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Insights into Editorial: Growing wealth inequality doesn’t bode well for India’s future

Insights into Editorial: Growing wealth inequality doesn’t bode well for India’s future

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Context:

The policy world has witnessed the ripples caused by Oxfam releasing its Annual Inequality Report ahead of the World Economic Forum in Davos.

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.

In many ways, India has earned notoriety for its rampant inequality that seems to grow exponentially each year.

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.

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.

Reasons for concern due to growing Inequality:

  • 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.
  • 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.
  • However, the current drying up of demand may be symptomatic of income (if not wealth) inequality being pushed to its very limits.

Symptoms of growing Inequality:

  • 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.
  • Oxfam said governments are massively under-taxing the wealthiest individuals and corporations and failing to collect revenues that could help lift the responsibility of care from women and tackle poverty and inequality.
  • Besides, the governments are also underfunding vital public services and infrastructure that could help reduce women and girls’ workload, the report said.

India’s richest 1% hold four times more wealth than 70% of poor: Oxfam:

India’s richest 1 per cent hold more than four-times the wealth held by 953 million people who make up for the bottom 70 per cent of the country’s population, while the total wealth of all Indian billionaires is more than the full-year budget, a new study said.

Releasing the study ‘Time to Care’ here ahead of the 50th Annual Meeting of the World Economic Forum (WEF).

As per the global survey, the 22 richest men in the world have more wealth than all the women in Africa.

It further said women and girls put in 3.26 billion hours of unpaid care work each and every day, a contribution to the Indian economy of at least Rs 19 lakh crore a year, which is 20 times the entire education budget of India in 2019 (Rs 93,000 crore).

Besides, direct public investments in the care economy of 2 per cent of GDP would potentially create 11 million new jobs and make up for the 11 million jobs lost in 2018, the report said.

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.

Consequences of Inequality:

  • The social and economic consequences of inequality are profound and far-reaching: a growing sense of unfairness, precarity, perceived loss of identity and dignity, weakening social fabric, eroding trust in institutions, disenchantment with political processes, and an erosion of the social contract.
  • Inequalities tend to produce social conflict among the social groups e.g. caste groups like Jaats, Maratha, Patels are demanding reservations but this demand is opposed by caste groups already claiming the benefits of reservations, such clash of interest due to perceived inequality tend to produce violent conflicts between opposing caste groups.
  • Inequalities among ethnic groups have led to various ethnic movements demanding separate states or autonomous regions or even outright secession from India. North East has been rocked by numerous such ethnic movement e.g. by Nagas for greater Nagalim etc.
  • Religious inequality tends to generate feeling of exclusion among religious minority groups. This reduces their participation in mainstream, in India religious minorities have large population their economic exclusion compromises the GDP growth of nation as whole.
  • Poor development indicators like IMR, MMR, low per capita income, lower education and learning outcomes at schools, high rate of population growth can be traced to existing socio-economic inequalities.
  • High economic inequality is detrimental to public healthcare and education. Upper and Middle classes do not have vested interest in well-functioning public healthcare and education as they have means to access private healthcare and education.

Conclusion:

The gap between rich and poor cannot be resolved without deliberate inequality-busting policies, and too few governments are committed to these.

Women and girls are among those who benefit the least from today’s economic system.

They spend billions of hours cooking, cleaning and caring for children and the elderly. Unpaid care work is the ‘hidden engine’ that keeps the wheels of our economies, businesses and societies moving.

The response by business and government must include a concerted effort to create new pathways to socioeconomic mobility, ensuring everyone has fair opportunities for success.

Getting the richest one per cent to pay just 0.5 per cent extra tax on their wealth over the next 10 years would equal the investment needed to create 117 million jobs in sectors such as elderly and childcare, education and health.

Governments must prioritise care as being as important as all other sectors in order to build more human economies that work for everyone, not just a fortunate few.

Oxfam said its calculations are based on the latest data sources available, including from the Credit Suisse Research Institute’s Global Wealth Databook 2019 and Forbes’ 2019 Billionaires List.