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Posted at: Feb 17, 2017, 12:35 AM; last updated: Feb 17, 2017, 12:35 AM (IST)

Income and inequality

Sushanshu Ranjan
This year’s Economic Survey has taken a serious note of the appalling conditions of India. The government must do something to reduce the disparity in income and raise the standard living of the poor. Universal Basic Income may come as a great relief for the poor but it is not a permanent solution.
Income and inequality
Trampling over social justice? Pedestrians walk past a homeless man sleeping on a footpath in New Delhi. AFP
ECONOMIC inequality is rising day by day the world over. It is the biggest cause of worry for economists and policy makers. Disturbing figures keep tumbling out of different researches conducted by different bodies.  One such figure is that 1 per cent of the affluent individuals of the world are in possession of more than the remaining 99 per cent, and the top .1 per cent own more than the 90 per cent from below. According to a report of Oxfam International, “An Economy For the 1%”, 62 wealthiest people of the world own half its assets. Curbing this inequality is a daunting challenge. 

In case of India, this canker acquires a more hideous proportion. According to a report of “New World Health”, India is the second most unequal country in the world after Russia in terms of distribution of wealth. In Russia, 62 per cent of the total wealth is in the hands of the few moneybags, while Japan is the most equitable country where only 22 per cent of the nation's assets are owned by the filthy rich. 

This year's Economic Survey has taken a serious note of the appalling conditions of India. Invoking the vision of Mahatma Gandhi, it has advocated the concept of Universal Basic Income (UBI), “Whose time, even if not ripe for implementation, is ripe for serious discussion”. It has a whole chapter titled “Universal Basic Income: A Conversation With and Within the Mahatma”. Since the vision of Mahatma Gandhi has been invoked, it will be in the fitness of things to understand what did Gandhi stand for. 

The Mahatma believed in the parity of salaries and wealth. In a letter to Viceroy Lord Irwin, dated March 2, 1930, he wrote about the inequality in income, “Take your own salary. It is over Rs 21,000 per month, besides many other indirect additions. The British Prime Minister gets £5,000 per year, that is over Rs 5,400 per month at the present rate of exchange. You are getting Rs 700 per day against India's average income of less than two annas per day. The Prime minister gets Rs 180 per day against Great Britain's average income of Rs 2 per day. Thus you are getting much over 5,000 times India's average income. The British Prime Minister is getting only 90 times.” He, in fact, advocated for the equal salary for the king as well as for the scavenger as his (scavenger's) work is no less important than that of king.

He was of the firm opinion that all wealth is socially produced as no Robinson Crusoe on a solitary island, be he a capitalist or a labourer, can generate wealth. So, he advocated the equal division of socially produced wealth. His speech at the inauguration of the Banaras Hindu University on February 4, 1916 reflects on his thoughts: “The Maharaja who presided yesterday over our deliberations spoke about the poverty of India. Other speakers laid great stress upon it. But what did we witness in the great pandal in which the foundation ceremony was performed by the Viceroy? Certainly a most gorgeous show, an exhibition of jewellery…compare with the richly bedecked noblemen the millions of the poor. And I feel like saying to those noblemen: There is no salvation for India unless you strip yourselves of this jewellery and hold it trust for your countrymen in India.” 

Even now we find a vulgar display of opulence in marriages when the filthy rich spend billions. His idea of trusteeship was a most revolutionary idea for ushering in an equitable society, free from exploitation. In his words, “My theory of trusteeship is no makeshift, certainly no camouflage. I am confident that it will survive all other theories. It has the sanction of philosophy and religion behind it…No other theory is compatible with non-violence.” However, none of his theories or ideas was subjected to such ridicule as “Trusteeship” was. This ridicule is quite natural when "sycophants of inequality" cry hoarse that rising inequality is an essential concomitant of economic growth. 

They feel that it will have a trickledown effect that will benefit the underprivileged. They have the audacity to argue that if the option of aggrandising unlimited wealth is closed, nobody will work or invest or do business. The idea of supporting inequality for growth is not only revolting but also factually wrong as is evident from an IMF study of 2015: “We find an inverse relationship between the income share accruing to the rich (top 20 per cent) and economic growth. If the income share of the top 20 per cent increases by 1 percentage point, the GDP growth is actually 0.08 percentage point lower in the following five years, suggesting that the benefits do not trickle down. Instead, a similar increase in the income share of the bottom 20 per cent (the poor) is associated with 0.38 percentage point higher growth.”

UBI is not a new idea. Switzerland rejected it last year. The Swiss government proposed to pay every adult citizen and long-term resident 2,500 Swiss francs (Rs 1.75 lakh) per month as UBI to all, irrespective of their earnings. In the referendum, the people rejected it as many were averse to the idea of giving people money for “doing nothing”. Some conservatives were worried about its budgetary implications. UBI may come as a great relief for the poor but it is not a permanent solution. The government must do something to reduce the disparity in income and raise the standard living of the poor. Planning occupied the centre stage of Indian thinking as World War II neared its end.  “A Plan of Economic Development for India”, prepared by a body of distinguished industrialists, was published in 1944. More popularly known as the Bombay Plan, it envisaged an investment of Rs 10,000 crore spread in three successive five-year stages. It said that only through heavy investment in the economy and through a concerted drive to raise the living standard of the people could the challenge of the appalling backwardness of the country, the indigence and illiteracy of its people and the high mortality rate be combated.

The writer is a senior journalist.

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