Fight inequality in the year ahead

As we enter the new year, we must not be deluded by the economy’s higher growth trajectory. What matters most is the distribution of fruits of economic growth. A healthy debate on imbalance is needed

As festivities usher in another year, it will be pertinent to examine what lies ahead for the Indian economy in 2018. How does the Indian economy fare in terms of other economies in the year ahead and what are the daunting policy challenges the country will be forced to grapple withIJ A recent report by the Centre for Economics and Business Research indicates a healthy picture for the global economy. India is all set to overtake Britain and France; and will assume the distinguished and coveted position as the world’s fifth largest economy.  But navigating the delicate contours of a rapidly changing geo-political scenario will require a certain degree of diplomatic finesse, persistence and competence.

After the BJP’s triumphant victory in Gujarat and the Congress’s drubbing in Himachal Pradesh, it is quite evident that Prime Minister Narendra Modi is an implacable political force. But again, the manner in which he exercises this mandate this year will determine the final outcome in 2019. What the Modi Government must focus its energies now is on the debate regarding inequality. This issue, if dealt with firmly and expeditiously, will certainly give an impetus to Modi’s rising popularity.

This polemic is not restricted to the basic measure of income, but the debate today is far more wide and diverse. Should we be only viewing the state of the economy from the point of view of growth numbersIJ In its ambit, it includes issues such as better access to health and education. It touches upon the environmental cost of growth and the contentious debate regarding climate change, which is a prime example of inequality and injustice. Is our growth model gender neutralIJ If not, then our policies are inherently biased and thus unequal. Are more billionaires in an economy synonymous with greater overall prosperityIJ These are pressing questions. It is a vast, multi-faceted and multi-dimensional issue which must be urgently addressed for India to uplift its citizens and catapult them in a fast paced world economy.

Although the trajectory of the Indian economy is upbeat, what matters more is the distribution of the fruits of economic growth. The size of the pie may be increasing but are the resulting dividends being shared fairlyIJ Glaring inequalities in any system do not augur well for the future. A rapidly growing Gross Domestic Product (GDP) is only a fair indicator of economic prosperity when the majority benefit from the progress being made. The news of India becoming the world’s fifth largest economy is a reason to extol the efforts of the architects, who meticulously implemented structural changes in the Indian economy in 1991 and ever since. But one must not condone the fact that we remain the second most unequal country in the world after Russia. The income distribution, as measured by the Gini co-efficient in economics, paints a disquieting picture.

In the year 1968, Robert Kennedy said, “GDP measures everything except that which makes life worthwhile.” He was certainly not wrong because history is witness to paradoxical trends. In Zambia, the GDP grew at six per cent between 1998 and 2010 but poverty levels rose from 43 per cent to 64 per cent. Although poverty levels in the country have been steadily declining, the richest one per cent of the population in India owns around 58.4 per cent of the wealth. The distribution is certainly skewed.

Domestically, it does not take much to discern trends in policy making, which could prove to be disastrous for the current regime. Our health sector is ailing. The much vaunted Right to Education Act has its own shortcomings. The amounts of funds which are being channelised to these two crucial sectors are woefully inadequate. Only 1.4 per cent of the GDP is spent on healthcare. This is the public sector spending. The statistic is abysmally low as compared to other countries around the world.

The United States spends almost 17 per cent of its GDP on health care. We simply cannot ensure an inclusive growth process if health and education are compromised. When the Government guarantees education and health but does not deliver all the time, then this also translates into a kind of inequality which may be hard to quantify but we cannot dismiss it.

Why is inequality so prevalent in IndiaIJ Can this be attributed to discrepancies in policy implementation or can one trace the origins of this injustice to other cornersIJ Many scholars ascribe various reasons but there is no doubt that an element of crony capitalism has crept into the system. Powerful corporations and influential people do wield tremendous power when it comes to framing and enunciating relevant policies. Capitalism is not immune to this practice. The pharmaceutical industry, financial firms and mining companies do influence policies in order to perpetuate their growing clout.

Once a fortune is amassed, it can grow exponentially; greater the consolidation of wealth, greater the influence. The affluent craft, often called ‘reinforcing feedback loops’, is one wherein the winner uses his market power as a leverage to return to the game with a larger risk appetite. Questions regarding preferential loans to influential corporate companies are still lingering in the collective consciousness of people. The most recent example is the now defunct Kingfisher Airlines.

Prime Minister Modi might argue that the market should operate freely and with minimum Government interference. This is the neoliberal ideology which was popularised post-World War II. Markets may in principle be self-correcting but they cannot be free from regulatory oversight. A degree of regulation is indispensable in order to ensure that regulations are not relaxed like they were prior to the 2008 financial crisis.

The Government must be active and a powerful stakeholder in the economy must ensure a degree of equality for all actors involved. Can lessons be learnt from the National Health Service in the United Kingdom which is widely regarded as one of the most efficient services world overIJ It is a prime example of effective Government planning and meticulous execution. Today, no one has to pay to see a doctor in the UK.

There are other issues in our growth model which need urgent attention. The alarming rise in pollution in the National Capital Region is an example of an externality; whereby an action undertaken by one entity has an impact on another group of people who have nothing to do with the economic activity in question. This is grave inequality. If we are growing in an unplanned and unsustainable manner, then are we really doing any justice to our posterityIJ It is the poorest communities that endure the risk. The problem arising from harmful emissions, and no health insurance, translates into a higher out of pocket expense in hospitals for this segment of society.  Reports suggest that highly exploitative oil and gas companies, which extract resources, would be unprofitable if we incorporate the environmental costs associated with their predatory practices. This is where the Government must actively contemplate and deliberate effective solutions.

So let us not be deluded by a soaring economy because numbers and blanket statements can conceal subtleties. Rampant gender violence is also not reflected in GDP numbers. let us also not take pride in the number of billionaires in the country because broader research suggests that being home to more billionaires will hamper growth and exacerbate inequality. It is abundantly clear that the battle against inequality requires a multi-pronged and persistent approach. We are certainly attacking it, but the road ahead is fraught with obstacles which we must urgently tackle and put to rest.

(The writer is a socio-economic commentator)

First published in The Pioneer.