Sustainable Development Goals, Human Development Index, the Gini co-efficient…we are in such a state of ignorance towards what’s happening around us that we need these conceptual crutches to hold on to and absorb the reality.
Inequality is a society-wide problem that stems from endemic poverty, large-scale unemployment, and pervasive misgovernance of public institutions. Imbalance in human rights, basic necessities, economic well-being, wealth distribution, and livelihood opportunities is eroding us of holistic and inclusive development that we very much seek to bring about as a nation.
In the first spread on #economyforall, we briefly touched upon what we perceive as the prime reasons for inequality in India. To bolster our knowledge and seek informed insights on this complex issue, we intend to speak to several experts, entrepreneurs and investors who have witnessed or studied inequality from their respective perspectives.
Dr. Anant Sardeshmukh, Director General of MCCIA, Pune voiced his thoughts on what is causing this divide, its effects and how it could be resolved.
Unequal Distribution of Assets
What are these assets?
“Primarily, self owned assets, like land, property, bank deposits, investments etc. that enable an individual to generate additional income.”
We all save money, invest in financial instruments, land, property, etc, why? To generate a surplus income which will help us lead a comfortable life. Inequality in terms of financial strength, the heavy concentration of wealth in the hands of a selected few people in the country has led to inequality.
Economists Thomas Piketty and Lucas Chancel recently published their findings on India’s income inequality. They said,
The top 1% of earners captured less than 21% of total income in the late 1930s, before dropping to 6% in the early 1980s and rising to 22% today. Over the 1951-1980 period, the bottom 50% group captured 28% of total growth and incomes of this group grew faster than the average, while the top 0.1% incomes decreased. Over the 1980-2014 period, the situation was reversed; the top 0.1% of earners captured a higher share of total growth than the bottom 50% (12% versus 11%), while the top 1% received a higher share of total growth than the middle 40% (29% vs. 23%). These findings suggest that much can be done to promote more inclusive growth in India.
Dr. Sardeshmukh explained this with the help of some very simple examples.
“An agriculturist who owns a small piece of land may not be able to get more land, due to low productivity and thereby low funds. This inhibits further asset building, and therefore his chances of generating more income.”
And the reason for unequal distribution of assets is – Lack of equal opportunities: If you deny a person or a group of people the opportunities to develop, grow and create a sustainable livelihood, inclusive development is not possible.
“Compare a student in an urban area with a student in a rural area. The education facility in an urban area is far higher than that in a rural area. So, even if a rural student is intelligent, the paucity of quality education will hamper his/her chances of securing a high paying job and therefore disable his efforts at creating assets.
If a worker is denied the minimum wages needed for survival, he/she cannot set aside surplus funds to create an income generating asset.”
As a country, we lag behind in giving equal access and availability of basic facilities like food, education, healthcare, livelihood and opportunities for self-development. If you compare the villages in developed countries like the US and Europe to those in India, you will see that even the rural parts of developed countries have the same level of basic education facilities as in urban areas, enabling the students to become equally competent as their urban counterparts.
In India, the disparity is too large. If the facilities provided are not equal and of good or comparable quality, then intended development gets hampered. For instance, if the quality of teachers and professors is not up to the mark, the students’ education quality suffers. Same applies to the food that is provided in the schools.
It has been identified that rural school children are malnourished and suffer from nutrient deficiencies. These children are the citizens of tomorrow. They are the future of our country and biased mentality among some authorities in the system are robbing us of our future.
Entrepreneurship Is The Solution
The solution to this would be to create more opportunities for people from BoP to avail, lift up their economic conditions, take charge of their lives and contribute to the development of the country.
“Creation of entrepreneurship and for-profit social entrepreneurship can solve this problem. Anything which can create more jobs and opportunities is good.”
Government schemes, and social entrepreneurs that promote livelihood and increase in access to know how is the starting point of resolving this divide.
The government’s Stand up India programme encourages persons from the BoP with incubation and funding, to start their small-scale enterprises for sustainable livelihood. He further goes on to say why promoting entrepreneurship holds more substance than creating jobs.
“We have not been able to create jobs. Creating entrepreneurial opportunities will create a multiplier effect, changing lives of more people.”
“We should work towards reducing asset inequality through redistributive land reforms but also through inheritance taxes, preventing monopoly of control over water, forests and mineral resources and reducing financial concentration. The equality of opportunity needs to be increased through good quality and universal public provision of essential amenities and social services. We can raise the public resources for doing all this by taxing the wealthy more and by increasing the effective taxation of corporations, which have benefited greatly from the boom and more than doubled their share of national income, but not been taxed accordingly.”
#economyforall is our honest attempt to understand what is fueling inequality and if it can be mitigated by social entrepreneurship. If you have a strong and informed opinion on this, please get in touch with us. We would love to hear your thoughts!
Keep watching this space for more interactions.