INEQUALITY IN INCOME
Inequality in income from different sections of Indian society has risen over the last three decades and a half with the top 10% of earners cornering 55% of the national income as of 2016. India’s income inequality problems are well-acknowledged, thoroughly studied and many believe that the roots of this inequality were laid down by the British Empire. The institutional and imperialistic commercial policies of British India made the rich richer and poor poorer during colonial rule, according to this popular view which holds British Raj responsible for income divide. As per the claims of several economic historians, this increased inequality between those owning property and the property-less is because of capitalist exploitation and colonial intervention which favored landlords, traders, and money-lenders over the weaker sections like peasants, artisans and landless laborers. Propertied classes also include the land-owning peasants, who experienced a rise in income share in the pre-war decades between 1875 and 1895 followed by a decline. The reason behind this disparity is mainly the open economy which prevailed in the 19th century which consequently affected land- and trade-dependent occupations in different ways. The people who were engaged in land dependant occupation were severely affected by low and average income generation, that too not on a consistent basis. Despite the limited and fragmented growth, it was deduced that the distance between average income and the poverty line did not change significantly, coming to a conclusion that the poorest did not become poorer under British rule. In such a situation, it is pertinent to compare Indias place amongst the various countries. Amongst the most important and dominating economic blocks, with the exception of West Asia, India’s record on inequality is the worst. The situation is alarming as it is basically double edged sword posing a threat to public policy and a potential cause of social unrest as it fails in equitable redistribution of wealth of the nation. Another fact must also be acknowledged that but, the level of income inequality in India in 2016 matched that in sub-Saharan Africa and Brazil, where the top earners accounted for a very high share of income in totality. If we look at the historical development we could see that that, the rise in income inequality has been more gradual in India since 1980 when compared to Russia. In Russia, the rise in inequality was abrupt and skewed. Whereas in China, it was moderate. This conclusion clearly indicates the role played by policies and institutions in balancing out inequality. The Inequality report has advocated “tax progressivity” which means higher taxes on the rich, lower on the poor. This has become an effective tool to address inequality. Income taxes are levied based on a person’s ability to pay and the rate increases as income level progress of the concerned person. India has been trying to tackle income inequality by various means, for example, it even formulated a combination of direct transfer of entitlements to the intended beneficiaries. I initiated a drive against tax evasion and brought about schemes meant to improve access to energy and finance by the poor. The findings of the Inequality report come at a time when the central government has started working on drafting a new direct tax code effectively which is likely to reform the tax structure. On the same footing , the state of Jammu and Kashmir is set to make a bold and new experiment with a universal basic income scheme from the next financial One of the reasons for national governments’ lowered ability to effectively tackle income inequality is the transfer of public wealth into private hands. Also, net public wealth (that is, public assets minus public debts) has declined in nearly all countries since the 1980s. “This arguably limits government ability to regulate the economy, redistribute income, and mitigate rising inequality. The only exceptions to the general decline in public property are oil-rich countries with large sovereign wealth funds, such as Norway,” quoted the inequality report. Experts in the economics arena said that effective measures and robust public policy intervention were required to address the issue of income inequality. While the facts and figures may be debatable, policies for broadening the tax base and increasing public expenditure on health and education are very much needed for a country like India where there is a social infrastructure deficit. Thus, instead of blaming the British Empire and colonial legacy, present, and coming governments should focus on the efficient formulation of public policies.