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INEQUALITY AND ECONOMIC POLICY IN INDIA



  Apr 30, 2024

INEQUALITY AND ECONOMIC POLICY IN INDIA



1. What does the term ‘inequality’ refer to in the context of the Indian economy?

Inequality in India refers to the unequal distribution of wealth and income among its population. Recent data indicates that a significant portion of the nation’s wealth is concentrated in the hands of a small percentage of the population, with the top 1% controlling over 40% of the wealth.

2. What triggered the recent debate on inequality in India?

The debate was reignited by the Congress party’s election manifesto, the Nyay Patra, which highlighted the issues of wealth concentration and proposed measures for wealth redistribution. This has led to public discussions, further fueled by comments from political leaders, including the Prime Minister.

3. How does India’s tax system contribute to inequality?

India’s tax system is considered regressive because it relies heavily on indirect taxes, which constitute about two-thirds of total tax revenue. Indirect taxes tend to burden lower-income individuals disproportionately. Additionally, even the direct taxes in India are not very progressive, with smaller companies facing a relatively higher effective tax rate than larger, more profitable corporations.

4. What is the current status of welfare spending in India?

Welfare and social sector spending in India is relatively low compared to other countries. For instance, public health spending is around 1.3% of GDP, which is below the target of 2.5% set for 2025 by the National Health Policy. Other areas like education, rural employment, and child welfare also show a decline in spending relative to total government expenditure or GDP.

5. How does the Indian government propose to address job creation and inequality?

The government’s approach includes expanding public services in health, education, nutrition, and social security to create jobs directly. Improving the quality and conditions of existing jobs, especially for frontline workers like anganwadi workers and accredited social health activists, is also a priority. Moreover, the government aims to enhance support for small and medium enterprises (SMEs) and promote skill training to boost employment.

6. What are some proposed measures in the Congress party’s manifesto to address inequality?

The Congress party’s manifesto proposes several measures including the introduction of cash transfer schemes like the Mahalakshmi scheme, which aims to provide direct financial support to the needy. It also emphasizes enhancing public expenditure on social programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Public Distribution System to bolster the economic security of lower-income groups.

7. What role can the government play in ensuring more equitable growth?

The government can play a critical role by focusing on equitable growth strategies that increase the purchasing power of the broader population. This involves investing in human capital, such as health and education, and supporting labor-intensive industries to create more jobs. Additionally, enabling policies that support women’s participation in the workforce and providing necessary infrastructure like childcare, transportation, and safe housing are crucial for inclusive growth.

These FAQs aim to provide a deeper understanding of the complex issues surrounding economic inequality in India and the various measures proposed to address them.
 

SRIRAM’s


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