Inequality could threaten social stability and slow growth down

We mustn't ignore the risks that widening horizontal gaps pose to India's democracy and economy

- HIMANSHU

The government may be echoing the World Bank's recent 'finding' that India is the fourth most equal country in the world, but this isn't true.

In reality, India is a high inequality country and any complacency based on artificially adjusted estimates as a result of statistical jugglery should be avoided. More than estimates of inequality, what matters is its nature and impact on growth, mobility and democracy.

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.