INTRODUCTION

• Rising inequality in India has reached concerning levels, with a significant share of national income in 2022-23 going to the top 1%, a situation that underscores the urgent need to address the consequences of unequal growth.

ISSUES

• Wealth Inequality:

• According to the World Inequality Database, in 2022-23, the top 1% in India earned 22.6% of the national income, the highest since 1922, and held 40.1% of the country's wealth. This is worse than the colonial rule.

• Taxation and Redistribution:

• Tax-GDP Ratio: India has a low tax-GDP ratio compared to other middle-income countries (17% in India vs. 25% in Brazil).It is a measure of a country's ability to generate resources for development.

• Regressive Tax Structure: Indirect taxes make up nearly two-thirds of all tax revenue collection, contributing to regressiveness.

• Tax Burden: Approximately 64% of the total goods and services tax (GST) in the country came from the bottom 50% of the population, while only 4% came from the top 10%

• Progressiveness of Direct Taxes: Direct taxes in India are not very progressive. Companies with over ₹500 crore profit before taxes have an effective tax rate of 19.14%, while those with 0-₹1 crore profit have a rate of 24.82%.

• The State of Food Security and Nutrition in the World, 2023: The FAO report says that around 74% of India’s population could not afford a healthy diet, and 39% fell short of a nutrient-adequate one.

• According to Global Hunger Index 2023: India’s 2023 GHI score is 28.7, considered serious according to the GHI Severity of Hunger Scale.

• India's child-wasting rate, at 18.7, is the highest child-wasting rate in the report.

• Gender Inequality: India was ranked 127th out of 146 countries in the 2023 Global Gender Gap Report, indicating a significant issue with "missing women" in the workforce.

• Low Welfare Spending:

• Low Public Spending: India's public spending on welfare is low, with health expenditure at 1.3% of GDP, far from the National Health Policy's 2.5% target by 2025. 

• Decline in Welfare Programs: Major budgetary allocations for social programs like MGNREGA, education, and children's welfare have decreased as a proportion of total expenditure or GDP.

• Example, FY24 budget for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme allocated ₹60,000 crore, which was 18% lower than the FY23 budget estimates of ₹73,000 crore. 

• Jobless Growth:

• According to the International Labour Organization’s (ILO) India Employment Report 2024, youth (15-29) unemployment rate has been rising over the past several decades: from 5.6 per cent in 2000 to 6.2 percent in 2012, and then increasing threefold, to nearly 18 per cent in 2019, and then dropping to around 15.1 per cent in 2020

INHERITANCE TAX (BOX)

• Inheritance tax is a tax paid for inheriting a property or asset from a deceased person.

• It is levied on the value of the inheritance received by the beneficiary, and it is paid by the beneficiary.

• Historical Context:

• Estate Duty Act, 1953: India had an estate duty (a form of inheritance tax) that was introduced in 1953. This tax was levied on the total value of the estate left by a deceased person. However, the Estate Duty Act was abolished in 1985 due to administrative difficulties and concerns about its impact on wealth accumulation and investment.

• Although India does not have a direct inheritance tax, inheriting assets can have other tax implications:

• Capital Gains Tax:

• Inheritance itself is not taxable, but if the inherited asset is later sold, capital gains tax may apply. 

• The cost basis for calculating capital gains is typically the asset's value at the time of the original owner's death (step-up in basis), which can be beneficial for heirs.

• Stamp Duty and Registration:

• If real estate or other properties are transferred due to inheritance, heirs may need to pay stamp duty and registration fees. 

• These are state-specific charges for registering the property in the new owner's name.

• Income Tax:

• Any income generated from inherited assets, such as rental income or dividends, is subject to income tax as per the heir's tax bracket.

CAUSES:

IMPACT OF INEQUALITY IN INDIA

• IMPACT ON EDUCATION:

• Access to Education: The All India Survey on Higher Education (AISHE) demonstrates unequal access to higher education, with lower enrollment rates among marginalised groups and rural populations.

• Healthcare Disparities

• Healthcare Access: The National Family Health Survey (NFHS) reveals significant disparities in healthcare access, with rural and lower-income populations facing greater barriers. 

• These disparities affect maternal and child health, nutrition, and life expectancy.

• Out-of-Pocket Expenditure: Data from the Ministry of Health and Family Welfare indicates high out-of-pocket healthcare expenses, which disproportionately impact lower-income groups, leading to financial stress and reduced healthcare access.

• Regional Inequalities

• Urban-Rural Divide: The National Sample Survey data illustrates the urban-rural divide, with rural areas often having lower income levels, reduced access to basic services, and limited employment opportunities.

• Interstate Disparities: Government data shows significant economic disparities among Indian states, with some states experiencing higher growth and others lagging in terms of economic development and social indicators.

