Wealth Disparities in India: Delving into the Roots and Ripple Effects of Income Inequality

Wealth disparity in India has a long history that continues to have ripple effects on the economy today. BA Hons Economics students aiming to influence public policy to address deep-rooted issues like income inequality must contextualise it to understand its origins and potential solutions.

According to a 2023 report by Oxfam, 77% of all Indian wealth is owned by the richest 10% of the population. The wealthiest 1% of Indians received 73% of the country's wealth in 2017, while the poorest half of the population - 670 million Indians, saw their wealth rise by only 1%. 

Role of Indian Universities in Educating the Economists of Tomorrow

These staggering statistics suggest the need for a massive overhaul of the Indian economy to cope with the rising tide of income inequality. Accordingly, the top universities of India have to design curriculums that train students to comprehend the complex long-term factors that contribute to income inequality so that they can propose practical strategies for alleviating poverty and narrowing the income inequality gap as future economists.

As one of the top universities of Rajasthan, Manipal University, Jaipur teaches BA Hons Economics students a comprehensive history of economic thought and provides an in-depth look at India's economy and the colonial context that has shaped it.

The best Liberal Arts colleges for Economics are shaping the future of economists and policy-makers of tomorrow and, hence, are responsible for developing holistic curriculums that aid them in bringing about positive change in the economy.

This blog will delve into India's wealth disparity, tracing its origins and effects. Understanding and resolving deeply entrenched issues like income inequality requires an in-depth study of its roots and progression over time.

Roots of Income Inequality in India

Colonialism had a profound impact on India's economy, impoverishing many while enriching a select few- setting the stage for long-term income inequality. Research by leading economists Abhijit Banerjee and Lakshmi Iyer shows that the historical property rights during the colonial period led to sustained differences in economic outcomes and income inequality.

The exploitative economic policies — like the land tenure systems and exorbitant taxation of Indian farmers — of the colonial government perpetuated wealth disparities that are still largely in place today.

The Indian economy is still facing challenges due to colonialism, and economists who take into account the colonial legacy can better target problem areas and find long-term solutions.

The predominance of the unorganised sector in India also substantially contributes to income inequality, as workers are often exploited and underpaid due to the lack of oversight in this sector. The sector also lacks job security, making its labour force increasingly insecure. The top universities of India teach BA Hons Economics students about the dynamics of the organised and unorganised sector and its labour markets.

Ripple Effects of Income Inequality

Income inequality profoundly impacts the social and economic spheres of the state. Rising income inequality can lead to social discontent, economic instability, and a vicious cycle of poverty due to insufficient access to healthcare and education.

Educational Divide

India has made some progress in educating the masses but still falls woefully behind according to international standards. India's literacy rate stands at 84.4% for men and 71.5% for women, according to the National Family Health Survey 2019-21.

However, the numbers fall sharply when we look at the percentage of men and women who have attained ten or more years of schooling. It stands at 56.3 % of women in urban areas and 33.7% for women in rural areas. The number of men with ten or more years of schooling is slightly higher, 62.1% for men in urban areas and 43.7% for men in rural areas.

These statistics indicate that the educational divide becomes more pronounced in rural areas and is strongly influenced by gender. The need for policies to target rural populations and women in education is unmistakable.

However, understanding the socio-cultural reasons that give rise to this education divide is just as important. BA Hons Economics students aspiring to become policy advisors must be familiar with sociology, psychology, and political science to have a holistic understanding of the challenges ahead.

This is why the best Liberal Arts colleges for Economics include electives spanning all these disciplines and relevant courses that can aid BA Hons Economics students gain a comprehensive understanding of the socio-economic issues plaguing contemporary India.

Economic Instability

High levels of wealth disparity can undermine economic stability by stifling consumption and investment. Many of the country's population struggling to afford necessities can lower aggregate demand, leading to reduced economic growth. Moreover, unequal distribution of wealth limits opportunities for entrepreneurship and innovation, hampering overall productivity and competitiveness.

Research by the Observer Research Foundation shows that increasing wealth inequality can actually obstruct economic growth. The Indian economy's growth relies on rising consumption, and while the top 1% prefer asset creation and saving, the lower classes have a higher propensity to consume.

Hence, the organisation suggests Keynesian policies to boost consumption and narrow income inequality to promote economic growth.

The best Liberal Arts colleges for Economics, like Manipal University Jaipur, include all the significant theoretical contributions in the field of Economics, including Keynesian economics, so that its students have a thorough understanding of the theoretical underpinnings of the field, without which serious policy suggestions cannot be made.

Conclusion

Wealth disparity and income inequality have deep roots in the Indian economy, and understanding these roots is essential for tackling such entrenched issues. A BA Hons Economics degree from the best Liberal Arts colleges for Economics can train you to delve deep into this complex but crucial issue that needs the expertise of future economists being nurtured by the top universities of India.

Income inequality is perhaps one of the core issues that the nation needs to address to progress on essential fronts like education, health, employment, and economic growth. Its effects are far-reaching and potentially dire, necessitating closer attention from all of us aspiring to contribute to our country's continued growth.