September 11, 2022

Dimensions of Inequality in India: Rising Exploitation and Exclusion

Sanjay Roy

THE neoliberal regime has forced upon rising inequality across the world. Despite the fact that such high levels of inequality creates instability to the current state of capitalism, the irony seems to be the fact that the system thrives on the rising gap between the rich and the poor.

The share of profit in national income has increased across the world together with a drastic fall in the share of wage income. In advanced economies such change has been triggered by increasing use of labour displacing technology and also because of declining employment due to relocation of production towards the global South. The World Inequality Report although suggests that inequality in income between countries has declined while within-country inequality has increased over the years but if we keep aside China the income gap between the advanced and developing economies remains more or less unchanged. In spite of the fact that there has been a relocation of productive activities towards the South, such a shift has not augmented employment in the developing economies either. The reason being the relocated activities are relatively capital intensive according to developing countries standards and didn’t create much employment as might have been expected.

Secondly, in order to compete in the global market, producers of the South also are inclined to adhere to technologies close to the global frontier that are mostly labour displacing, so as to meet the cost and quality requirements. More importantly the rising inequality reduces the growth of purchasing power of the masses but on the other hand enhances the appetite for financial assets among the rich. And for the current state of capitalism, if growth primarily depends on speculative financial gains accrued by the corporates and the surplus squeezed out of workers from across the world, then inequality is something that needs to be politically managed rather than being done away with.


The recently released, State of Inequality in India report put forth some interesting facts as well as some alarming trends on rising inequality in terms of income, wealth, access to health and education. The report particularly focuses on the recent years covered by the Periodic Labour Force Survey including the abnormal years of the pandemic. Lucas Chancel and Thomas Piketty studied inequality in India covering the time span 1922 to 2015 using specialised survey and income tax data and arrived at the conclusion that inequality in 2015 was higher compared to the pre-Independence period showing 0.1 per cent of the top accounting for 5-7 per cent of national income. The World Inequality Report released last year authored by AbhijitVinayak Banerjee and Esther Duflo also commented that India stands out as a poor and very unequal country with affluent elite. It reported that while the top 10 per cent and top 1 per cent hold respectively 57 per cent and 22 per cent of total national income, the bottom 50 per cent’s share has been only 13 per cent. On account of wealth the inequality has been even higher. Bottom 50 per cent of the population only accounts for 6 per cent of the total wealth and the top 10 per cent and 1 per cent account for respectively 65 per cent and 33 per cent of total wealth in India.

Using PLFS data, the State of Inequality in India report suggests that among the wage and salary earners the minimum salary of top 10 per cent is only 25000 rupees per month and nearly 15 per cent of the workforce earn less than 5000 rupees per month in India. Within the ‘less than 5000 monthly income bracket’, 77 per cent are self-employed. This highlights the low income of wage and salary earners and the very low earnings of most of the self-employed working population. The top 1 per cent of wage and salary earners account for roughly 6-7 per cent of the total wage and salary income and they earn roughly three times the income of the bottom 10 per cent of employees. It has widely been discussed and perceived by many that inequality has increased during the pandemic. The report substantiates the fact by looking into the growth rate of income of various income slabs. During the period 2017-2020 the growth of income of the bottom 50 per cent taken together was 3.9 per cent while income grew at the rate of 8.1 per cent for the top 10 per cent and by 15 per cent for the top 1 per cent. In the case of the bottom 10 per cent, income fell by 7 per cent in 2018-19 and the broad group of bottom 50 per cent suffered an income of loss of 2 per cent. This underlines the fact that the burden of the pandemic has been unequally borne by the poor who lost their purchasing power while the top income earners could increase their income much faster compared to others.


Besides inequality in income it is also important to see how inequality increased in terms of access to health and education. AmartyaSen’s capability approach was a critique of the liberal notion of conventional wellbeing, which revolves on the idea of revealed preferences of individuals and assigns utmost importance to the growth of per capita income. Sen’s idea of wellbeing, on the contrary, relies on notions of capabilities, entitlements and freedom as it has been shown that well-being differs widely among countries and individuals despite the average per capita remaining the same. Hence instead of ensuring an income as an indirect means to achieve capabilities, it is important to ensure direct provisioning of nutrition, health and education facilities as well as access to information and knowledge. The state of inequality report suggests that even out of pocket expenditure on health in monthly per capita income has declined but such expenses still account to 13 per cent on an average. According to the Global Health Index, India ranks 101 out of 116 countries. The average cost of rural hospitalisation in private hospitals is more than six times to that of government hospitals and in urban areas private hospitals are more than nine times costlier than government hospitals and as health service is increasingly being privatised and moved towards insurance based schemes a large number of poor people are increasingly excluded from health service. In the case of education, the drop- out rate has undoubtedly declined over the years, although it continues to be high for students belonging to scheduled caste and scheduled tribes, but the digital divide is going to impact the poor and underprivileged students adversely in the coming future.

Only 38.5 per cent of schools in India have functioning computers and 22.18 per cent of the schools have access to the internet. For households, internet access has increased over the years but only 34.4 per cent of rural households and 55.12 per cent of urban households have access to the internet. This essentially implies that more than half of Indians are being left out in accessing information and knowledge through the internet.

Finally, the report also underlines the fact that even if the labour force participation rate has increased as the economy gradually recovered from the pandemic, still the labour force participation rate in 2019-20 was 53.5 per cent indicating that roughly half of the population within the working age is out of the labour force. This is significant and reflects the intensity of discouraged workforce who have lost expectation from the job market. It is also important to note that the concentration of unemployment has been lowest, 0.6 per cent among the non-literate population while it is highest at 19 to 20 per cent for people having diploma/certificate or graduate or postgraduate degrees. The recent CMIE report not only substantiates this trend showing that the proportion of graduates within the workforce shows a declining trend but points out another disconcerting fact of India’s employment trends. The proportion of younger people within the workforce shows a decline and the share of those belonging to the forties and fifties, their proportion has increased in the recent past. This essentially means that when the economy is supposed to educate and employ the bulging youth population and make full use of the demographic dividend, it is moving towards a reverse direction when less educated and relatively older people are being absorbed in greater proportion compared to the younger workforce.