Bridging Inequality

 Looking at the ever-increasing size of the Union Budget, doubling every three years, Finance Ministers are hard pressed to generate resources to meet the Central Government’s ballooning expenditure. Competitive populism dictates that more and more money is spent on handouts and freebies every year, and except for some token gestures like doing away with senior citizen concession on train travel, nothing much is done to curb expenditure. All parties, both at the Centre and in States, pay lip service to elimination of subsidies and freebies, but promptly forget their promises once elections are announced.

A situation has emerged where one political party’s welfare expenditure is another party’s freebie, and viceversa. The Central Government, whenever it needs extra funds, often takes short cuts like increasing GST rates or playing around with Central Excise levies on petroleum products. This is child’s play for the Government, since the Centre now controls all significant levers of taxation; Direct Taxes through Income-tax, and almost all Indirect Taxes through GST. State Governments follow the Centre’s lead, wherever they can.

Such ill-thought measures affect citizens adversely, because incidence of tax i.e., the particular segment of the population that has to pay the tax, is rarely one of the considerations. Even otherwise, Indirect taxes hit the poor more; according to the latest Oxfam report “Survival of the Richest: The India Story,” a little less than two-thirds (64.3 per cent) of the total GST is paid by the bottom 50 per cent of the population, one-third of the GST is collected from the middle 40 per cent, and only 3-4 per cent from the richest 10 per cent of the country.

Another toxic method is to resort to deficit financing. According to the Fiscal Responsibility and Budget Management (FRBM) Act 2003, fiscal deficit was to go down to 3 per cent of GDP by 31 March 2008, and reduce annually by 0.3 per cent thereafter, yet the fiscal deficit on 31 March 2024 is estimated at 5.8 per cent ~ far in excess of what was originally envisaged. Also, according to FRBM, Central Government Debt should not exceed 40 per cent of GDP by 2024-25, but according to Budget Estimates, Central Government Debt is slated to touch 82.4 per cent of GDP by 31 March 2025. The ills of uncontrolled State borrowing are many; it is a debt we incur, but which is repaid by future generations. Almost two and a half centuries ago US President Thomas Jefferson had observed: “The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Thus, there are many good reasons for reducing Government expenditure. Unfortunately, all such reasons pale into insignificance in the face of compulsive populism. The FRBM Review Committee Report made a host of recommendations for ensuring fiscal prudence, including the setting up of an autonomous Fiscal Committee to manage fiscal strategy. None of the Committee’s recommendations have been implemented. Also, the Fifteenth Finance Commission had recommended a review of Central Schemes, with axing of unviable ones. However, Revised Estimates for Financial Year 2023- 24, show an expenditure of Rs.19.06 lakh crore on Central Schemes, out of total Budget expenditure of Rs.44.90 lakh crore, with no review of Central Schemes in sight. Obviously, an efficient tax system along with a brake on profligacy can help the Government balance its books.

But, sadly, in the recent past, no thought has been paid to the review of the overall taxation structure. Even in the third decade of the twenty-first century, Direct and Indirect taxes operate in different silos in India, never mind that most advanced countries, including UK and USA, have integrated both long ago. The first report of the Tax Administration Reforms Commission (headed by Dr Parthasarthy Shome), submitted on 30 May 2014, suggested integration of the two Revenue Boards, but even this suggestion got lost in the turf wars of North Block. Post-Covid, when the West faced economic uncertainty, certain ultra-rich public minded citizens, came forward offering to pay extra tax, to rescue their governments. No corresponding movement was seen in India, but the public noticed that in Covid times, when ordinary citizens faced extreme distress, certain categories of businesses like pharmaceutical companies and pharmacists, online retailers etc., made extraordinary profits.

In India, post-Covid, after a K-shaped economic recovery, though strenuously denied by Government agencies, the difference between the rich and poor has exacerbated, which has drawn the attention of a host of international agencies, including Oxfam and UNDP. Recently, a paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj” authored by Thomas Piketty, Lucas Chancel, and Nitin Kumar, stated bluntly: “By 2022-23, top one per cent income and wealth shares (22.6 per cent and 40.1 per cent) are at their highest historical levels and India’s top one per cent income share is among the very highest in the world, higher than even South Africa, Brazil, and the US.” Notably, the share of the top 1 per cent was 6.1 per cent in India’s wealth and income in 1982, which rose steadily thereafter, with the rise being much more pronounced during the Covid period.

Currently, according to Hurun Research Institute’s 2024 Global Rich List, India is home to 271 billionaires, with 94 new billionaires added in 2023 alone. The number of new billionaires added last year is more than in any country, other than the US. The billionaires’ collective wealth amounts to almost US$1 trillion ~ nearly 7 per cent of the world’s total wealth. The Chancel, Piketty and Kumar Report also stated that more government expenditure on health, education, and nutrition was required to improve the lot of average Indians, so that the fruits of economic progress and globalization could trickle down to them.

The Report has prescribed a “super tax” of 2 per cent on the net wealth of the 167 wealthiest Indian families in 2022-23 which would garner 0.5 per cent of national income in revenues, and “create valuable fiscal space to facilitate such investments.” This is a worthwhile suggestion. Myriad anomalies have crept in the Indian taxation system, which was conceptualised by Nicholas Kaldor in the 1950s and implemented in the early 1960s (See “Taxation Travails,” 5 March 2024). Raising more revenues, the way the Government does it, i.e. by increasing GST rates, would only lead to more burdens for the poor. Probably, the required revenue for social sector spending could be generated by levying wealth tax on individuals holding assets in excess of Rs.100 crore, as also inheritance tax on inheritances above Rs.100 crore.

