It is Time to Tackle Inequality by Shifting the Economic Paradigm

Context: In the context of COVID-19 led to economic disruption, the government’s top priority should be to invest in public health infrastructure, which should include not just physical infrastructure, but also human capital.

Structural issues of Indian economy worsening inequality: reinforced by COVID-19 pandemic

• Neglect of important sectors like health and education:
  • For example, The shift to online teaching has reinforced inequalities in the quality and access to education and exacerbated others.
• Informal sector: The least protected, faced a severe loss of income and jobs.
• Impact of economic reforms: have led to a secular rise in inequality across all categories, including based on region, gender, caste and religion.
• Dilemma of generating jobs vs increasing wages: The challenge of creating adequate and decent new jobs contributed to a decline in wages and incomes, which has adversely affected poverty reduction.
• Worsening of nutritional outcomes: The National Family Health Survey points to a worsening of nutritional outcomes and a decline in food intake.
• Distress in the rural economy: particularly the agricultural sector; contributed by flawed policy regime for agriculture and compounded by occasional shocks such as demonetization and global price factors.

Way forward:

• Investing in people:
  • More investment in human capital through education, health and nutrition.
  • Increase the purchasing power of those at the bottom of the income/wealth pyramid.
  • Moving away from pro-capital policy stance to a pro-people regime: by re-orienting expenditure towards rural areas, creating non-farm jobs, and social protection for the vulnerable.
  • Advantages:
    • Will create demand for locally-produced goods, thus helping the Atmanirbhar Bharat mission and revival of the economy.
    • Will reduce inequality on various dimensions.