BackIncome disparities evident in India: report
Growth in manufacturing and high-end productivity services sectors has not been sufficiently employment generating.
Premium(Ramesh Pathania/Mint )
New Delhi: Income and consumption inequalities have accompanied globalization, said a United Nations Conference on Trade and Development (Unctad) report, adding that this was particularly evident in the case of India within the South Asian region.
The report, released on Wednesday, dwells at length on the theme of inequality in the backdrop of the current global economic slowdown. It traced the roots of the inequality to the 1980s when countries began transitioning to market economies.
“In Asia where inequality of personal income is generally lower than in other developing regions, it has increased since the early 1980s in terms of both income disparities across all income groups and the share of top income groups in total income," the report said.
“The gains from (economic) growth in India have been concentrated among the surplus takers (profits, rents and financial incomes). A major reason for this is that growth in modern sectors (manufacturing and high-end productivity services such as the software industry) have not been sufficiently employment generating," it said.
This has meant that about half the workforce is engaged in agriculture, which now accounts for less than 15% of the country’s gross domestic product (GDP) and “in low-remuneration services," the report said.
This is “where most of the discussion on inclusive growth comes in," said Biswajit Dhar, director general of the Delhi-based Research and Information Systems thinktank, who was present at the launch of the report in New Delhi.
“In India’s context, we have been talking about inclusive growth to mean reducing the disparities between different sections of society in their access to productive resources," he said.
Given the adverse global economic situation that’s squeezing growth in India, Dhar warned against the tendency of governments to cut expenditure, including social spending, to reduce budget deficits.
“There is the obvious attack on social expenditure or education and health. These are the obvious soft targets," he said, echoing the line taken by the Unctad report that calls for increased public spending and progressive taxation to bridge the income disparity between rich and poor.
The report urged governments to formulate “policies that preserve the share of workers in national income and redistribute income through progressive taxation and public spending to improve equality as well as economic efficiency and growth."
Such policies “and the provision
of essential goods and services to low-income groups, can strongly contribute to the process of inclusive growth," it said.
Planning Commission member Abhijit Sen warned against the tendency to listen to “big capital, the corporate sector much more" than the problems of workers and small enterprises. “Listening and doing little things is much more important... than making major policy announcements," he said.
The Unctad report said it was possible to improve tax collection and make it more progressive without negatively affecting economic incentives.
“For example, taxation could be increased on top incomes resulting from rent-seeking activities—that is, activities directed more at increasing the share of the pie a few people (in) key positions get—as compared with profits from entrepreneurial activity and productive work that increases the size of the pie itself," it said.
The report said governments in resource-rich developing countries should ensure these resources benefit the entire population and not just a few domestic and foreign actors.
“By enlarging fiscal space, governments can apply countercyclical policies—such as are needed to increase demand during the current economic downturn—as well as redistribute income and finance investment for more sustainable and inclusive growth," it said.
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