Needless to say, concentration of wealth will also get diluted, to some extent, by these taxes. The two main objections to re-introduction of the Wealthtax and Inheritance Act are: These taxes were discarded long ago because of difficulty in computation and also because they did not yield a significant amount of revenue. These objections are easily met. Presently, almost the entire wealth of the ultra-rich is held in financial assets like shares, mutual funds etc. which are liquid, divisible and easily valued in a transparent manner. Secondly, these taxes will affect only a minuscule proportion of taxpayers, which will ensure proper supervision by tax authorities, but as seen above, would result in generation of a sufficient amount of revenue.

Also, because of the liquid nature of the majority of assets, ‘hardship cases’ of children rendered homeless after a parent’s death due to inheritance tax, or holders of immovable property not being able to pay wealth-tax, will be few and far between. Then, there could be exemption clauses for a certain value, or for a certain asset class, or for both. In the ultimate analysis, taxation is a necessary evil for a civilised nation. As Oliver Wendell Holmes Jr. had said in one of his famous judgements: “I like to pay taxes. With them, I buy civilization.”

DEVENDRA SAKSENA

Source: The Statesman, 08/04/24

For an equal India

 As per the World Social Protection Report, only 24.4% of the country’s population is covered by at least one social protection benefit

At a time when India is debating free welfare schemes, inadequate investment on a basic, universal social protection system is making millions of lives vulnerable and unequal. In its latest World Social Protection Report, 2020-2022, the International Labour Organization has listed a few areas of concern for countries lagging in investments in social protection to its needy population.

As per this ILO report, only 24.4% of India’s population is covered by at least one social protection benefit as against more than 70% coverage in neighbouring East Asian countries. In India, the low social protection coverage for children (24.1%), mothers with newborns (41.5%), person with severe disabilities (5.6%), older people (42.5%) and labour force benefiting pension scheme (15.5%) are a few areas that stand against the building of an inclusive, equal society. Unfortunately, there is no social protection scheme for unemployed young people either. The Centre for Monitoring Indian Economy data suggest that 53 million people are unemployed in India. This is largely due to the decline of 8 million jobs in rural India on the back of a sluggish monsoon followed by a loss of 2.5 million salaried jobs. Failing to generate jobs for its young people and not implementing any social protection scheme for this vast population would have a devastating impact on India’s progress. The National Crime Records Bureau says that 1,64,033 people claimed their lives in 2021;  most of these deaths were related to employment. 

The ILO report further says that public employment programmes, such as the Mahatma Gandhi National Rural Employment Guarantee schemes, can offer a degree of protection for informal sector workers, but coverage is usually limited and workers can only rely on benefits for up to 100 days. The need for expanding the safety net programme to increase rural demand notwithstanding, the Centre’s budgetary allocation for this flagship rural jobs scheme in 2022-23 was cut by 25% compared to last year’s expenditure. During the first Covid-19 lockdown, the scheme provided a critical lifeline for a record 110 million workers in rural areas. The government should have increased its allocation to enhance the social safety net of people desperately looking for such temporary jobs scheme for sustenance.

Next is the issue of injuries reported among workers. Only 3.7% of workers a recovered in case of an injury (Employees’ State Insurance Corporation reported injuries among 24.1 million workers in 2016-17 while 32 million were injured in 2017-18). In countries where a large proportion of health services are provided by the private sector, considerable effort should be deployed to ensure that the population is adequately protected financially. The ILO report says that evidence from Bangladesh, India and Nigeria indicates that dominant private-sector provisions without appropriate social health protection mechanisms contribute to high out-of-pocket expenditure on health.

Owing to the relatively low investment in social protection, the amounts transferred under non-contributory benefits are usually too low to provide adequate protection. For instance, India’s and Bangladesh’s disability benefits are equivalent to only about 5% of GDP per capita and non-contributory old-age pensions in India, Thailand and Sri Lanka are even lower. Even though social assistance programmes targeted at poor or vulnerable individuals can provide some relief in case of loss of employment, the benefit levels are usually too low to ensure minimally adequate living conditions for  the beneficiaries. Moreover, registration and qualification for these programmes can be slow or only available at specific times, leaving many workers unprotected. These gaps in the existing programmes must be examined to strengthen India’s social protection system.

Until the country includes every single citizen in its social protection system (from the current 24%), ending free welfare schemes will be counter-productive and stand as a big hindrance to building an equal India. 

(Sachi Satapathy works as Director, AF Development Care, New Delhi)

Source: Telegraph India, 10/11/22

India needs a new social contract

 

Harsh Mander writes: The pandemic exposed the horrors of the existing economic and social arrangements that privilege some but treat others as expendable

The pandemic has dramatically laid bare the catastrophic public costs of inequality. Thousands of lives could have been saved if much greater investments had been made in public health provisioning. The explosion of mass hunger and joblessness and the dislocation of millions of working poor people could have been averted had labour protection, social security, and wage levels of workers been secured.

