Economic Dynamics and Inequality

  • After the liberalization of 1991 in India, there has been a rapid increase in economic inequality. Increasing economic inequality questions the non-inclusive nature of economic mobility.
  • As per the annual report on Oxfam’s wealth 2019, the top 1 percent of people in India have become 39 percent richer while the wealth of half the population at the bottom of the country has increased by only 3 percent in the same period.
  • According to the Global Wealth Report (GWR) 2018, the top 10 percent of India’s rich people hold 77.4 percent of the country’s wealth. One percent of the wealthiest people own 51.5 percent of the country’s wealth. On the other hand, 60 per cent of the people at the bottom of the country own only 4.7 per cent.
  • According to the GWR report 2017, between 2002 and 2012, the wealth of 50 per cent of the people at the bottom of the country decreased from 8.1 per cent to just 4.2 per cent. In the same period, the wealth of one percent of the richest people in the country increased from 15.7 percent to 25.7 percent. According to GWR data, only the top one percent of people in Indonesia and America have more wealth than India.

What is economic mobility?

Economic Dynamics
Economic

  • Economic dynamics reflect the change in economic condition of people over a given period of time. Economic dynamics are expressed as improvements in the income and social status of an individual or family over a lifetime or between generations.
  • This mobility can occur between generations or in the inter-generational or individual’s lifetime. Mobility can also be absolute or relative.
  • A study conducted by economists from the World Bank, Dartmouth University and the MIT Institute has revealed that the intergenerational mobility of the people of India has remained stagnant since liberalization in 1991.

Effect of economic mobility on inequality

  • Economic inequality arising due to economic inequality negatively affects people’s welfare in the long run.
  • Economic mobility has the potential to mitigate the negative effects of inequality.
  • If other factors are assumed to be neutral, then an economy with greater economic mobility produces more income and consumption parity in relation to an economy with less mobility.

Hindering economic mobility in India

  • Poverty: Studies have revealed the fact that a large number of poor population in India is a major reason for the low rate of mobility in India.
  • Inequality in property and income: Increasing inequality between different income levels has slowed the pace of economic mobility in India.
  • Rural population: About 70 percent of India’s population lives in rural areas with extremely limited economic opportunities. This situation reduces the opportunity for economic mobility for a large population.
  • Low level of education: Education is considered to be the best medium of upward mobility for a community or individual. High level of illiteracy and low level of quality education is the biggest obstacle to upward mobility in India.
  • Social tax-caste and religion: Access to opportunity is limited for backward castes (SC / ST / OBC) in India, this also reduces the economic mobility of these castes. Similarly, due to lack of oppression and limited opportunities for minority communities (especially Muslims), the least economic mobility is seen.

The conclusion

In India, such families which are economically at the bottom of the society, get entangled in the vicious cycle of poverty due to increasing economic inequality and stable economic mobility. In this perspective, inequality in India causes the emergence of serious consequences. The study of economic mobility in the context of India has challenged the traditional view that according to which the condition of marginalized people in India is improving, it has also questioned the efficacy of those programs and schemes in India. Which are being implemented to improve the economic condition of the marginalized people. Instead of various temporary measures, the government should try to permanently improve the economic condition of poor families. For this, the government can adopt measures like capacity building and asset redistribution. The difference between caste, religion, gender and rural-urban can be reduced by emphasizing inclusive development in India. This will help in achieving faster economic mobility in India thereby reducing income disparities.

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