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In the last two months or so, two important international reports have been published related to economic inequalities in the world. First one is the World Inequality Report 2022 that was published by the Paris School of Economics on December 7, 2021. The other is the Inequality Kills Report published by Oxfam International on January 17, 2022. Both these reports have categorically pointed towards the globally growing economic disparities.     

WHERE DO THE GLOBAL ECONOMIES STAND?  

To the extent World Inequality Report 2022 is concerned, it has analysed inequalities on four parameters i.e. wealth, income, gender and ecology. The report found that the poorest half of the global population possesses just 2% of the total wealth, whereas the richest 10% of the global population owns 76% of all wealth. Amongst the globally compared eight regions (Sub Saharan Africa, South and South East Asia, Latin America, Russia and Central Asia, Middle East and North Africa, East Asia, Europe and North America), the Middle East and North Africa (MENA) region is the most unequal region in the world, whereas Europe has the lowest inequality levels. In the context of income, the report states that the topav 10% of the global population earn 52% of the total income, whereas the bottom 50% take just 8.5% of it.

The report prominently highlighted the widespread gender inequalities. Women’s share in labour income that used to be 30% in 1990 barely reached 35% in three decades. In addition, it is documented that gender inequality is more pronounced in different countries or regions. The report also corroborates that global income and wealth inequalities have given way to ecological inequalities. In case of CO2 emissions, the top 10% emitters spread close to 50% of all emissions, while the bottom 50% produces just 12% of the total.

Oxfam International’s Inequality Kills Report pointed out that since March 2021, billionaires have seen their wealth increase by $5 trillion from $8.6 trillion to $13.8 trillion particularly due to the respective governments’ intervention that took the stock prices up for the billionaires. The document also underlined that a new billionaire emerged every 26 hours since the initiation of the pandemic. Where over 160 million people got pushed into poverty due to Covid 19, at the same time, the world's 10 richest men doubled their wealth. The inequality is so widespread that it is apprehended that if 10 of the world’s richest men spend a million dollars each a day, it would take them 414 years to spend their combined wealth. Also, the report inimitably argued about the vaccine inequality between the countries. Vaccination apartheid owing to patenting not only took a toll on precious lives but also created vaccine billionaires as well. In terms of the climate crisis, it says that the world’s richest 1% emit more than twice as much CO2 as the poorest 50% of the world.

WHAT DO THE REPORTS CITE FOR INDIA?

So far India is concerned the World Inequality Report has remarked India as a poor and a very unequal country. Here the top 1% population owns 33% wealth, the top 10% possesses 65% wealth and the bottom 50% have only 6% wealth. Similarly, income inequality ensures that 1% of the population had 22% of the total national income in 2021 and the bottom 50% had just 13%. It concluded that the economic reforms and liberalisation adopted by India had by and large benefited the top 1% only. For the female labour income share, the report observed that the income share of female labour in India is just 18% which is significantly lower than the average in Asia (21%, excluding China) and just slightly better than the Middle East and North African countries where this share is 15%.

Just as experiments follow theory, in the same fashion Oxfam’s Inequality Kills Report India Supplement 2022 as an appendage (incidentally) to the World Inequality Report 2022 justifies the reasons why India is remarked as a poor and very unequal country. The document exhibits that India’s governance structure is accountable for the promotion of accumulation of wealth into fewer hands along with poor provisioning of safety nets for the rest of the population. In fact, it underlines that the basis for growing inequality stands on the pillars of inconsistent taxes, declining social sector spending and increasing privatisation of social goods.