“Inequality Kills” is the apt title of a devastating report by Oxfam India released at the time of the World Economic Forum in Davos. For India’s super-rich, the pandemic became a time to swell their wealth dizzyingly. The worst year of the pandemic for India was 2021. In this year, the net wealth of just one Indian billionaire, Gautam Adani, multiplied eight times, from $8.9 billion in 2020 to $50.5 billion in 2021. The net worth of Mukesh Ambani doubled to $85.5 billion in 2021, rocketing him from India’s to Asia’s richest man. In fact, Ambani added Rs 90 crore to his wealth every hour right from March 2020, the start of the pandemic. In 2021, the number of dollar billionaires in India expanded by 39 per cent. India is home today to the largest number of dollar billionaires, after the US and China, with more billionaires than France, Sweden and Switzerland combined. In 2020, 98 families held more wealth than 555 million Indians. India’s top 10 per cent owned 45 per cent of the country’s wealth. Three-fifths of India’s top 100 added $1 billion or more to their wealth in 2021 over the previous year.

In this same period, as many as 84 per cent Indian households suffered a fall of income, for many into deep and stubborn poverty. The RBI estimated a GDP contraction of minus 8.7 to 7 per cent. 120 million jobs were lost, of which 92 million were in the informal sector. In 2021, FAO reported there were 200 million undernourished people in India and India was home to a quarter of all undernourished people around the world. Pew estimated that the number of poor people in India doubled from 55 million in 2020 to 120 million in 2021. Oxfam reports that daily-wage workers topped the numbers of people who committed suicide in 2020, followed by self-employed and unemployed individuals.

Evaluations in the media do not adequately recognise that the greater part of the grim economic devastation that surrounds us in India today — deaths, joblessness, hunger — is not caused primarily by the Covid-19 virus. They are the consequence of market-led public policies that have fostered unequal life chances. This got exposed more in these times of global calamity.

Imagine a vastly different India. Imagine, for instance, a country that has secured free and quality healthcare for every citizen, a guarantee of food for all, workers’ rights to social security and wage payments to all during lockdowns, and decent housing and clean water. The deaths and unemployment that engulfed a large section of Indians could have been eschewed. If millions of working people had more money in their hands, the greatest contraction of the economy since Independence could have been forestalled. If decent social housing and clean water supply had been secured by governments for all residents, it would have enabled the millions forced into overcrowded shanties to protect themselves by keeping distance in well-ventilated tenements and washing their hands regularly. Millennials might then argue: All of this is unattainable; what, then, is the point of painting scenarios of utopias?

But just as the humanitarian crisis today could have been prevented, the alternative is eminently feasible if people and government commit themselves to the goals of the Constitution. India spends only 3.54 per cent of its budgetary resources on healthcare, much less, as noted by Oxfam, than other middle-income countries like Brazil (9.51), South Africa (8.25) and China (5.35). Income inequalities reduce life chances in India even more for those disadvantaged by caste, gender and religious identities. A Dalit woman, for instance, has 15 years lower life expectancy than an upper-caste woman. Confronted by a broken and starved public health system, even the poor have to rely on private health providers, and 60 per cent of health spending in India is out-of-pocket, among the highest in the world, and a major cause of poverty. In the pandemic, the exclusions were even more spectacular. Oxfam found middle-class families spending Rs 4 lakh a day in private hospitals during the second wave — sometThe starting point of our vision of a new India is for the state to assume responsibility to provision quality healthcare, education, food, pension, clean water and housing, free or in affordable ways for all citizens. Economist Prabhat Patnaik, in his contribution to the India Exclusion Report brought out by the Centre for Equity Studies, says that to resource all of this would demand a public resolve to expand taxation of the super-rich. Sufficient to fund all of this, he calculates, is two taxes levied only on the top 1 per cent of the population — a wealth tax of 2 per cent and an inheritance tax of 33 per cent. Our government is doing the opposite; it withdrew the wealth tax in 2015 and reduced the already low levels of corporate tax. The result is regressive taxation burdening the poor and abysmally low public spending.

Those who care for a kinder world must not miss this moment when the pandemic has revealed to us the horror of our moral collapse; of economic and social arrangements that privilege some lives, but treat the rest as expendable. The struggle of our times must be for a new social contract based on solidarity and inclusion.hing a casual worker earns in 1,000 days.

Written by Harsh Mander

Source: Indian Express, 29/01/22

How the pandemic has worsened inequality in India

 

Ishan Bakshi writes: It has adversely affected chances of social mobility. This could combine with already high levels of inequality of opportunities and precipitate greater demands for income redistribution.

That India is a highly unequal economy is beyond contestation. And that was so before the pandemic struck. While precise estimates of the level of inequality in India are hard to come by — household surveys tend to massively underreport consumption, income and wealth — it’s hard to dispute the notion that Covid has deepened existing faultlines, exacerbating entrenched inequalities. The rise in the fortunes of the very rich during this period, when juxtaposed against the misery of the millions of migrant workers who had to walk back to their villages, is a stark reminder of the extent of economic disparities. To that extent, the latest edition of the World Inequality Report serves as a useful reminder of the concentration of income at the very top of the pyramid. The top 10 per cent earns 57 per cent of the national income. Within the top 10 per cent, the very elite top 1 per cent earns 22 per cent. In comparison, the share of the bottom 50 per cent in national income has declined to 13 per cent. And this is only one estimate of inequality. In the case of inequalities based on wealth, the numbers are even more skewed.

By and large, the discourse on inequality in India tends to centre around disparities in consumption, income, and wealth. But countries like India are also marked by high levels of inequalities in “opportunities”. In such societies, an individual’s class of origin, his household of birth, who his parents are, tend to have a significant bearing on his educational attainment, his employment and income prospects, and as a consequence, his class of destination. In such countries, characterised by low levels of social mobility across generations, children born in disadvantaged households have a lower chance of moving up the income ladder. While these bonds may well have weakened over time in India, the question is to what degree has the pandemic, which has widened economic disparities, also impacted social mobility?