• Social Impact: 

• Social unrest: The rising inequality has contributed to social tensions and unrest, with increased protests and demands for social justice.

• Political Participation: Inequality affects political participation, with lower voter turnout among marginalised groups, impacting democratic representation and governance.

INDIAN GOVERNMENT  INITIATIVES TO REDUCE INEQUALITIES: (ROUGH CHART)

(For copy paste purpose @guru)

• Direct Redistribution Measures

• •Programs like the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) provide direct cash transfers to farmers.

• The PDS provides subsidised food grains to eligible households.

• Progressive Tax Policies

• Tax reforms: Introduction of additional tax brackets for high-income earners

• Welfare Programmes

• Examples: MGNREGA and Social Security initiatives like Atal Pension Yojana

• Education and Skill Development

• Right to Education Act (RTE) ensures free and compulsory education for children aged 6 to 14.

• Skill India Mission provide skill development and vocational training to millions of youth

• Health care initiatives:

• National Health mission and Ayushman Bharat PM Jan Arogya Yojana

• Gender Equality Initiatives

• Programmes like Beti Bachao Beti Padao

• Maternity Benefit (Amendment) Act provides for 26 weeks of paid maternity leave, promoting women's participation in the workforce

• Regional Development programme

• Niti Aayog’s Aspirational Districts Program which focuses on the development of India's most backward districts

• Special Category States- They receive extra government funding to reduce regional disparities and promote inclusive development.

WAY FORWARD

• Progressive Tax Policies

• Broaden the Tax Base: Expanding the tax base to include more high-income earners and corporations is crucial. 

• Data shows that few Indians pay income tax but improving compliance and closing loopholes can boost revenue.

• Increase Direct Taxes: 

• Direct taxes like income tax and corporate tax are usually more progressive than indirect taxes. 

• Focusing on direct taxes can reduce inequality.

• Strengthen Social Welfare Programs

• Expand MGNREGA: Increasing the scope of MGNREGA can provide more employment opportunities in rural areas. 

• Enhance Social Security: 

• Programs like the Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) and the Atal Pension Yojana (APY) should be expanded to cover more unorganised sector workers. 

• Invest in Education and Skill Development

• Strengthen Right to Education (RTE): 

• Improving the implementation of RTE can increase school enrollment and quality of education.

• According to the Ministry of Education, although enrollment has improved, there are still gaps in learning outcomes.

• Expand Skill India Mission: 

• Continued investment in skill development programs is crucial for preparing youth for the job market. 

• Increase Public Health Spending

• Achieve National Health Policy Targets: The National Health Policy aims to increase public health spending to 2.5% of GDP by 2025. 

• Strengthen Ayushman Bharat: Expanding this program's coverage and ensuring better access to healthcare facilities can reduce healthcare-related inequalities.

• Promote Gender Equality

• Enhance Maternity Benefits: Providing greater support for working mothers, including childcare facilities and extended maternity leave, can promote gender equality in the workforce. 

• Data from the Ministry of Women and Child Development shows a positive impact from recent maternity benefit amendments.

• Support Small and Medium Enterprises (SMEs)

• Provide Financial Support: Expanding access to credit and financial support can drive SME growth and generate more jobs.

• Promote Labor-Intensive Industries: 

• Supporting industries that are labour-intensive can create more employment opportunities. This shift can help reduce unemployment and income inequality.

• Strengthen Regional Development Programs

• Focus on Infrastructure and Connectivity: Investing in infrastructure, especially in rural and underdeveloped areas, can drive economic growth and reduce regional disparities. 

• Promote Inclusive Governance and Political Participation

• Enhance Democratic Participation: 

• Ensuring that all groups have a voice in governance can help address inequality. 

• Encouraging voter registration and participation in elections is crucial. 

• Election Commission data shows lower voter turnout among marginalised groups, indicating a need for increased engagement.

• Ensure Policy Representation: Involving marginalised groups in the policy-making process can lead to more equitable outcomes.

• Private Sector Engagement: Encourage corporate social responsibility (CSR) initiatives that focus on inclusive development.

•  Encourage private companies to invest in social sectors and support community development projects.

• Social and Financial Inclusion:

• Land Reforms: Implement land reforms to address issues of land ownership and tenancy. Ensure fair and equitable distribution of land resources.

• Promoting Civil Society: Provide a greater voice to traditionally oppressed and suppressed groups, including by enabling civil society groups like unions and associations within these groups.

• Technology and Innovation: Embrace technological advancements to create new opportunities for all.

GLOBAL BEST PRACTICES

CONCLUSION

India can move toward a more equitable society by adopting inclusive policies that address the root causes of inequality. This shift reflects the goals of the United Nations' Sustainable Development Goal 10, which aims to reduce inequality within and amon

Tags:
Polity

Keywords:
INEQUALITY SDG SOCIETY SOCIAL DEVELOPMENT