INEQUALITIES IN INCOME DISTRIBUTION 11.1 Meaning of Inequalities in Income Distribution 11.2 Nature and Magnitude of Inequalities of Income in India 11.3 Causes of Inequalities of Income 11.4 Consequences of Inequalities of Income 11.4.1 Positive Effects 11.4.2. Adverse Effects 11.5 Measures Undertaken by the Government to Reduce Inequalities of Income +» Summary + Review Questions 11.1 MEANING OF INEQUALITIES IN INCOME DISTRIBUTION An important characteristic feature of Indian economy is the existence of gross inequalities in the distribution of income and wealth. Inequalities in distribution of income refers to a situation where a small privileged group is able to corner a very large chunk of total income and a very large group is able to get a very small proportion of income. In other words, a small minority of the population is able to take away a major portion ofnnational income, while the majority of population is able to earn only asmall fraction of national income. That is, some people are too rich | majority of people are poor. : s 1.2 NATURE AND MAGNITUDE OF INEQUA! INCOME IN INDIA There are four forms of inequalities in incom i The magnitude of overall inequalities int> - TICS, and Urban to the RBI estimates for the lities of Wealth in the Rural Sectors 1 Ineque 4. year 1981, while tt bout 5 per cent ofall t owned nearly 80 per cent ofall Property. As py or cent perc he year 1986, 45 per cent of the households belo; — a ch owning less than 10,000 cash) owned owners sail assets. At the other end of the distribution, 10 Per cent of the \ oS to higher assets group (each Owning assets of more pi | lakh) owned 56 per cent of the value of total assets es timated Lorenz ratio for the year 2011-12, For rural India, the (b) N ea for the total consumption supeediare ies 0.30 while for urban ol it was 0.37 indicating rh Se eed in when areas. c) According to Economic Survey ae, income inequality measured 4 of the Gini Coefficient in rural areas is Kerala, Maharashtra, Pui in rural areas of Bihar highest in Madh he bottom 39 1e rural families owned at per : Property; the top 30 F er the RBI estimates Nging to lower asset only 4 percent of the i 11-2012) of National Sample _ me RR. i ’) based] is \ (d) Based on 68% acre snd recy for rural and urban India. It reflects rura' and & 2629.65 res; fe urban income disparities. i States 5. Income Inequalities among Different Ar ashes i tates a i iti ong different s fore Income — different states. As as ere oe % 25,716 (at current prices) Per capita in A nce in average of per capitaich above the national average. It 4 mu income in many ee 4 €32,170 in Maharashtra. On ] i, ©30,700% uch lower th ‘ in Delhi, 30 A 3 was m| er tl | inc in some an per capita oa the lowest per capita income? average. BINA tates of the country like Delhi, Goa, ‘ s relatively Very high— higher tt ; ashtra, Gujarat, etc. was Z ae ke Assam, Madhya Pradesh, Orissa, Raj avers vstates with low Per capita income. Thus, wide incom etc. wert states W sat different states are observed. S$ OF INEQUALITIES OF INCOME inequalities are : Various causes responsible for income 11.3 CA inheritance ‘ the successors under the law of inheri | ration to another. 1. Succession and I The transfer of assets to inequalities of income from one gene! 2. Ownership of Assets n ownership of assets such as land in rural Difference i financial asse 3. Difference in Innate Capabilities in urban areas result in income i people are more intelligent than others. like acting, dancing, painting and writing. N than ordinary workers. : Inequalities of income arise from di opportunities. People who are born int and t ining. They earn higher incot families are generally either illiteratelee a eee es in Income Distribution alii ned | i i. ‘The process of economic development is spulation from the less productive aor: po ated with shy Ms griculty Shift of won, podem industrial sector. This leads to nore °F tO the Working me 4 penefits of economic development in meen ae © agricul ities, of Green Revolution improved techniques oF Itura| Sec ‘Or, in the f of the revolution have gone only to ri pened x inequalities in the rural areas, i fi} ich farmers, This has led to a ncrease in Unemployment 4, In a mic development has increased thee E ee in employment opportunities has | foce resulting from population increase, The number of P=opleunent ‘a underemployed has risen significantly, Increase in the Number of oe ployed persons has raised the number of low-income eamers. On th a ; a people at the upper end of the scale % other ha continue to am higher incomes. oie resulted in increase in income inequalities, his ha ployment opportuni iti 5, s88ed behind he gone but this incr g. Unequal Regional Growth The rate of growth of different regions has been unequal, Some sates achieved ahigh rate of growth while many others, experienced a very low growth rate, Forexample, most of the North-East States like A Megha vA ; Pradesh experienced low rate of growth, v i Gujarat and Maharashtra’ showed trer many states continue to be poor disparities among different 9, Inflationary Rise in As prices continue to they sell their output at workers get fixed iiIGVY tipties Oe i —" S in turn, raises catingas product in nthe economy. 