consequent malnourished, stunted children with no skills or real education can only provide an unproductive workforce which is good for nothing. Under-employment, which the government will not admit to, is a bigger problem than unemployment. Agriculture, which was doing quite well till a few years ago, has been crushed with faulty MSP and export/import policies and tens of millions of farmers have been rendered destitute.

The existing problem has now been exacerbated by the present government’s regulatory overdrive. A social and economic structure as complex and diverse as India’s cannot be reformed overnight or in one term of a government: a modern super structure cannot be placed on a creaking, dated infrastructure without first preparing the latter for the change. Instead of the delicate fine-tuning required, the BJP’s muscular shove has further excluded tens of millions more from the benefits of economic growth. Both demonetisation and GST have made a bad situation even worse.

Aadhaar has multiplied the woes. Irrefutable evidence is now available that millions have dropped from MNREGA and the PDS system, and even school children from the Mid-Day Meal scheme for the same reason. By insisting on portraying these ‘missing’ beneficiaries as ghost units the government is only reaffirming its callous and insensitive nature.

Recent policies are only increasing the rich-poor divide in the country. Policing and regulation have to be replaced by compassion and empathy. The government of the day has to support the farmer, unorganised retail and MSMEs which contribute to 90 per cent of livelihoods, instead of regarding them as tax evaders and ‘entitlement’ seekers; only then will GDP growth have any meaning for the overwhelming majority of the country. Democracy has to be both economic as well as political for it to be sustained.

Avay Shukla
Served in the IAS for 35 years and retired as Additional Chief Secretary of Himachal Pradesh
Email:avayshukla@gmail.com

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