It is argued that the central government’s tax collection went down by `1.5 lakh crore due to the cutting down of corporate tax from 30% to 22% in 2019-20. When the pandemic gripped India, the government declared a strict lockdown throughout the country that brought all economic activities to a standstill. Thus, nearly 12 crore jobs were lost in 2020-21 of which 9 crores were in the informal sector itself. Concomitantly, it resulted in a fall in the government's collections of corporate tax, income tax and goods and services tax (GST). Amid depression, private or foreign players too recused themselves from investing in government’s disinvestment projects. Ultimately, all this culminated into a major shortfall in revenue for the government. In order to make up for the losses, the government decided to increase excise duty on petrol and diesel. This increase in the prices of petrol and diesel jolted the poor more amidst joblessness and falling incomes. Further, the already high indirect taxes i.e. custom duty, excise duty and VAT were once again hiked for daily use items like petroleum products, metals, sugar, automobiles and consumer durables.

The central government noticed the pandemic as an opportunity in adversity to design such tax policies that could expedite the practice of increasing fiscal dependence of state governments on the central government. For this, the Special Additional Duty of Excise on Motor Spirit and Road and Infrastructure Cess on fuel were imposed in the year 2020-21 in addition to the Agriculture Infrastructure and Development Cess in 2021-22 - all of which are placed in the non-divisible pool i.e. the proceeds which are not shared with the states. Worsening of states’ economic condition led to lesser expenditure on the poor and an increase in inequality.

In addition to this, the report noticed that poor spending on the healthcare sector also added to the inequalities. Lack of a publicly-funded healthcare system pushed many people to avail healthcare facilities in the private sector. Estimates in the report held that middle class citizens had to spend on an average `4 lakh per day for hospitalisation at private hospitals during 2020-21. Similarly, low public spending by the government in education witnessed many children being pushed out of the schools and their entry in (child) labour market along with their poor parents. Since, sending a child to a private school is approximately nine times the cost of a government school, hence, it led to the exclusion of students of many marginalised Dalit and Adivasi families besides girl students. It is also reported that between June and October 2020, child marriages increased by more than 33%.

Whatsoever social sector schemes got announced like Ayushman Bharat, Health Card, Labour Codes, E-Shram Portal, etc. they hardly found any takers from the beneficiaries groups. On the whole, the report summarised that decrease in corporate levies, increase in indirect taxes, reduced funding for social spending and growing privatisation has bolstered inequalities that made the rich richer, while the national minimum wage remained stagnant at `178 ($2.4) a day since 2020.  

HOW BUDGET 2022 CAN ADDRESS INEQUALITIES?

Findings of these reports have not only repudiated India’s claims as a world leader, rather sounded warning bells for the Indian government to take necessary steps before it gets too late.

The nominal projections for GDP growth for the financial year 2021-22 that were earlier `222.9 lakh crore have now been revised to `232.15 lakh crore. Fiscal deficit pegged at 6.8% of the earlier expected GDP (`222.9 lakh crore) was amounting to `15.8 lakh crore that will now be revised to `15.1 lakh crore (with `232.15 lakh crore as GDP) which gives the government `70000 crore more for spending. The government should invariably and without any delay allocate this supplementary amount towards the flagship social sector schemes like PM Kisan, MGNREGS and other healthcare schemes.

Secondly, there is an emergent need to foster the fixed capital formation. The data shows that India’s fixed capital formation rate has decreased from 36% of GDP in 2008 to 26% in 2020. In the past few years, the government has banked upon the private sector for igniting new investment. Accordingly, several sops and concessions were extended to the private sector. However, the Indian economy failed to get the desired results; rather it has pronounced more inequality. Now, the government should come forward and announce investment in the infrastructural projects which will help to generate more jobs at the lower levels thereby enhancing consumption and crowding in private investment.

Oxfam report estimated that 4% wealth tax on India’s 98 richest families can take care of the Ministry of Health and Family Welfare for more than two years, the Mid-Day-Meal programme of the country for 17 years or the Samagra Siksha Abhiyan for six years. Similarly, 1% wealth tax on 98 richest billionaire families can finance the Ayushman Bharat scheme for more than seven years. These figures are enough to understand that a sturdy effort is required to introduce such schemes that tax the rich and finance the government to spend more towards the poor and the vulnerable.  A quick and needful stride taken by the government can only act as a stitch in time that will save nine.