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Oct 9, 2018

Is India committed to reducing inequality? This report finds out more

Oxfam India

inequality in india

Earlier this year Oxfam India published its report Widening Gaps: India Inequality Report 2018 on the real and rising inequality in the country. The report revealed some shocking statistics about the gap between the rich and poor, but more importantly, it debunked the myth that India is a low-inequality country. The report suggested reducing the widening economic gaps through progressive direct taxation by introduction of wealth and inheritance tax and increasing public spending on health and education. 

With the Commitment to Reduce Inequality index, released by Oxfam and Development Finance International, the inequality conundrum becomes even pertinent with India being ranked 147th of the 157 countries. It has been placed 151st on the index for public spending for healthcare, education and social protection, 141st for labour rights and wages, and 50th on taxation policies.

This map shows what countries around the world are doing to fight inequality. 

 

What is the Commitment to Reduce Inequality Index?

The index is a global ranking of governments based on what they are doing to tackle the gap between rich and poor released by Oxfam and Development Finance International. It focuses on 3 key policy areas- social spending, tax and labour rights- because there is widespread evidence that strong progressive action by governments in these areas can significantly reduce inequality and which are relevant for all countries regardless of their income level. These are also areas where comparable and reliable data is available for the majority of countries.  

  1. Evidence from over 150 countries spanning more than 30 years shows that investing in healthcare, education and social protection significantly reduces inequality.  For example, if a government invests in free quality public services poor people don’t have to use their meagre earnings to pay for them- this can significantly boost their available income by as much as (if not more than) their regular earning. Social spending can also reduce unpaid care work carried out by women- by redistributing child and elder care, healthcare and other domestic labour. Social spending has been shown to reduce inequality by 20 percent across OECD countries.
  2. Taxing the wealthiest in society more than the poorest directly reduces income inequality. If these taxes are invested in public services, they can further reduce inequality. Tax systems can also be used to discourage practices that exacerbate inequality and encourage practices that reduce it e.g. tax breaks for businesses that share more of their profits with their employees.
  3. There is significant evidence that higher wages and stronger labour rights - especially for women workers who tend to work in the lowest paid and most insecure jobs - are key to reducing inequality. For example, if the Indian government ensured women were paid the same amount as men for the same job, women’s incomes would be boosted by almost a third. 

 

 

 

According to calculations by Oxfam, if inequality is reduced by a third* in India, more than 170 million people would be lifted from poverty. Government spending on health, education and social protection is low and more often than not, subsidizes the private sector. The tax structure of India Commitment to Reducing Inequality Index 2018 reasonably progressive on paper, but in practice much of the progressive taxation, like that on the incomes of the richest, is not collected. **On labour rights and respect for women in the workplace India also fares poorly, reflecting the fact that the majority of the labour force is employed in the agricultural and informal sectors, which lack union organization and enforcement of gender rights.
(source: *A. Arendar and E. Seery (2014). Even it Up: Time to end extreme inequality. p.36. Oxfam. http://oxf.am/Ffd.**S.Kumar (2015). Private Sector in Healthcare Delivery Market in India. Institute for Studies in Industrial Development Working Paper 185.)

 

India ranks second in South Asia on progressive taxation. CRI defines progressive taxation as "where corporations and the richest individuals are taxed more in order to redistribute resources in society and ensure the funding of public services, is a key tool for governments that are committed to reducing inequality."

taxation in india

Sadly, the country scores low when it comes to labor policies and social spending. The CRI suggest that "governments can have a direct impact here by setting minimum wages and raising the floor of wages; they can also have an indirect impact by supporting and protecting the right of trade unions to form and organize." Evidence from the International Monetary Fund and others shows that the recent decline in trade union organization has been linked to the rise in inequality, as workers lose bargaining power and more of the value of production goes to profits and the owners of capital. On public spending China spends more than twice as much of its budget on health than India, and almost four times as much on welfare spending, showing a much greater commitment to tackle the gap between rich and poor.

labour law in india

 

budget on education and health in india

 

Inequality slows economic growth, undermines the fight against poverty and increases social tensions. The World Bank predicts that unless governments tackle inequality then the goal of eradicating extreme poverty by 2030 will not be met and almost half a billion people will still be living in extreme poverty. It has been three years since 193 world leaders made a promise to reduce inequality. But are they walking the talk? It is time to ask-Are governments fuelling or fighting inequality?

 

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