High growth doesn’t necessarily mean high inequality: Chancel:

High growth doesn’t necessarily mean high inequality: Chancel:

Context

Bottom 50% in India has little access to quality education, health or transport.

World Inequality Lab

Inequality in India has accelerated in the recent decades, says Lucas Chancel, co-director, World Inequality Lab and of WID.world at the Paris School of Economics

There is another way

He also maintains that high growth and high inequality need not go hand-in-hand, highlighting the example of China which has managed higher growth than India without the same degree of inequality.

The Top 1% have the most

  • We observe a very sharp and progressive rise in inequality in India since the mid-1980s. The top 1% richest individuals captured 6% of [the] total income in the early 1980s, and the value is now of 22%.
  • In 2000, the top 1% captured close to 15% of [the] total income. In fact, we do not have evidence of a clear trend-break over the period.

Lying Averages

There has been higher average income growth in India since the 2000s than before, no one denies this.

The growth rate of average Indian

  • Income growth rates for the average Indian have been close to 4% per year once inflation is taken into account
  • When we go beyond the average, we see that the poorest 50% of the population grew at 2.5% per year since the 2000s.

Vast Difference

This is non-negligible, but not very impressive either, especially when we compare this figure to the average or to very top groups (above 6% per year on average).

Effect

  • Such differentials mechanically lead to a much higher concentration of incomes at the top. They also suggest that much more could have been done for the bottom groups.
  • Overall, the bottom 50% in India still have little access to basic goods such as quality education, health or transport.

Much More could have been done

When the top 0.1% (eight lakh adults) capture as much total income growth as the entire bottom 50% (400 million adults), clearly, this shows that much more can be done for the bottom groups in this country.

Inequality is Multidimensional

Itis also about access to health, a fair justice system, education, a safe environment, etc. are all fundamental dimensions of inequality. The report focuses essentially on income and wealth inequality

Non-economic inequality is connected to economic inequality

  • In the U.S., for instance, access to quality education is really determined by parental income. In India, this statement can be extended to access to quality health services and other forms of non-economic inequality
  • Indeed, reducing inequality in access to health or education is critical to reduce economic inequality.

Steps that should be taken

First, we should stress that it is up to Indian citizens to make their own choices. We are here to open debates, rather than close them

No Inheritance Tax

There is no inheritance tax in India for instance, meaning that inherited wealth, gained just by sheer luck of being born in the right family, is taxed at 0% when the poor face high taxes on certain basic consumption goods

Progressive Taxation

Progressive taxation (that is, the richest should contribute more because they have the ability to do so) is essential to finance public investments in education or health for everybody.

Conclusion

When we look at all countries around the world, we see that high growth for bottom income groups and for the middle classes can be achieved without skyrocketing inequality

Print Friendly and PDF