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Economic growth and Inequality UPSC NOTE

 Issue of economic growth and inequality in India 

  • At the annual conference of the World Economic Forum (WEF), dutifully relayed back to India sound bytes uttered by the allies of the world’s giant corporations. 

  • Among these was the laudatory statement by the WEF’s President that India was a $10 trillion economy in the making

  • This is only the most recent of a spate of predictions on the future size of India’s economy. 

  • In 2019, upon returning to office, Prime Minister Narendra Modi said that India aimed to become a $5 trillion economy by 2024, which would have been the end of his current term.

  • That this has not materialised as yet has not deterred other political leaders from making predictions of, or expressing an aspiration for, a $1 trillion economy for their States. 

  • Though these leaders represent political parties with widely differing social agendas and ideologies.

  • From Davos to Lucknow and Chennai, never before has growth dominated the economic agenda in democracies

  • This bears mentioning, as a democracy is also meant to deliver other things.

  • Growth is a legitimate aspiration in India where the majority of the population is yet to attain a reasonable standard of living

  • Indeed, it should remain on the table so long as this is the case. 

  • The point, is that going all out for economic size may not do much by way of levelling the income of the presently excluded even as it may generate outcomes that are undesirable to all.

  • Such outcomes are already in evidence in India, and an economic policy that privileges growth could exacerbate them.

  • The first thing to note about the recent growth in India is that it has been accompanied by growing inequality.

  • It is important to recognise that this trend is not new. 

  • Having commenced in the 1980s, it picked up in the next decade.

  • It has, by now, reached levels that make India one of the more unequal societies in the world.

  • With government agencies appearing reluctant to supply data.

  • it is difficult to provide precise estimates of this inequality.

  • But the world’s leading inequality researchers are very likely right in describing India as “a poor country with an affluent elite” (‘World Inequality Report’, 2022). 

  • This augurs badly for the country. 

  • It is not just that the growth we are witnessing is unequalising, it is that it appears to be making little difference to the income levels of the poorest. 

  • The rising tide may not be lifting all boats after all.

Why inequality does matter

  • We can think of at least two reasons why it does

  • First, as has been carefully documented, unequal societies are subject to the worst forms of social pathology. 

  • These range from violence to disease and mental health disorder

  • The rich are not immune from the pathologies, for they must now build moats around their urban castles to protect their riches.

  • Second, inequality stands in the way of achieving collective action at a time when it is most needed. 

  • It does so by lowering trust between groups for they stand differently in their valuation of some public goods

  • Think of India’s challenge at achieving total sanitation, which is what the Swachh Bharat Mission ostensibly aims for. 

  • The rich, who have all their basic needs and more met, want clean public spaces, while the poor, whose basic needs are unmet, are not as motivated to contribute towards this

  • The persistence of open defecation, which reflects an unwillingness to shift to practices that contribute to the greater public good, is an example of this

  • Inequality can defeat attempts to build public goods in spheres as diverse as the conservation of natural capital and urban waste management to lowering the threat from climate change.

  • For those excluded from economic growth have less of a stake in these goals.

  • However, whatever its pernicious effects, the reduction of inequality ought not to be seen merely in terms of its instrumentality in overcoming some of our most pressing challenges

  • India is a democracy, as the Prime Minister constantly reminds us, and it is not in the spirit of democracy to have such divergent economic outcomes. 

  • India has not, historically, given enough space in its economic policy to the gross inequality of opportunity across its population

  • If at a time of an already unequal distribution of income the preoccupation of political parties is how to maximise the size of the economy, it is unlikely that we will ever bridge the gap.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Economic growth and Inequality UPSC NOTE
Economic growth and Inequality UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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