India and Inequality: As RSS Flags It Too, Will BJP Govt Bridge the Rising Gap?

Top 1 percent of India’s population has one-fifth of nation’s income while 50% population has only 13% income

Still, a lot more needs to be done though if the nation needs to progress for all and not a few. Lower growth might have reduced inequality without creating opportunities for upward socio-economic mobility for most vulnerable groups

(Photo: The Quint)

The Rashtriya Sevak Sangh (RSS) recently flagged issues of poverty, unemployment, and rising inequality in the country, arguing for the need to create a robust environment for entrepreneurship so that “job seekers become job providers."

“The poverty in the country is standing like a demon in front of us. That 20 crore people are still below poverty line is a figure that should make us very sad. As many as 23 crore people have less than Rs 375 income per day. There are four crore unemployed people in the country. The labour force survey says we have an unemployment rate of 7.6 percent,” said RSS General Secretary Dattatreya Hosabale during a webinar organised by RSS-affiliate Swadeshi Jagran Manch for its Swavlambi Bharat Abhiyan.

‘Access Inequality’ Is a Glaring Issue in Modern India

Hosabale highlighted the other major issue, of rising economic inequality across India.“One figure says that India is among the top six economies of the world. But is this a good situation? The top 1 percent of India’s population has one-fifth (20%) of the nation’s income. At the same time, 50% of the country’s population has only 13% of the country’s income,” he points.

Expanding on this, Hosabale further discussed the issue of rising ‘Access Inequality’, adding, “A large part of the country still does not have access to clean water and nutritious food. Civil strife and poor level of education are also a reason for poverty. That is why a New Education Policy has been ushered in. Even climate change is a reason for poverty. And at places, the inefficiency of the government is a reason for poverty.

According to Hosabale, the idea that only urban spaces will have jobs has emptied villages and turned urban lives into hell.

In a nutshell, most of what he has discussed here despite the BJP being in power at the Centre for over eight years, is an extended elucidation of the core macro (and micro) economic worries concerning most development scholars on the state of economy-and societal landscape for at least a decade now.

Decoding Poverty Beyond Wealth Distribution

Poverty is a multi-dimensional concept, going beyond income and wealth compositions, requiring a more thorough review of literature to showcase trends in poverty for different economic and social groups.

Scholars like Amartya Sen, Abhijit Banerjee, Jean Drèze, Esther Duflo have done extensive work to show how India’s poverty numbers have remained troubling despite the stew of neoliberal economic reforms passed in the 1990s.

But, let’s look at the other major structural concern of rising inequality-and the different ways one needs to measure it to understand it’s ramifications.

A recent study published this year by Ghatak, Raghavan and XU attempts to carry out a comprehensive analysis of growth and inequality of income, wealth, and consumption in India. The authors try to synthesise the various data sources and measurement methodologies, as well as provide an explanation for the contradictory findings on the trends in inequality in recent years in India.

Examining wealth inequality in India by looking at two different sources: the World Inequality Database (WID) and the recent All India Debt and Investment Survey (AIDIS) report, the study observes how: “On the WID data, since 1981, the share of the wealth of the top 10% and top 1% has consistently increased, while the share of the wealth of the bottom 50% has consistently declined (Table 1 and Figure 1).

For the most recent decade, the top 10% group has taken up more than 60% of the total wealth in India. This is in sharp contrast with the mere 6% of the total wealth shared by the bottom 50% of the population, suggesting a significant increase of wealth inequality in India over the past 40 years.

Photo: Chetan Bhakuni/The Quint 

The Rich Gets Richer Faster 

To understand the dynamics of wealth across different economic groups, the authors calculate “the group-specific growth rates of wealth based on the WID data”. As shown in the Table below, the rich groups (i.e., top 1% and top 10%) experienced faster wealth accumulation than the bottom 50%, especially at the turn of the 21st century.

However, wealth growth significantly slowed down after 2010, from a growth rate of roughly 8% in 1995-2010 to 5% in 2011-2020.

Photo: Chetan Bhakuni/The Quint

Photo: Chetan Bhakuni/The Quint

Impact of Inflation on Wealth and Assets

An interesting result evident from the authors’ study on 'Inequality in India' is on the nature of conflicting trends observed in the rise of wealth inequality across one time period to another.

