Economic reforms have accelerated inequality in India

    There have been endless debates on whether economic reforms have benefited everyone, especially those at the bottom of the society. The International Monetary Fund (IMF) says economic growth in India has only fueled inequality.

    According to the IMF, India’s net Gini coefficient increased from 45 in 1990 to 51 by 2013. It was in 1991 when India implemented substantial economic reforms. Gini coefficient is a measure of inequality. If it is zero, it means everyone earns the same and if 100, it would mean one individual earns all the income. The higher the Gini coefficient, the higher the inequality.

    India is not alone in this, as we can see from the table below. Inequality has increased in China too.

     

    Country Net Gini Coefficient
    1990 2013
    India 45 51
    China 33 53
    Korea 32 31
    Japan 27 31

     

    The rising equality is a recent phenomenon in some Asian economies such as China, Hong Kong, Korea and Singapore. These have been termed as ‘miracle economies’ because their rapid economic growth in the last few years has reduced inequality in terms of wealth and income distribution. 

    IMF had sourced the numbers from a wonderful research done by Frederick Solt, who created the “The Standardized World Income Inequality Database”.

    The image shows how the net Gini coefficient has moved for BRIC countries from 1960.

    Income-inequality

     

    Economic growth is needed. But, policy makers must focus on economic reforms that benefit all, if not most. What is required, along with economic growth, is equal access to education, healthcare and financial services for all.

     

     

     

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