To the extent that Covid has led to a worsening of education inequalities, induced labour market scarring, and exacerbated income inequality, it is likely to depress social mobility. While some effects will be evident in the immediate, others will take shape over time. Take education. The extended closure of schools and the shift to online modes of education has widened the learning gaps between children from poor and affluent households. With early education being critical to creating a semblance of a level-playing field, that younger children from low-income households were more deprived of mediums of learning, smartphones, will reflect in lower learning outcomes. The ASER 2021 report attests to this.

Children born to parents with lower levels of education were less likely to have access to a smartphone, although even the availability of a smartphone in the household may not have necessarily led to greater access for children. Over a fourth of children in households with a smartphone could not access it (for those in the lower grades the numbers are significantly higher). This has already begun to impact learning outcomes — children are unable to catch up with their curriculum.

To what extent these learning gaps will rise or fall over time is difficult to estimate. Needless to say, the larger the gap, the greater will be the effort required to bridge it. But, a drop in foundational skills, an inability to catch up, “educational scarring” as some have called it, is bound to impact their life chances. Education, after all, provides pathways to upward mobility.

Then there is the issue of jobs. From the labour market data during this period, three broad trends emerge, all of which have worrying implications for social mobility.

First, since the onset of the pandemic, there has been a decline in labour force participation. According to CMIE data, the labour force participation rate has fallen from 42.7 per cent during September-December 2019 to 40.2 per cent during May-August 2021. This means that despite a “young” population, the number of individuals looking for jobs has actually fallen, perhaps dismayed by the lack of employment opportunities.

Second, over the same period, the unemployment rate has risen from 7.5 per cent to 8.6 per cent. This implies that among those looking for jobs, those unable to find jobs, perhaps even at lower wages, have risen. Third, among those with jobs, more are increasingly being employed as casual wage labour. This growing “casualisation” or “contractualisation” of the workforce implies an absence of well-paying, productive jobs. This labour market scarring has implications for social mobility. Being unemployed for a long period or shifting to less paying, less productive jobs will have a bearing on an individual’s lifetime earnings. This will weaken avenues for upward mobility for entire households.

A swift return to a higher growth trajectory will heal some of the scars. Periods of rapid growth lower obstacles to mobility, create opportunities to move up the income ladder. But if growth is subdued and uneven, if the benefits flow disproportionately to those at the top end of the income distribution, to the owners of capital, and among those employed, to the more educated, skilled sections, as seems to be the case now, then this will only hinder social mobility. Paradoxically though, as high mobility perhaps blunts concerns over high inequality, it is of greater consequence in highly unequal economies.

Left unaddressed, this toxic combination of high inequality and low social mobility will lead to greater demands for redistribution. The clamour for levying a wealth/inheritance tax will only get louder, as will demands for equal taxation of income from labour and capital considering that those at the very top of the income pyramid get a larger share of their income from capital. Political expediency will demand bowing to such demands, more so when every action is viewed through the prism of politics. Arresting this slide is not going to be easy. The world of Horatio Alger seems distant.

Written by Ishan Bakshi

Source: Indian Express, 13/12/21

World Inequality Report 2022- Highlights

 

France-based World Inequality Lab published its report titled “World Inequality Report 2022”.

Highlights

• This report was authored by Lucas Chancel, who is the co-director of World Inequality Lab.
• It was coordinated by famed French economist Thomas Piketty.

Key Findings of the report

• Report notes that, top 1 % of the India’s population owns more than one-fifth of the total national income in 2021.
• The bottom half of the population earns just 13.1 per cent.
• It highlights that, economic reforms and liberalization that India has adopted, have mostly benefited the top 1 percent.
• Report identifies India as a poor and an unequal country, with an affluent elite.
• 1 percent richest people in India hold 22% of the total national income in 2021, while the top 10 % owns 57 per cent of the income.
• Average national income of the Indian adult population is Rs 204,200 in 2021, on the basis of purchasing power parity.
• However, report clarified that average national income of a country masks inequalities.

Income Gap

The income gap between top 10 percent and bottom 50 percent in India is 1 to 22 in 2021. The report noted India as one of the most unequal countries worldwide.

Where does BRICS nations stand?

Among the BRICS nations, South Africa and Brazil have wider income inequalities as compared to India. Income gap between top 10% and bottom 50% stood at 1 to 63 in South Africa and 1 to 29 in Brazil. In China and Russia, the income gap was 1 to 14.

Scenario in world’s richest nation

Ratio in richest nation that is US, is 1 to 17. The richest ten of the global population owns 52 per cent of global income. On the other hand, poorest half of the population earns 8.5 per cent of the global income.

Inequality in British India

Inequality in India has widened as compared to British rule. Report finds that, Indian income inequality was very high under British colonial rule, during 1858-1947. Top ten per cent of the population shared around 50 per cent of the national income.

Covid deepened inequalities: wealth, education, gender

 

An Oxfam report, titled ‘The Inequality Virus’, has found that as the pandemic stalled the economy, forcing millions of poor Indians out of jobs, the richest billionaires in India increased their wealth by 35 per cent.

A new report by Oxfam has found that the Covid pandemic deeply exacerbated existing inequalities in India and around the world.

The report, titled ‘The Inequality Virus’, has found that as the pandemic stalled the economy, forcing millions of poor Indians out of jobs, the richest billionaires in India increased their wealth by 35 per cent.

