Wealth inequality lessons for post-Covid times

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Growth and inequality often come hand in hand. Despite its high growth rate, India is one of those countries with widening financial inequality. A recent Credit Suisse Research Institute report has stated that the pandemic has widened inequalities in the country. The wealth share of the top 1% jumped from 33.5% in 2000 to 39.5% in 2019 and rose further to 40.5% by the end-2020.

The Gini coefficient – which measures wealth divide with 0 as perfectly equal and 1 as perfectly inequal – stood at 82.3 in India in end-2020 from 74.7 in 2000 and 82 in 2019.

The report also states that the wealth share of the top 1% jumped in India from 33.5% in 2000 to 39.5% in 2019 and rose further to 40.5% by the end-2020.

The top 10% holding 77% of the wealth in a country with 135 crores plus population – according to Oxfam report – cannot be a matter of satisfaction for any policymaker.

The pandemic has pushed more than 4 crore Indians into extreme poverty according to an IMF report in October 2020 when the second wave was not in sight.

That places the onus of incentivising job creation in the unorganised sector on the policymakers. They have to usher in a climate fertile for tiny and small businesses. But in a country like India, the informal sector would always create more employment than the organised sector and if there is no boost for this sector employment generation will not take place at the desired level. The MUDRA loans constitute a step that can help a common man to create employment not only for himself but also for a few others. Many such initiatives are needed to boost the unorganised sector.

The pandemic has clearly outlined the vulnerabilities of the unorganised sector. Helping the vulnerable with free foodgrains and cash assistance is essentially an emergency response in a desperate situation.