There are two kinds of poverty measurements: relative & absolute. Absolute poverty is the measurement of the percentage of people below the set poverty line in a given society. In the midst of intense political attention & debate on absolute poverty in the wake of the recent NSSO survey, the recently published statistics on relative poverty is on the backburner. Measurement of relative poverty brings economic inequality to surface. And according to a recent NSSO survey, economic inequality has been on a constant rise over the last 15 years or so. In between 1999-2000 and 2011-12, for the 5% of the most affluent rural population, consumption expenditure has increased more than 60%; on the other hand, over the same period, for the 5% of the poorest rural population, this rate of increase is 33%. For the 5% urban & rural population of the same categories, the rates of increase are respectively 63% and 30%.
If one analyzes these data from a different perspective, one finds, in the year 2000, the richest urban socio-economic unit would spend 12 times more than the poorest urban socio-economic unit. In 2012, the former spends 15 times more than the latter. In the rural areas, this gap has grown to 9% from the previous 7%. There are two conclusions to be drawn from this body of statistics.
First, inequality, across urban and rural regions, in terms of lifestyle, has increased. Second, advantages of economic reforms or liberalization and national income growth have not trickled down to the lower economic sections of the nation. Past experiences of economic surveys show that the inequality in terms of expenditure has generally been lower than the inequality in terms of income. So the overall picture appears to be bleaker.
The result of the survey is ominous. There are worries on two fronts: political and economic. This kind of an economic inequality is dangerous for political stability. Maoist insurgency has been gaining a rapid momentum once again. Political unrest in both Kashmir and the north-eastern states is not on the wane either. Social and economic inequality of such a degree will strengthen extremists’ hands in near future. Our study of politically volatile and vulnerable nations proves that social and economic inequalities widen political instability.
Economists like Raghuram Rajan have shown how economic inequality led to the economic downturn in the USA in 2008. Indian middle classes have been benefitted from the IT boom and economic liberalization in late 1980s to early 2000s. But the poorer and especially rural population has not come to terms with the changed economic infrastructure. Spread of education is not yet a pan-Indian phenomenon. Amartya Sen and Jean Drez, in their recently published book have reminded of such a possibility. If our policymakers don’t pay attention to this ever-widening gap between economic conditions and remain obsessed with GDP growth, Indian economy will keep suffering in the long run.
- POVERTY is increasing and so harmful (donnayford.wordpress.com)
- Wealth Inequality in the US (kummernuss.com)
- A look at economic inequality, through a Latino lens (nbclatino.com)
- Relative Poverty (economistsview.typepad.com)