“The wealth of Indian billionaires increased by 35 per cent during the lockdown and by 90 per cent since 2009 to $422.9 billion ranking India sixth in the world after US, China, Germany, Russia and France,” states the report.

According to Oxfam’s calculations, since March, as the government announced possibly the strictest lockdown anywhere in the world, India’s top 100 billionaires saw their fortunes increase by Rs 12.97 trillion — enough money to give every one of the 138 million poorest Indians a cheque for Rs 94,045 each. In stark contrast, 170,000 people lost their jobs every hour in the month of April 2020, the report points out.

“In fact, the increase in wealth of the top 11 billionaires of India during the pandemic could sustain the NREGS scheme for 10 years or the health ministry for 10 years,” according to Oxfam’s calculations.

The report states that Covid has the potential to increase economic inequality in almost every country at once — the first time this has happened since records began over a century ago.

Oxfam details how the pandemic aggravated all manners of inequalities.

Sectorally, India’s large informal workforce was the worst hit as it made up 75 per cent of the 122 million jobs lost. Informal workers had relatively fewer opportunities to work from home and suffered more job loss compared to the formal sector. The 40-50 million seasonal migrant workers, typically engaged working in construction sites, factories etc. were particularly distressed, notes the report.

The pandemic also spiked health and education inequalities.

Over the past year as education shifted online, India saw the digital divide worsening inequalities. On the one hand, private providers such as BYJU’s (currently valued at $10.8 billion) and Unacademy (valued at $1.45 billion) experienced exponential growth yet, on the other, just 3 per cent of the poorest 20 per cent of Indian households had access to a computer and just 9 per cent had access to the internet.

In terms of healthcare, Oxfam found that since India does not report case data desegregated by socio-economic or social categories, it is difficult to gauge the distribution of the disease amongst various communities. But India currently has the world’s second-largest cumulative number of COVID-19 positive cases and globally, the poor, marginalised and vulnerable communities have higher rates of COVID-19 prevalence.

“The spread of disease was swift among poor communities, often living in crammed areas with poor sanitation and using shared common facilities such as toilets and water points,” it states.

In this regard, it found that only 6 per cent of the poorest 20 per cent households had access to non-shared sources of improved sanitation, compared to 93 per cent of the top 20 per cent households in India.

In terms of caste, just 37.2 per cent of SC households and 25.9 per cent of ST households had access to non-shared sanitation facilities, compared to 65.7 per cent for the general population.

The pandemic has also widened gender disparities.

The unemployment rate among women rose from already high 15 per cent before Covid to 18 per cent. “This increase in unemployment of women can result in a loss to India’s GDP of about 8 per cent or $218 billion,” states the report. Of the women who retained their jobs, as many 83% were subjected to a cut in income according to a survey by the Institute of Social Studies Trust.

Beyond income and job losses, poorer women also suffered healthwise because of the disruption in regular health services and Anganwadi centres. “It is predicted that the closure of family planning services will result in 2.95 million unintended pregnancies… 1.80 million abortions (including 1.04 million unsafe abortions) and 2,165 maternal deaths,” states the report.

The pandemic also fueled domestic violence against women. As of November 30, 2020, cases of domestic violence rose by almost 60% over the past 12 months.

“While the Coronavirus was being touted as a great equaliser in the beginning, it laid bare the stark inequalities inherent in the society soon after the lockdown was imposed,” said Oxfam India CEO Amitabh Behar.

Oxfam India’s findings are part of the Oxfam International report released on the opening day of the World Economic Forum’s “Davos Dialogues”.

“The deep divide between the rich and poor is proving as deadly as the virus,” said Gabriela Bucher, Executive Director of Oxfam International.

Oxfam has argued the urgent need for policymakers to tax the wealthy individuals and rich corporates and use that money to “invest in free quality public services and social protection to support everyone, from cradle to grave”.

However, with the Union Budget round the corner, not everyone is convinced of these policy recommendations.

N R Bhanumurthy, Vice-Chancellor of Dr B R Ambedkar School of Economics University in Bengaluru, said that this is not the year to prioritise inequality.“Reducing inequalities is very important but it should be a medium-term target. Between growth and distribution, we must get the sequencing right. We need to grow first before we can distribute. Otherwise, we can get stuck in a low-income equilibrium,” he said.

Source: Indian Express, 25/01/21

Parasite: A defining film on class relations, inequality

Through smell and sight, it depicts the intimacies that bind and the resentments that divide the haves and have-nots

In a world of growing inequalities, where the divide between the rich and poor is increasing, awarding Parasite as the Best Picture at the Oscars is befitting. A saga of differences between the rich and the poor is in itself not a novel topic. Yet, what makes Parasite one of the most gripping tales of our times, quite apart from its brilliant cinematography and acting, is that though about money, this film does not trace differences between the rich and poor only through the prism of money. Instead, the director, Bong Joon-Ho, presents to us the everyday realities of inequalities through bodily senses, particularly of smell and sight.

Bong Joon-ho provides, at once comic, at once tragic, intersections between two families (same in size, each with four members) — the upper class Park family and lower class Kim family. The Kim family is an unemployed bunch, aspiring to a comfortable life, and, in a fateful (later on, tragic) turn of events, they plot their way into the house and lives of the Park family. From thereon, they are all interlocked in a web of dangerous intimacies. The Park family members are presented as privileged, entitled, and also “nice” people, who talk politely to their helps. Bong’s genius lies in the fact that unlike previous films on class, the rich do not utter the word “poor” or its synonyms to describe the class that is serving them. Rather, they identify and, therefore, demarcate their service class from themselves through their smell. Park’s son, depicted as an able boy scout, comments that their driver (Kim), new housekeeper ( Kim’s wife), and tuition teachers (Kim’s children) all have the same “smell”. In another scene, Park while engaging in a physically intimate act with his wife, comments that Kim has a peculiar smell like those who ride the subway, and this smell is so strong that it seeps right to the back of their Mercedes Benz — an intimacy that he does not like. Kim (and his children), hiding under the table, become privy to this conversation, and it is this comment more than the visible and tangible differences of financial status between them, which leaves a deep mark on Kim — a burning feeling of resentment, which propels him to later on commit a gruesome act.

