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Rising inequality in India

Recently Oxfam International has released a report titled “The Inequality Virus”. The report highlighted the increasing inequalities in India during the time of Covid pandemic. The report found out the existing inequalities in the world have increased to new heights. In this regard, there is a larger question on how to reduce inequality in India?

General aspects of the report:

First, COVID pandemic has increased the economic inequality in almost every country. This is the first time this has happened ever since records began.

Second, there is a huge increase in the wealth of the 10 richest billionaires since the crisis began. This increase in wealth is sufficient to prevent anyone on Earth from falling into poverty because of the virus. The top 10 richest can also pay for a COVID-19 vaccine for everyone in the world.

Findings of Report about India:

First, the impact of the pandemic on Rich and poor: The wealth earned by the top 11 Indian billionaires during the pandemic alone is sufficient to sustain the MGNREGS or the Health Ministry’s budget for the next 10 years.

Second, the Impact of Pandemic on Informal sector: India’s earliest and stringent lockdown made the Informal sector, the worst affected sector due to Pandemic.

Third, Digital divide worsened as education shifted online. Girl students were most vulnerable as there is a higher chance of forced marriage, domestic violence, and early pregnancies.

Fourth, The report also mentions poor, marginalized, and vulnerable communities have higher rates of Covid-19 prevalence in India.

Reasons for rising inequality during pandemic:

First, the pandemic’s impact on labour-intensive manufacturing: the lockdown also affected the consumer-based economy of India. Apart from that, the social distancing norms made it impossible to work with social distance.

This created a domino effect on the transportation sector, loss of GST revenues in states, unemployment, etc. Overall 40-50 million seasonal migrant workers faced distress.

Second, crowded agricultural sector: The migrant workers who lost a job in the manufacturing moved to the rural areas and demanded jobs at very low wages. This made the agriculture sector more crowded and also created Stagnation in agricultural wages.

Third, 14 days mandatory home or institutional quarantine/ person infected with Covid-19 impacted the lower-income group the most. In many cases, the person who underwent the home quarantine/infected with the disease was also the sole breadwinner of the family. This created inequality as the whole family lost the income for at least 14 days

Fourth, the cause of lockdown: During the pandemic, white-collar workers (person performs professional, managerial, desk, or administrative work) isolated themselves and worked from home. It led to the closure of many small income avenues like roadside vendors, smaller shops, restaurants, etc.

Impacts of inequality during Pandemic

First, Inequalities will create Social unrest: The income inequality during the pandemic is one of the reasons for the sufferings of migrant workers and the recent farmer’s protest also.

Second, Inequalities increased government budget and the burden of subsidies: the government unveiled many stimulus packages to get the economy on track and to provide relief to economically weaker sections (EWS). The government introduced the Atma Nirbar Bharat package and schemes like Pradhan Mantri Garib Kalyan Yojana.

Third, Impact on Informal sector: The Pandemic impacted the informal sector more than the formal sector. During the pandemic, 75% of the total (122 million) job loss belongs to the Informal sector.

Fourth, the Pandemic is detrimental to public healthcare and education: the closure of schools has directly affected 32 crores of students. Among that 84% of students belong to rural areas and 70% of them attended government schools.

Fifth, the Impact of Pandemic on gender disparity: The report mentioned the unemployment rate among women increased to 18% from 15% in pre-covid time. Also, women are 23.5% less likely to re-employed compared to men.

  • The report also predicts 2.95 million unintended pregnancies, 2,165 maternal deaths, and 1.80 million abortions (including 1.04 million unsafe abortions) among women due to the closure of family planning services.

  • The report also mentions domestic violence increased by almost 60% over the past 12 months of the pandemic.

Sixth, the Impact of Pandemic on health and sanitation: The report mentions only 6% of the poorest 20% have access to non-shared sources of improved sanitation.

Apart from that, there is an increase in hunger and malnutrition levels among the economically weaker sections of society. The issue of hunger and malnutrition is highlighted by the recent NFHS report.

Way forward

First, the report itself suggests a few important measures to bridge the inequality. Such as;

  • Re-introduction of wealth tax and one-time COVID-19 cess of 4% on taxable income of above 10 lakhs. According to the report’s estimate, a wealth tax on 954 richest families can raise 1% of India’s GDP.

  • The report mentions India has to grow first then only it can distribute the wealth. Focusing on distribution now can lead India into a low-income equilibrium trap.

Second, the government needs to focus on the Promotion of Labour Intensive Manufacturing post-covid phase like Textile, Construction, Footwear, Clothing, etc.

Third, the Government also has to utilize the time to trains persons in skill development: A skill-led economy is the need of the hour to completely utilize India’s demographic dividend towards equality.

Fourth, the State has to be the dominant provider of merit goods such as health, education, nutrition, etc. This can be achieved by increasing the budgetary spending on health, education to the desired 6% of GDP.

The World Bank has calculated that if countries act now to reduce inequality then poverty could return to pre-crisis levels in just three years. So it is high time for India to act on inequality reduction activities.


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