Perpetuating Inequality and Jobless Growth

(The writer is an independent journalist, educator and documentary film-maker. This article is based on columns he has written for Asian Age/Deccan Chronicle.)

Indian society was always unequal. In recent years, although the country’s gross domestic product (GDP) has grown faster and more consistently than ever before, there is little evidence to indicate that economic inequality has come down. On the contrary, there are indications that India has become more polarized, perhaps more vertically (that is, across income and expenditure classes) than horizontally (namely, across geographical regions). Even if the poor in India have not become poorer, the gap between the rich and the poor has continued to grow even as politicians mouth empty slogans about the need for “inclusive growth”.

It is often argued that economic growth invariably results in inequality widening but that poverty cannot be alleviated without growth. It is also claimed that China has not just grown faster than India but that China is more unequal than India. Both these contentions can be challenged and in fact, have been in a book Awakening Giants: Feet of Clay with a subtitle Assessing the Economic Rise of China and India that has been written by Pranab Bardhan, professor of economics at the University of California, Berkeley and published by Oxford University Press.

Prof Bardhan points out that inequality in India is not merely higher than in China but possibly “in the Latin American range” as official data from the government of India (notably, from the National Sample Survey Organization) is largely based on distribution of consumption expenditure and not income. This clearly under-estimates inequality as the rich tends to save much more than the poor. He has further argued that the temporary reduction in the net worth of sections of India’s corporate oligarchy on account of the economic slowdown has not at all reduced its corrupt grip on the country’s political life or brought down the power of the elite that captures local governance and misappropriates natural resources, funds and services meant for the poor.

If one considers factors such as inequality in the distribution of land and capital, access to education, health-care and employment opportunities and mobility across generations and social groups, Prof Bardhan believes that India’s performance is inferior to that of China. He writes that while regional disparity in income or consumption is greater in China than in India, over the last two decades, China’s backward regions have grown at rates almost comparable to its advanced regions and regional earning disparities may be narrowing. In India, on the other hand, the poorer states (largely concentrated in the central and eastern regions) have grown much more slowly than richer states (mostly in the west and the south) implying that relative inequality has increased.

In his book, Prof Bardhan explains why the impact of growth on poverty reduction has been weaker in India than in China, “probably on account of initial conditions, including larger inequality (of opportunity) in India, owing to inequalities of land, education and social status”. The penultimate sentence of the chapter on poverty and inequality in his book reads: “The link between economic reform and inequality is … ambiguous and difficult to disentangle from the effects of other ongoing changes.”