Parasite also brings the discussion of inequalities to the forefront through “sight”. As audiences, our eyes move “down” as we note the lives of Kim’s family — the underbelly of the city, living in a lower-ground level small, smelly, bug-infested flat, from where they see the world outwards and upwards. In contrast is the Park’s family, living in a mansion, perched on top of a hill, from where they look “down” upon the city. One of the other cinematographic geniuses of this film is the use of stairs — the Kims access their home by climbing down the stairs, whereas the Parks climb up to enter their home. As the movie unravels, we find out that Park’s previous housekeeper has surreptitiously been occupying the basement of their mansion. The lives in this mansion are starkly divided between the above and the below; metaphorically and literally, a below that the above is unaware of.

Richard Sennett was one of the first sociologists to talk about “The hidden injuries of class” (1972) as he drew attention to feelings and affections that mark class realities — respect and honour (or lack thereof in the case of lower classes). Since then, and indeed more recently, scholarship has studied the underbelly of the city through the prisms of affections — resentment, humiliations, anxieties. In the Indian context, a few recent films have made a foray into this field such as Dil Dhadakne Do (2015), which depicts the anxieties and vulnerabilities of the rich with nuance.

The brilliance of Parasite lies in its ability to explain class differences and inequalities, at the opposite ends of the spectrum, through bodily fluids and affections. This is not a Downtown Abbeyesque saga where inequalities are presented as a manual of code of conduct that regulates interaction between the rich and the poor — though “basement” remains central in both depictions. Instead, Bong presents the real yet dystopian, the hopeful yet doomed, the lateral yet vertical, macabre state of inequalities.

Bong Joon-Ho’s brilliant direction brings to the centre bodily fluids as the dividing and defining difference between classes, as he presents to us the resentful and dangerous intimacies between the haves and have-nots.

Parul Bhandari is associate professor, sociology, OP Jindal Global University. She is the author of “Money, Culture, Class: Elite Women as Modern Subjects”

Source: Hindustan Times, 11/02/2020

Growing wealth inequality doesn’t bode well for India’s future

If the Oxfam report is any indicator, an unequal present implies an exponentially more unequal future, that entrenches within it some of Indian society’s greatest failings.

The policy world has witnessed the ripples caused by Oxfam releasing its Annual Inequality Report ahead of the World Economic Forum in Davos in January. Every year, this report captures staggering increases in global wealth inequality over the years. This year, the report established that the richest 1 per cent in the world have more than double the wealth of 6.9 billion people combined. Within this 1 per cent, the world’s billionaires, just 2,135 people, have more wealth than that of the bottom 4.6 billion combined.

Suffice to say, these figures point to a problem serious enough for the fiscally conservative International Monetary Fund to come out and call for resolving inequality, to protect long-term economic growth.

In many ways, India has earned notoriety for its rampant inequality that seems to grow exponentially each year. We now know that nine of India’s billionaires own as much wealth as the bottom 50 per cent of the country’s populace and that it would take the average female domestic worker 22,277 years to earn the annual pay-out to India’s top tech CEO.

Yet, while we have seen a lot of discussion around what this means for growth, there is a critical need to understand what this inequality means for the future of today’s youth. If the Oxfam report is any indicator, an unequal present implies an exponentially more unequal future, that entrenches within it some of Indian society’s greatest failings.

The burden of inequality continues to be borne by India’s women: They continue to be tasked with bearing the burden of care work, and spend — on average, 352 minutes a day for this purpose. In contrast, men put in only 51.8. As the report argues, increasing spending on social welfare could drastically reduce this burden. But there again, India continues to allocate a little over 5 per cent of its GDP to health and education.

By tasking women with unpaid care work, we simultaneously withhold their entry into the labour force. The Periodic Labour Force Survey (PLFS) 2017-18 showed a dramatic drop in women’s work participation rates, to only 16.5 per cent, while unemployment rates for the economy as a whole continued to climb. This is a reason for concern primarily because it means that fewer and fewer women are participating in India’s labour force, and that even those who do now find themselves without work.

At a time when resolving the gender wealth gap is predicated on increasing women’s incomes, this economic outlook only points to the deepening of this divide as millennial women remain both underpaid and underemployed.

Growing wealth inequality is also symptomatic of the rise of an entrenched rentier class which looks to leverage their fixed assets in the form of land and property to extract the greatest possible rents from tenants and leases. For our millennial professionals, this means that cities continue to grow unaffordable, and prospects of actually purchasing a home early in their career turns from optimistic to bleak.

With a 2019 study by the Reserve Bank confirming that housing affordability has significantly deteriorated over the last four years, it is unsurprising how millennials now choose to rent rather than bear the increasingly unaffordable burden of high EMIs.

