Declining incomes-increasing inequalities
July 15, 2021
The welfare of the common man can be ensured through economic development along with employment generation, decentralised production system, upliftment of rural economy, based on the principles of Swadeshi and self-reliance, that is, Atmanirbhar Baharat. — Dr. Ashwani Mahajan
Recently, former Governor, Reserve Bank of India, Duvvuri Subbarao has expressed his deep concern towards the growing inequalities in the country. Though, economic recovery was experienced after the first wave of the corona pandemic, however, its benefits are very unevenly distributed. The rich are getting more benefit in this recovery, due to which the gap between the rich and the poor is widening. It is not only morally correct wrong, but ‘politically corrosive’ too.
About surprise surge in stock markets, he says that on the one hand the economy is facing severe turmoil due to the pandemic, on the other hand due to inflow of investments by foreign institutional investors in the greed of earning more profit, the stock markets are skyrocketing. Therefore, it can be understood that today the growing stock markets have no linkage with the economy. It’s believed that the boom in the stock markets is purely the result of speculation.
Subbarao has expressed concern that due to the second wave of Corona, employment opportunities have started diminishing again, but the process of increasing the wealth of the rich people continued unabated. He has warned that the prospects of economic growth can be adversely affected in view of the disruption in the incomes of the poor. Significantly, according to Forbes magazine, the wealth of India’s 100 richest people has increased by 14 percent from last year (2020) to $ 517.5 billion in 2021.
It has to be understood that these inequalities are increasing not only in India but also in the rest of the world, which is becoming a cause of concern all over the globe. Significantly, in the last one year of Corona, the number of billionaires worldwide increased by 493. Significantly, according to the definition of Forbes magazine, a billionaire is a person whose assets are more than one billion US dollars. This is the biggest jump ever in the number of billionaires in the world. If the assets of all 2755 billionaires are considered, then they are 13100 billion dollars in 2021, which was only 8000 billion dollars in 2020 (with 2092 billionaires), that is, an increase of 5000 billion US dollars ( 5 trillion US dollars) in a single year (of pandemic).
Another important fact which is attracting attention is that due to the increasing demand and high prices for medicines and vaccines during pandemic, many people have now joined the ‘billionaires club’ and already rich companies have become even more richer. A coalition of organizations called the ‘People’s Vaccine Alliance’ says that nine new billionaires have emerged purely due to that reason, during the pandemic; and their net worth is estimated have increased by $ 19.3 billion. During this period, the net worth of all pharma companies has increased by $32.2 billion. That is, it can be said that while the common people are losing jobs during the Corona period, absolute poverty has been increasing, the increasing wealth of the rich is naturally going to worsen inequalities in India and the world.
In the past, due to the hard work of the people of all developing countries, new technology and social welfare policies of the governments, the Human Development Index had continuously been improving. Per capita income, education facilities and health facilities, all had been witnessing unprecedented progress. But in the Corona era, that process has come to a halt. According to a recent report by the United Nations Development Program (UNDP), for the first time since the 1990s when the concept of the Human Development Index was first conceived, most countries are expected to see a decline in the Human Development Index in 2020. Global per capita income is expected to decline by 4 percent; andas the World Bank has said, an additional 40 to 60 million people will be pushed into extreme poverty. African countries and Asian countries will be the worst affected. The International Labour Organization (ILO) says that more than half of working people could lose jobs and the global economy is expected to lose $1 trillion. The World Food Program says that if no steps are taken, 26.5 million additional people may become victims of hunger. The organization believes that 40 million people can slip into poverty in India alone because most of the people in India are employed in the unorganized sector.
It’s understood that the incidence of poverty is increasing due to depleted employment opportunities, declining income and burden of disease. In such a situation, due to the efforts of the Government of India to create jobs in the rural areas, free ration to 80 crore people during the first wave and repetition of the same during the second wave, the impact of Corona on poverty could be abridged to some extent in our country, but this cannot be an alternative to creation of employment opportunities through normal economic activities.
What is the solution?
To deal with this severe poverty, unemployment, inequalities, health crisis etc., arising out of Corona, some special efforts will have to be made. In the coming times, we cannot continue our dependence on imports, and huge trade and payment deficit; and financing the same by foreign exchange coming from FDI and FPI,as we did in the past. The first condition for poverty alleviation is employment generation and the condition for employment generation is production by labour intensive technology. If along with GDP growth, employment is also increased proportionately, the income of the masses will increase and inequalities will automatically start coming down. It has to be understood that the welfare of the common man can be ensured through economic development along with employment generation, decentralised production system, upliftment of rural economy, based on the principles of Swadeshi and self-reliance, that is, Atmanirbhar Baharat. This is the only effective way to deal with growing inequalities and making lives of people better by lifting their living standards.
(Dr Ashwani Mahajan is a Professor at PGDAV College, University of Delhi and National Co-Convenor of SJM)