Similar to their analysis with the WID data, the decile group-specific growth rates of assets as in the AIDIS data are plotted to capture the dynamics of wealth accumulation over the recent years. See the Figure reproduced below, for showing the annualised growth rates of net assets (that is, gross assets minus debt) for each decile group in the asset distribution, adjusted for inflation.

(Chetan Bhakuni/The Quint )

From these sets of figures, the authors find that among the ten decile groups, “only the richest top 10% experienced a negative growth rate of net assets, while all other groups witnessed positive net asset growth—with annualised growth rates ranging from 2% to 8%.

The bottom 10-20% group experienced the highest growth rates of assets, suggesting that the poor are gradually accumulating wealth in recent years.

Data Suggests Rising Wealth Inequality

The yellow line captures the average real growth rate of net assets, and it is significant that this is, in fact, negative, which is driven by the negative growth rates of the richest 10%.”

The two data sources employed by the authors seem to show conflicting trends in wealth inequality in India over the last decade. The WID data, which covers a longer time span, reveals “a stark increase in wealth inequality over the last 40 years, and this is not generally seen in peer and developed countries”.

However, based on the AIDIS reports, the authors find that “Indian households have been experiencing a more recent decrease in inequality, measured in terms of gross and net assets from 2014 to 2019”.

Another interesting insight from the study is articulated in the relationship drawn between growth and inequality.

According to Ghatak et al:

“If the process of growth in an unequal and labour-surplus economy leads to increasing inequality, a slowdown of the overall growth rate can lead to a reduction in inequality. This reflects the idea that if the rich benefit more from economic growth than the poor (as earnings from capital rise faster than that from labour, due to the relative scarcity of capital in a labour-surplus economy), then on the flip side, a growth slowdown would tend to decelerate this process.

Other things being constant, increasing inequality is obviously undesirable.”The two data sources employed by the authors seem to show conflicting trends in wealth inequality in India over the last decade. The WID data, which covers a longer time span, reveals “a stark increase in wealth inequality over the last 40 years, and this is not generally seen in peer and developed countries”.

However, based on the AIDIS reports, the authors find that “Indian households have been experiencing a more recent decrease in inequality, measured in terms of gross and net assets from 2014 to 2019”.

Focusing on labour-intensive growth opportunities that can create better economic and social mobility opportunities for lower classes of citizenry remains central to the cause of reducing poverty, unemployment, and subsequently inequality.

If one needs a narrower picture of other dimensions of ‘inequality rise’ to get the diagnosis correct on spatial factors, our own research work with the creation of the Access (In)Equality Index in 2021 from the Centre for New Economics Studies (CNES) study, ranking the performance of Indian States across 5 pillars may shed some more light. I have discussed the results of the index for each pillar extensively here

Hosabale, in his address too, acknowledges the contribution of access inequality, poor government policies and its administrative inefficiencies in making “A large part of the country still to not have access to clean water and nutritious food.” And, how “Civil strife and the poor level of education are also a reason for poverty.”

There Needs To Be a More Comprehensive Economic Plan

It’s not as if the entire nation has done wrong on addressing these structural social-economic ills. Politics of social mobilisation, sustained rights based movements and the right-policy interventions have allowed many states across the South of India, parts of the East, and others like Goa to have done reasonably well, over time, in safeguarding or providing more equitable access for basic social-economic goods and services (healthcare, education), access to job or social security, better financial access, and legal recourse for seeking justice, to its respective state populations.

Still, a lot more needs to be done though if the nation needs to progress for all and not a few. Lower growth might have reduced inequality without creating opportunities for upward socio-economic mobility for most vulnerable groups (see here for more on access inequality condition for SCs, STs, religious minorities).

Hosabale’s recent remarks delivered as part of the Swawalambi Bharat Abhiyan, coming straight from the RSS headquarters, must be deciphered as an instructive note of advice for the ruling BJP administration.

(Deepanshu Mohan is Associate Professor and Director, Centre for New Economics Studies, Jindal School of Liberal Arts and Humanities, OP Jindal Global University. He is Visiting Professor of Economics to Department of Economics, Carleton University, Ottawa, Canada. This is an opinion piece and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)