The net effect of this damage is felt most in the country’s economic growth. Over the last 15 years, the Indian economy has successfully braved growing income-wealth disparities to chug on. However, the current drying up of demand may be symptomatic of income (if not wealth) inequality being pushed to its very limits. When the PLFS notes that 75 per cent of regular workers earn less than Rs 20,000 per month and 60 per cent of casual workers earn less than Rs 5,000, it should come as no surprise that even the employed don’t earn enough to keep the national consumption cycle going.

Current social unrest and student protests should be viewed as symptoms of this growing economic inequity. Lack of upward mobility and drastic economic slowdown has only exacerbated existing societal tensions. It is precisely for this reason that we must ensure that the campaign transcends just economics, and enters the public conscience.

By increasing social spending, changing gendered attitudes towards care work, and ensuring the wealthy pay their share, we could take concrete action towards this goal. Doing so would be critical to resolving, not only the glaring inequities of the present, but also the threat of a more unequal future.

This article first appeared in the print edition on February 3, 2020 under the title ‘An unequal future’. The writer, 23, is the Asia Democracy Network fellow at the Centre for Policy Research, New Delhi

Source: Indian Express, 3/02/2020

Nations must develop action plans to tackle inequality’

Social spending is almost always progressive because it helps reduce existing levels of inequality. Despite this, in many countries, social spending could be far more progressive and pro-poor.

India has been ranked among the bottom 11 countries in a new worldwide index released on October 9, 2018, on the commitment of nations to reduce inequalities. UK-based charity Oxfam International’s ‘Commitment to Reducing Inequality Index’ ranks India 147th among 157 countries analysed, describing the country’s commitment to reducing inequality as a “a very worrying situation”.

In an interview with Hindustan Times, Amitabh Behar, CEO, Oxfam India, talks about the report and what India needs to do to get its act right.

KD: Inequality is bad for all. Why?

AB: The question to ask is do we believe that inequality is good? Are we happy to live in a country alongside people who are dying of hunger; girls who are being denied education, children trafficked for money, hard-working men and women who despite working for 15 hours a day are unable to buy medicines for their ailing children? The extreme inequalities that divide us are human made and consequence of misguided policies. Inequality is not a sign of a prosperous world, on the contrary, it reduces the economic growth of the country.

KD: What impact does it have on women?

AB: Oxfam’s new index finds that on labour rights and respect for women in the workplace, India fares poorly. While the bulk of farming work is done by women, they own only about 10-15% of the land. The wage gap between men and women in India is 32.6%. If the government ensured women were paid the same amount as men for the same job, women’s incomes would be boosted by almost a third. Women and girls are paying the real price of growing inequality. As things stand today, women living in poverty will never be able to come out poverty, unless the economy is re-build for them.

KD: Nigeria, Singapore, India and Argentina are among a group of governments that are fueling inequality…’ says the report. How is the Indian government ‘fueling’ inequality?

AB: India has a responsibility and accountability as it is one of the largest democracies in the world with a population of 1.3 billion people, many of whom live in extreme poverty. Its inactions affect the world’s commitment to reduce the gap between the rich and poor. Sadly, India ranks amongst the bottom 15 countries on the commitment to inequality index, which means the government is not doing enough to fight extreme inequality. Oxfam has calculated that if India were to reduce inequality by a third, more than 170 million people would no longer be poor. India can lead the global movement and help in creating an equal world. What is required is political will.

Government spending on health, education and social protection continues to be woefully low. Indians are the sixth biggest out-of-pocket health spenders in the low-middle income group of 50 nations. The amount India spends on public health per capita every year is Rs 1,112, less than the cost of a single consultation at the country’s top private hospitals.

India’s tax structure looks reasonably progressive on paper, but in practice much of the progressive taxation, like that on the incomes of the richest, is not collected. India’s low tax GDP ratio (17%) is one of the lowest in the world.

KD: If inequality is so rampant in India, then meeting Sustainable Development Goal No 10 will be a great challenge. What kind of policy interventions does the Indian government need to do for tackling inequality?

AB: The Indian government needs to adopt a multi-pronged approach to tackle economic inequality. This includes – among other policy interventions – increasing social sector spending and regularly evaluating programmes to improve delivery efficiency, building and implementing fairer tax systems, and ensuring workers – especially women workers – are better paid and protected. At the same time, it must also improve the quality and quantity of publicly available data on inequality in India and provide timely and predictable reports on the schemes utilised to tackle it. A full assessment of whether governments are delivering on their commitments to reduce inequality – made when they signed up to the SDG framework – will only be possible if this data is available.

Schemes like the merger of schools under the ‘One School One Campus’ initiative in Madhya Pradesh foster greater privatisation which inevitably hurts the marginalised. The ‘Ayushman Bharat’ scheme, while inclusive on paper, does not help solve the problem of an increasingly strained if not broken public health system which, in turn, results in greater private participation to meet demand. On nutrition, the government’s allocations to key centrally sponsored schemes like the Mid Day Meal scheme rose by a mere 5% from the year before to Rs10,500 crore in the 2018 budget, which is woefully low.

AB: The different levels of inequality that exist from one national context to another show that inequality is far from inevitable; rather, it is the product of policy choices made by governments. There are, of course, contextual challenges to consider in every situation, as well as contextual advantages in some cases.

Currently, no country is doing particularly well. Even top-ranking countries still have large room for improvement. For example, Denmark comes first overall but 126th in the indicator of progressivity of the tax structure; Germany comes second overall but 142th on education spending and Finland comes third overall but 52th in the minimum wage indicator.

All governments must do more to tackle inequality, develop national inequality action plans. These plans should include delivery of universal, public and free health and education and universal social protection floors. They should be funded by increasing progressive taxation and clamping down on exemptions and tax dodging.

