Rising Income Inequality in India

Rising Income Inequality in India

Important for Prelims:

United Nation Development Programme(UNDP), Gini Coefficient, Per Capita Income, Community Kitchen, One Nation, One Ration Card, Ujjwala Yojana, Ayushman Bharat Nutrition Abhiyan, Samagra Shiksha, Pradhan Mantri Garib Kalyan Anna Yojana, Direct Benefit Transfer (DBT), Pradhan Mantri Jan Dhan Yojana (PMJDY), National Food Security Act (NFSA) in India.

Important for Mains:

GS-3: Income inequality, scenario of income inequality in India, main causes of income inequality, efforts of the Government of India to remove income inequality, solutions.

Nov. 22, 2023

​ Context:

  • Currently, India is included in the list of high income countries. According to the report of the United Nations Development Program (UNDP), India will reach fifth position among the top-10 economies of the world in the year 2022. It is moving towards becoming the world's third largest economy by the year 2027. Economic inequality is continuously increasing in India. It is a matter of concern that in the last 20 years, the extent of inequality in people's income and wealth has increased rapidly.

About Income Inequality:

  • Income inequality refers to unequal or uneven distribution of income across the population. The less equal the distribution, the greater the income inequality. Income inequality is linked to wealth inequality, which is the unequal distribution of wealth.

Gini coefficient:

  • National income inequality around the world is measured by the Gini coefficient.
  • The Gini coefficient ranges from 0 to 1, where 0 represents equal income for all and 1 represents complete inequality.

Income inequality scenario in India:

poverty:

  • According to the report of the United Nations Development Program (UNDP), poverty in India has reduced from 25 percent to 15 percent during 2019-2021 as compared to 2015-2016. That means 13 crore people have come out of poverty in the last five years.
    • According to the report, although poverty alleviation campaigns have reduced poverty in India, income inequality has increased in India.

Per Capita Income:

  • According to the Asia Pacific Human Development Report 2024, the per capita income in India has increased to approximately Rs 2 lakh in the year 2022 compared to approximately Rs 37 thousand in the year 2000.

Main causes of income inequality in India:

  • Poverty, social discrimination and lack of resources etc. are the main causes of inequality in India.

Efforts of the Government of India to eliminate income inequality:

The following schemes have been instrumental in directly and indirectly reducing poverty levels and reducing health and hunger challenges:

Prime Minister Garib Kalyan Ann Yojana (PM Gareeb Kalyan Ann Yojana)

  • Launched in March 2020, the scheme has not only benefited the poor in empowerment but also reduced income inequality.
  • Recently, the Central Government has extended the scheme of distribution of free food grains to more than 80 crore eligible people for the next five years i.e. till December 2028.

Free Food Distribution Scheme

  • Its objective is to provide 5 kg quantity of quality food grains at affordable prices to the citizens to lead a dignified life. Under this Act, distribution of food grains to ration card holders at Rs 3, wheat at Rs 2 and coarse grains at Rs 1 per kg was started.
  • The scheme is implemented under the National Food Security Act (NFSA) in India notified on 10 September 2013.
  • India's food security has been strongly appreciated by various social security global organizations of the world including the World Bank and the International Monetary Fund.

Direct Benefit Transfer (DBT):

  • Started from January 1, 2013, this initiative has not only brought direct benefits in making payments to beneficiaries while reducing leakages but also empowering the poor.
    • The government has transferred more than Rs 29 lakh crore directly to the bank accounts of the beneficiaries through DBT since 2014.

Pradhan Mantri Jan Dhan Yojana (PMJDY):

  • Launched on August 28, 2014, through this scheme approximately 47 crore poor were financially empowered through Jan Dhan accounts.

Food Safety:

  • Continuously increasing record food grain production is strengthening India's food security. Food grain production is estimated at 3305.34 lakh tonnes in the current agricultural year 2022-23, but there are signs of decline in wheat and pulses production in the year 2023-24.
  • According to United Nations data, India has become the world's most populous country, overtaking China with a population of 142.86 crore people in April 2023. Since 780 to 800 lakh tonnes of wheat and rice are procured annually in the central pool of food grains.
  • To distribute grains under PDS, 500 to 590 lakh tonnes of grains are required. In the year 2023-24, the Center has allocated 600 lakh tonnes of wheat and rice in NFSA.
  • India is the world's leading food grain producing country, but lags far behind in food grain storage. Other large grain producing countries, China, the US, Brazil, Ukraine, Russia and Argentina, have food grain storage capacity far in excess of annual production. In such a situation, the current food grain storage capacity in the country is 1450 lakh tonnes. In the next 5 years, a target has been set to increase the total food grain storage capacity to 2150 lakh tonnes by developing a new capacity of 700 lakh tonnes of grain storage in the cooperative sector.

Other welfare schemes:

Schemes like Community Kitchen, One Nation, One Ration Card, Ujjwala Yojana, Ayushman Bharat Nutrition Campaign, Samagra Shiksha.

Solution:

  • There is a need to reform the current economic model of India because this model will lead to rapid increase in both the number and wealth of billionaires and millionaires in the coming years and will increase economic inequality.
  • The country's policy makers and planners should emphasize on achieving the goal of all-inclusive development so that the marginalized, deprived, backward and exploited people can be brought into the mainstream of development.
  • To overcome the present economic inequality, good education and good employment should be provided to the deprived class. For this, the government will have to increase welfare schemes.
  • To strengthen the structure of the country's economy and make it among the top three economies of the world, work should be done on priority basis towards reducing inequality in the country.
  • There is a need to create an environment in which all the people of the country can have access to better health and education, adequate employment, justice and advanced and excellent technology.

Conclusion:

Income inequality is the greatest irony of a welfare state. When it reaches critical high levels, public support for liberal economic reforms reduces. The economic growth rate in India has increased due to neo-liberal policies, but it has not removed the poverty of the poor at the same rate as it has increased the wealth of the rich. As a result, the gap of economic inequality is widening year after year. For this, policy makers and planners should adopt corrective measures.

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Mains Exam Question

Serious efforts are needed to remove economic inequality in the country. Discuss.