Inequality: Its causes and remedies

Indian Economy: Inequality

"A nation will not serve morally or economically when so few have so much while so many have so little."

Bernie Sanders

Inequality - It is defined as the differences in income/expenditure/wealth holding of different sections of a society.

Measurement of Inequality 

There are various methods of measuring inequalities, they are -

1. Population & Cumulative income method
2. Quintile Ratio method
3. Palma Ratio method
4. Lorenz Curve
5. Gini Coefficient

Population and Cumulative income method - It measured the cumulative income/wealth of 20% richest and 20% poorest person in the country.

In India, the cumulative wealth of -

• 20% poorest = 8%
• 20% richest = 45%

Quintile Ratio - It is defined as the ratio of the wealth of 20% richest to the wealth of 20% poorest.

According to Human development report, the quintile ratio of India is 5.3.

Palma Ratio - It is defined as the ratio of the wealth of top 20% to the wealth of bottom 40%.

It was given by Gabriel Palma.

As per Human development report, the palma ratio of India is 1.5.

 

Lorenz Curve - It is given by Max O. Lorenz.

It is a graphical representation of inequalities in which cumulative percentage of population is plotted against cumulative percentage of income.

Note - More the deviation of curve from the line of absolute equality greater will be the inequality.

Gini Coefficient - It was given by Corrado Gini.

It is the arithmetic measure of inequalities based on Lorenz curve. It is the ratio of the area between the absolute equality and Lorenz curve to the area below(or above) the line of equality.

Range of G = (0,1)

If G = 0, then there is no inequality.

If G = 1, then there exists the extreme/most inequality.

As per Human development report, India's Gini coefficient is 0.351 or 35.1%.

Inequalities → difference in income, expenditure (relatively low) but in wealth (it is huge).

Oxfam report 

1% of Richest in India holds 58% of total wealth & 1% of Richest in the world holds 50% of the total wealth.

Wealth generated in 2017, 73% of that is acquired by 1% richest.

These data shows that the inequalities are further increasing.

Causes of Inequalities

1. Differences in ownership of land and wealth
2. Inheritance laws
3. Differences in access to education and skill development
4. Scarcity of capital
5. Poor infrastructure including social infrastructure (Schools, Hospitals, Community, etc.)
6. Leakage in government developmental expenditure (or Corruption)
7. Inheritance difference in abilities of individuals
8. Differences in access to credit facilities

Government's measure

1. Land reforms (Abolition of Zamindari)
2. Land ceiling
3. Tenancy reform
4. Reservation for SCs, STs and OBSs in government educational institutions and jobs
5. Establishment of public sector (PSUs)
6. Support to MSMEs
7. Progressive taxation
8. Nationalisation of banks
9. Various developmental schemes
1. Poverty alleviation & employment generation programs like MGNREGA, Udyami Scheme, etc.
2. Rural development program such as Pradhan Mantri Gram Sarak Yojana, Jal Jivan Mission (rural), Pradhan Mantri Awas Yojana (Gramin), etc.
3. Urban development program such as PM Awas Yojana (Urban), Smart city mission, etc.
4. Skill development program such as Kaushal Vikas yojana
5. Social security program such as Old age, widow, disability pension, Sugamya bharat abhiyan, etc.
6. Nutritional program such as Mid-day meal, PDS system, etc
7. Educational program such as Sarv Siksha Abhiyan, Sarthaw initiative, etc.
8. Women empowerment program such as Beti Bachao Beti Padhao, Poshan Abhiyan, etc.
9. Health program such as Aayushman bharat scheme, National digital health mission, Indradhanush yojana, etc.

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Note - This is my Vision IAS Notes (Vision IAS Class Notes) and Ashutosh Pandey Sir's Public Administration Class notes. I've also added some of the information on my own. 

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