Social spending is almost always progressive because it helps reduce existing levels of inequality. Despite this, in many countries, social spending could be far more progressive and pro-poor.

Source: Hindustan Times, 17/10/2018

Helping Dalits start business would be more effective than any affirmative action to achieve equality: RBI Governor

RBI governor Raghuram Rajan has come up with his master plan to bridge the caste gap in the country by stating that enabling Dalits to start businesses will be a more effective step in bringing about social equality than any other affirmative action.

This opinion of Rajan is backed by the logic that money empowers than many other forms of affirmative action.

Rajan further added that rather than prohibiting the use of money and wealth, let us think about increasing society’s tolerance for its use, he said, addressing the convocation ceremony of Shiv Nadar University in Greater Noida.

Rajan also cautioned against the growing inequalities in the country. He emphasised on the role of education and health care to restore faith in markets in these circumstances.

Taking a difference stance on tolerance in the society the RBI Governor said that money is a great equaliser and took took on the criticism of money by US political scientist Michael Sandel in his book What Money Can’t Buy: the Moral Limits of the Market.

Rajan pointed out that the income inequality is on the rise, with some having colossal incomes and others worrying about the next meal.

In his address, “Money and Education”, the RBI governor attributed the growing inequalities partly to skills and capabilities that have become much more important in well-paid jobs. As such those born in good circumstances have a much better chance at acquiring these.

As a solution, he said, we have to work to provide effective access to schooling and health care for all, a non-discriminating job market with many jobs, equal opportunities for further advancement regardless of gender, race or background. All this will increase the perceived legitimacy of wealth and society’s willingness to broaden the areas where it is spent.

Thoughtful philanthropy can further help enhance society’s acceptance of great wealth, he said.

These observations of the RBI governor are noteworthy because it comes admist the International Monetary Fund’s warning to India and China, the two fastest growing large economies, about rising inequalities.

He also said India needs to have a more “contingent student loan system” which needs to differentiate between those who can repay their loans and those who cannot. Such a system would prevent an US-like education loan crisis in India, he added.

Rajan also pointed that unscrupulous schools do not prey on uninformed students, leaving them with high debt and useless degrees.

As on January 2016, the unpaid student debt could be as high as $1.2 according to reports.

Source: Digital Learning, 11-05-2016

Addressing the causes of inequality

Equality,”

wrote Balzac, “may be a right, but no power on earth can convert it into a fact.”

Just ask any schoolchild who has watched some classmates breeze four grades ahead in the math curriculum as others struggle to complete their daily assignments. Life is rife with inequality: some people are good looking and others plain, some clever and others slow, some soar to popularity while others long to be noticed.

No wonder we are so preoccupied with inequality, and no wonder our conversations about policy solutions leave off many of the inequalities that most worry us. The world is full of problems, but public policy recognizes only those for which there’s a reasonable chance the government might attempt a solution. Any other “problem” is simply a sad fact, and will remain so.

If we want to have a public discussion about inequality, the first thing we have to do is define which sorts of inequality meet the definition of a “problem”. We then need to decide which of these problems should be solved. Not every problem qualifies.

We will begin by excluding the “sad facts”: the large swathes of inequality that the government probably won’t attempt to solve, because the possible solutions would be politically impossible or morally abhorrent. The government isn’t going to find you friends, nor can it get you a loving spouse or a better singing voice. On the other hand, the government is pretty good at moving money around, so we tend to spend a lot of time talking about income inequality.

Yet, even income inequality turns out to be surprisingly ill-defined. It is a melting pot into which we throw wealth inequality, wage inequality, inequality of opportunity, inequality of political power and often rigidity of socioeconomic class. Frequently, we also toss in the absolute, rather than relative, difficulties of a life in poverty. Yet, no matter how hard we stir, these things cannot all be made into a single issue called “inequality”.

So, which ones should we try to fix, and how?

I would cross income inequality itself off the list of priorities. Far greater concerns include: absolute suffering among those with low incomes; a socioeconomic structure that seems to be ossifying into a hierarchy of professional classes; and a decline in income mobility, which is to say, in equality of opportunity. It doesn’t really matter whether Bill Gates has some incomprehensible sum of money at his disposal. It does matter a great deal whether there are Americans in desperate want. And of course, it matters whether anyone with the aptitude and motivation can become the next Bill Gates, or only a handful of privileged people who are already well off.

I also submit that the importance of the issue is inversely proportionate to the ease of solution. The government is very good at taxing income of some Americans and writing cheques to others. (Whether you think it should do this is, of course, a different question.) It is very bad at preparing someone to live a solid and fulfilling life of work and community, which is one reason we mostly leave that job to parents.

The government is also not well suited to creating a lot of satisfying and remunerative jobs. It can contribute to productivity and help companies to flourish, for example, through basic research and by maintaining a competent legal and regulatory system. And it can directly create a few jobs providing government services; these have been, for many communities at many times, a stepping stone to the middle class.

But there are limits to how many jobs the government can create without choking off the productive economy that funds the government (not least, the current financial limits imposed by state budgets already deeply overstrained by financial promises made to previous generations of workers). For the most part, the best the government can do is to avoid stepping on the creation of satisfying and remunerative jobs; no nation on earth seems to have figured out how to generate “good jobs” for everyone.

All this means is that there is no silver bullet for the government to guarantee full employment and solve structural inequality. The government can do something—but it remains to be seen exactly what, and how much.

Source: Mintepaper, 11-05-2016