Why India must tackle inequality to ensure stability

For historical reasons, and rightly so, India’s debate has focused on poverty more than the distributional aspects of inequality. This was understandable, given our large numbers languishing in poverty. But with India’s rising per capita income and growth, poverty is no longer as pervasive.

On the other hand, there is substantial evidence to show that the last three decades have been accompanied by rising inequality in all its dimensions. A true assessment of its level is difficult, given the absence of comparable data on consumption inequality. But estimates based on income, as reported by the World Bank, would put India among the countries with high inequality.

While these are based on synthetic estimates made using tax data, they not only show high inequality but also a secular rise in it over the past three decades. A similar conclusion can be reached from wealth data.

A far more serious problem is one of ‘horizontal inequality’, which refers to inequality among groups with a shared identity. These are based on caste, religion, age, gender, class, region and so on. While most measures of inequality capture only the gap between households or individuals on income, wealth or consumption, it is these horizontal inequalities that determine access to resources and opportunities for upward mobility within, say, a generation. Most of these inequalities are structural and historical, but also relate to social justice and stability.

The process of economic growth, which leads to prosperity, can also contribute to alienation of groups if that growth is not broad-based. In fact, the exclusion of certain groups from access to public services such as education, health and nutrition can create barriers to mobility. India’s progress on many of these fronts has been slow, compared to its success with economic growth.

Even the minor gains on human development outcomes are not equally shared by all groups. Most marginalized groups face disadvantages in basic health, education and nutrition. There are also vast differences across states, with the gap increasing in recent decades between poorer states such as Bihar, West Bengal, Jharkhand and Odisha and the relatively affluent states of west and south India.

Historically, India’s growth process has been unable to reduce these inequalities, with the task left to the state. In recent decades, these inequalities have appeared to not just threaten the process of economic growth, but also social and political stability.

The recent farmers’ agitation and reservation demands by groups such as Maharashtra’s Marathas, Gujarat’s Patels and Uttar Pradesh and Haryana’s Jats are manifestations of social instability. It has also contributed to the perverse trend of state governments trying to reserve government jobs and access to higher education for residents of the state. This stokes anti-immigrant sentiment.

One unfortunate consequence of deepening horizontal inequalities is its impact on inter-generational and occupational mobility. Many studies show that horizontal inequalities contribute to low inter-generational mobility for the disadvantaged.

India has not yet reached a situation of political instability. Recent upheavals in Nepal, Bangladesh and Sri Lanka led by their youth culminated in governments being overthrown. Similar protests in Indonesia and Thailand against their regimes and political establishments signal growing discontent with growth not delivering broad-based benefits. Such political unrest is a result of many factors, no doubt, but it still holds some lessons for India.

Despite our economic growth, we face high unemployment among the youth, with stagnant real earnings. Disparities among and within regions and across various groups have only increased. With unequal access to educational and employment openings, there is also a sense of alienation among a majority of disadvantaged groups.

While affirmative action policies can reduce horizontal inequality, this is unlikely to help much without the country’s growth process being broad-based and inclusive. Inequality matters not just for economic growth, but, more importantly, for long-term social and political stability.

The author is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.