The Hindu Editorial Analysis- 4th September 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Talce on the challenge ofrising income inequality

Why in News?

Addressing income inequality is a serious global challenge. It is a complex and multifacvted endeavour which demands examining, trying and implementing several different strategies to find a suitable way to f«ster a more equitable society. 

 The Evolving Landscape of Income Inequality in India 

•  Geographical Divide of State Domestic Product (SDP):  A clear geographical distinction exists between states with per capita SDP above the national average in 2019-20 and those below it. 
•  The affluent states are situated in the south, west, and northwest,  while the less prosperous ones are in the north, center, and east. 
•  During 1990-91,  the per capita SDP of the higher-income states was 1.7 times that of the lower-income states which increased to 2.5 times by 2019-20. 

 Reasons Behind Income Inequality in India 

•  Historical Factors:  The British and industrialists focused on developing regions with strong potential for manufacturing and trading, such as Kolkata, Mumbai, and Chennai. 
•  Failure of Planning Mechanism:  Planning mechanisms have widened the gap between India’s developed and less developed states. 
•  Lack of Growth of Ancillary Industries in Backward States:  A decentralized approach to developing backward regions failed due to a lack of growth in ancillary industries, leaving these areas underdeveloped. 
•  Failure of India’s Industrialization Strategy:  India struggled to industrialize like China, with the services sector becoming the main driver of economic growth. However, from 2012 to 2019, there was less than a 1% point increase in the employed workforce. 
•  Concentration of Services Sector in High-Income States:  The services sector is mainly located in higher-income states, with West Bengal (Kolkata) being a notable exception. 
•  Declining Public Investments:  The shift from public to private sector investment post-1991 liberalization has contributed to the growing disparity in per capita SDP and income. 
•  Poor Linkage of Economic Hubs:  India’s growth hubs are poorly connected, limiting spillover effects and creating pockets of poverty in poorer states. 
•  Limited Success of Green Revolution (GR):  The benefits of the Green Revolution were unevenly distributed, primarily benefiting regions like Punjab, Haryana, and Western UP. 
•  Others: 
  •  Labour Force Disparity:  Northern and central states have lower labour force participation rates and regular wage workers compared to the national average. 
  •  Disparity in Access to Engineering Education:  70% of engineering seats are in higher-income states. 
  •  Poor Investment in Education:  Investment in education has decreased from 10.8% to 9.7%. 
  •  Entrepreneurship Imbalance:  Higher-income states accounted for nearly 75% of factories and employment, according to the Annual Survey of Industries 2019-20. 

Impacts of Unequal Growth

•  Health:  Access to healthcare services may be limited due to overcrowding and insufficient facilities. 
•  Nutrition:  Poor populations migrating to urban areas may struggle to access affordable and nutritious food. 
•  Physical Infrastructure:  Overcrowded cities may lack adequate physical infrastructure, impacting services such as water supply, sanitation, and waste management. 

Government Interventions for Backward Regions

• Financial Commission's Approach to Regional Development :The  14th Finance Commission  has placed significant importance on addressing regional disparities in development by assigning a 50% weight to income distance when determining the distribution of tax revenue among states. This approach aims to ensure that resources are directed towards states with greater financial need, thereby promoting a more equitable distribution of wealth and resources across the country. 
•  Backward Regions Grant Fund Scheme : The  Backward Regions Grant Fund (BRGF) Scheme  is a government initiative designed to address regional disparities in development. It aims to provide financial support to areas that are lagging behind in terms of economic growth and infrastructure. The scheme focuses on promoting balanced regional development by allocating funds to backward regions, enabling them to catch up with more developed areas. 
•  Rashtriya Sam Vikas Yojana : The  Rashtriya Sam Vikas Yojana  is a government program aimed at fostering development in backward regions of the country. It focuses on implementing targeted development programs to uplift these areas, ensuring that they receive the necessary resources and attention to improve their economic and social conditions. 
•  Aspirational Districts Programme : The  Aspirational Districts Programme  is a government initiative aimed at transforming 112 of the most under-developed districts across the country. The program focuses on improving key indicators such as health, education, agriculture, and infrastructure to elevate the living standards of the people in these districts. 
•  National Rural Livelihoods Mission :The  National Rural Livelihoods Mission (NRLM)  is a government initiative focused on reducing poverty in rural areas by promoting sustainable livelihood opportunities. The mission aims to empower rural communities through skill development, capacity building, and access to financial services, ultimately helping them achieve economic self-sufficiency and improved living standards. 

Way Forward to Reduced Income Inequality in India

• Connecting Value Chains Across States :There is a need for a national policy to create value chains that link businesses in southern and western states with those in northern and eastern states. This would involve southern and western states supplying inputs (like raw materials or components) to northern and eastern states.  
• Skill Development : Immediate actions are necessary to improve skill development and engineering education. This will help build the skills needed to attract businesses and industries to these regions. 
• Region-Specific Interventions : There is a need for interventions that focus on the specific needs of different regions. These interventions should be supported by significant investments in education and health to improve overall quality of life and productivity. 
• Relaxing Borrowing Limits for Poor States : Easing borrowing limits for poorer states will allow them to increase their capital expenditure (capex) spending. This increase in spending can boost economic growth and help these states catch up with more prosperous states.
• Increasing Female Labour Force Participation Rate : According to the Periodic Labour Force Survey Report 2022-23, the female labour force participation rate was 37.0% in 2023. Efforts to increase this rate can enhance overall economic productivity and growth.