11.4.2 Adverse Effects Some harmful effects of inequalities of income are 1. Wide Differences in the Standard of Living Income inequalities divides the society into two cla nots’. While a few rich people have all the luxuric poor persons are deprived of even the basic nee 2. Misallocation of Resources Resources are allocated in the prod there is demand by the cons resources are allocated in the prod— pn ces because More resources ap, i e diy, ources are available for the Bi toth — ‘tothe : ly seer ‘sono hy, mn ig of Efficiency eee oss er of poor people are not abl e . number Oe i ee parBe "AACE: This leads _ their Poor health and j ce basic y inet Th persons spend their time in Clubs, Patties ang cietey ane es s > and it re uct ive power. Thus, at both ends, Production ne This os @ in Social Welfare cea ss ‘ i ’ al utility derived from a unit of income by ari o derived by a poor person, Tnequali ¢ ha i isi g income of the rich people and Talsing income a att ne amount of enjoyment by the Poor Tesulting from fee ian more than the loss of satisfaction suffered by the ine id bet +. ee tas Hel dl ne. Thus, equality in income distribution Taises Welfare of the eae : In ee ‘archer ieee ‘ a oe words, large income inequalities reduces welfare Of the society, 0 Marg) thant reduclt Then th ch perso, s : a ities of income Ss uc! woul p Concentration of Economic Power 5 alities of income breed concentration of. economic power, ae Inequi entrated in the hands of few rich people, Large business oe is ae give liberal donations to political parties, They can buy haa afford Me the government, etc. In India, large business houses diese ie are dictating terms of Indian polities. Rich pers are abet Sasi economic power for their political gains c i eel i e11.8 Effective Implementation of Land Reforms The government introduced various land reform measures after ip d Through land reform measures, like abolition of the Zamindarj System on ownership of land and tenancy reforms, the government has C bring about equal distribution of land holdings in the agriculture country. Surplus land in excess of ceiling, has been distributeq to marginal farmers and landless labourers. Tenancy legislation land to the cultivator to some extent. Still more sincere and de are required to effectively implement land reforms. It wil] inequalities by a great extent in the agriculture sector, 2. Progressive Taxation Progressive taxation is an effective way to reduce i progressive taxation, people with higher income of taxes, whereas those with lesser income bea’ 3. Expansion of Public Sector Growth of public sector is necessary to Expansion of public sector has been enco Year Plan, to stimulate economic develop of economic power and wealth. It was e: promote an equitable distribution of in 4. Policy of Controlling Concent The major form of wealth in the urb wealth. The government has taken ty concentration of industrial and comm are: (a) The Governmentof! Practices (MRTP) control the con business houses (b) Introduction of injuatities 10 HHCOME Distribution we ‘ . fortili A ig jrorvioes, oUCh ag $OrS, itrigation, iil 1 Water, ou “ ef “etricity, housing, credit, ¢, Social Security Schemes v6 ont has undertak ‘i rhe government eM Various see) : jndustrinl workers and salaried class, Some ee Measures to assist monsuren mre : employees provident Scheme, em, ian Portant social security family pension scheme, maternity benefit chit ee insurance scheme, 7, Special Schemes for Backward CL fed A, —e reas The government has adopted various schemes kwar and development of backward areas (such ag nite the bac o se schemes are in the field of medical care mMaterni 4 iat valli ak fimily planning, mid-day meals for school children Abeta : “ ; i ind thereby reduce income inequalities, 4, Setting up of Small-scale and Village Industries The government has Promoted th industrie: ned at providing emp raising their income, Small-scale j they provide source of livelihood to poor people. vital role in reducing inequalities of income and 9. Generation of Employment © The creation of adequate em, people, is important in reducis undertaken several special as part of anti-poverty mi Rural Development Progs Programme, Jawahar R unacceptable and p the poor. Thus, effo: But since total eli government pol interest of the