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Introduction

India’s significant and escalating income and wealth inequality have garnered attention among economists and global observers. The issue has taken center stage in the ongoing parliamentary election, as highlighted by the Loknity-CSDS 2024 pre-poll survey (The Hindu, April 11, 2024). This disparity in wealth distribution has become a focal point across various media platforms, with concerns raised about the increasing difficulty in securing employment, particularly among certain demographic groups.

Supporting Data

Income and wealth inequality have been on the rise globally, but India's situation is particularly acute. Research indicates that since 2000, income and wealth inequality in India have surged, with the top 1% of the population now commanding 22.6% and 40.1% of the income and wealth shares, respectively. This data, presented in a research paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of Billionaire Raj,” authored by Thomas Piketty, Lucas Chancel, and Nitin Kumar Bharti, underscores India's position among countries with the highest levels of income inequality worldwide.

Theoretical Insights

The renowned economist Simon Kuznets introduced the inverted “U” hypothesis in 1955, suggesting that economic growth initially exacerbates inequality before eventually reducing it as a nation progresses. However, empirical evidence has shown mixed results, with some studies supporting Kuznets’ hypothesis while others refute it. Moreover, the correlation between inequality and economic growth varies across countries and time periods.

Inequality and Development

It’s crucial to distinguish between economic growth, which primarily focuses on GDP expansion, and development, which encompasses broader societal improvements. Development involves a multidimensional process that includes not only income enhancement but also institutional, social, and attitudinal transformations. High economic inequality impedes genuine development, as it restricts the equitable distribution of resources and opportunities necessary for societal progress.

Policy Implications

To achieve sustainable development, India must address its staggering income inequality. This entails implementing policies aimed at redistributing wealth and opportunity to marginalized groups. Strategies may include investing in quality education, healthcare, and vocational training, as well as ensuring access to essential goods and services at affordable rates. Additionally, safeguarding the rights of vulnerable populations, such as women and the elderly, is paramount for fostering an inclusive society.

Lessons from Economic History

India can draw lessons from the development trajectories of East Asian economies like Taiwan, South Korea, Japan, and China, which prioritized equitable growth through government intervention. Embracing a similar approach, India can foster a more inclusive development model that empowers all citizens to contribute meaningfully to the nation’s progress.

Conclusion

In reevaluating its economic policies, India must prioritize inclusivity and equitable growth to realize its full developmental potential. By addressing income and wealth inequality, India can create a more just and prosperous society conducive to sustained economic and social advancement.