The government is making several efforts to reduce “bad inequalities”, such as unequal access to education and health, in an attempt to enhance the country’s growth potential, an essay by the Office of Chief Economic Adviser (CEA) said.
“While inequality is a relative and vexed issue, absolute poverty is a more direct and pressing one. For a developing country like India, where the growth potential is high, and the scope for poverty reduction is also significant, being the fastest-growing major economy is an achievement as much as the need of the hour,” the essay titled, ‘Perspectives on the Inequality Debate in India’ said.
The year 1991-92 marked a structural break when the rate of poverty reduction was accelerated, and despite rising inequality, the responsiveness of poverty to growth increased, that is, faster growth has also been more pro-poor, the essay said.
Between the years 2015-16 and 2019-21, about 135 million Indians moved out of “multidimensional” poverty. The NITI Aayog’s National Multidimensional Poverty Index (MPI) Report, 2022, showed that the national MPI nearly halved from 0.117 in 2015-16 to 0.066 in 2019-21, primarily due to the government’s strategic focus on achieving universal access to basic amenities.
“That said, bad inequalities, such as unequal access to education and health, directly reduce the potential for growth, besides being unfair to the individual. These form one of the most entrenched problems of development whose mitigation lies in a strategic long-term effort,” the essay said.
The essay cited a study, saying that personal income tax (PIT) revenues constitute a mere 2.5% of GDP. And over 40% of the tax assesses pay zero taxes, and positive income taxpayers (those who pay taxes) account for less than 6% of the adult population. “By concentrating income tax collections from amongst a small minority, this very feature contributes to a high level of progressivity of income taxes,” the essay said.
