‘a more liberal foreign investment policys ae : corporations and international generics companies Hav also been attracted to restructure their operations an ~ increase thet stakes in existing ventures in India and Sei up new dentures. The auto-components industry has also significantly improved its export orientation, having 1. “Trebled its exports berween 2001-2 and 2004-5 and increased its export share in output from 13 per cent to 16 per cent over the same period. “The post-reform era has also spurred the development of the biotechnology industry which is driven by new enterprise and new innovation. Skilled human resources, active government support, and increased investment— public 2s well as private—promises sustained growth of this industry with global orientation. India is emerging, a5 the most favoured destination for collaborative R&D, bioinformatics, contract research and manufacturing, and clinical research as a result of growing compliance with internationally harmonized standards. Several states have taken steps to develop bio-clusters based on academic and entrepreneurial strengths: ‘Export performance of manufactured goods provides. * some indication of how Indian industry has fared in’ attaining global competitiveness. While data on India’s Penetration in world markets are not readily available, the trend growth of India’s exports shows Indian industry on the move. Between 1991-2 and 2001-2, India improved its growth of manufactured goods exports to 11.8 per cent pér annum from the 11.4 per cent per annum of the 1980s. This was significant as it came on the higher base of the 1980s and was attained after allowing for adjustment to the balance-of-payments crisis of 1991. The subsequent two years for which data are available show even higher growth rates of manufactured goods ‘exports, that is, 22 per cent and 17 per cent, respectively. has Ise Jupce AHLUWALIA Inequality Inequality has been a key theme in the research agenda of ‘economists because of: () the intrinsic ethical auractiveness of equality and (i) the significant implitations of inequality for many macroeconomic variables like grown and poverty Although isses related to inequality can be analysed along - several dimensions, we deal mostly with inequality in {income or consumption and wealth. Before undertaking a study of inequality one is ‘always confronted with the issue of how to measure inequality. Since itis impossible o describe and compare the distribution of income of the whole population, itis necessary to have summary measures. One can get an idea of inequality by using rough measures like the share of the, say, bottom 10 or top 10 per cenof. the population. However, such a measure ignores the intermediate 80 per cent of the population, There is now a large body of literature dealing with the measurement of quality (Sen 1997). One of the most commonly used.measures-of incor — or consumption inequality is.the-Gini-coefficient. It measures the extent to which the distribution of income or consumption among individuals deviates from the equal distribution, A high value of this coefficient ‘gnifies a more unequal distribution. Let us consider 2 population of N individuals with incomes ¥),¥ 3...» ¥g Wercan plot thie cumulative percentages of total income received by cumulative percentages of the population starting from the poorest. Such a plot is called the Lorenz curve. Obviously, for equal incomes, X per cent.of the population will always enjoy X per cent of the total income and the Lorenz curve is the diagonal straight line. Othenvise, the curve-always lies below this line since the bottom X percentage of the population will always have less than X‘ per cent of the total income. ‘The Gini coefficient captures the gap between the actual Lorenz curve of the economy and the hypothetical equal distribution ine Algebraically, the Gini coefficient can be computed using the following formula. NK > diy 1 : oo a DYN) and 1¥-¥) is the absolute difference between incomes of individuals and). It considers differences over all pairs of incomes and there are N? such pairs of incomes. Hence, it can be viewed as one half of the mean of absolute values of differences berween all income Pairs. This measure of ‘inequality has many de ible fearures, | In the Indian context, the consumption expenditure surveys (National Sample Survey [NSS)) constitute the ‘most baie source of inequality measurement. These Surveys are conducted on -rregular basis and cover a fairly large sample of households. Recently, it return data have been used to. analyse. income st individuals in the ‘op earnings bracket. Since Population is exempt from income taxation, to look at only the top 1 per cent of the por, ‘The various measures in’ where ¥*is the mean income ¥* vidual tax hares of * most of the is possible” Population. ‘Table 1 provide a ‘Snapshot Scanned with CamScan~ ; 376 EQUALITY Table ‘ble 1 Inequality in tnd Computed Using Various ‘Measures, 1951-2004 Yer eo ie mom Me 1983 3149 86 40.5, 646 eS a * Banerje and Pikety (2005). . of inequality in India. Because of space limitations, information is only provided fora handful of years Hiscorically,inequalic levels (wealth as well a income- oF consumption) in India during the 1950s were quite high. ‘The average Gini index for consumption in the 1950s would be in excess of 35; the Gini index for land distribution for this period would also be in excess of 40. However through the 1950s and 1960s, there was a steady (though not substantial) ectine in all these measures The Gini index fl fiom 35 0 2 lower level of 30.TThe consumption share of the bottom 20 percent of the population went up and the corresponding share ofthe top 20 per cent declined. The income share of the top i percent also showed a significant decline, Many scholars aibute this tend tothe shower growth and socialist, polices ofthis period. However, inequality measures remained fairy ste during the 1970s and 1980s. There is no evidence of any clear increasing or decreasing trend. Infact, the absence ‘ofa trend is somewhat more pronounced if we look at the Gini coefficients for rural and urban households separately. Since inequality among urban households is inequality among rural houscholds, greater greater than inequality among rural houscho urbanization during this period could have led 10-n ysn rall inequality. This feature is ‘observed in the early 1990s also. However, the income share of the top I per cent did turnaround in the 1980s after falling steadily for neatly three decades. It is interesting to note that this coincided with the beginning of the more pro-business oriemtation of the economy and higher growth rates. Infact, some economists attribute the beginning of the higher growgh phase in the early 10 mid-1980s to this shifcin policy orientation. While there is general agreement about the stable very mall ierease in nature of inequality in the 19703 and 1980s, a different picture emerges after the 1990s. Two major rounds of surveys were undertaken in 1993-4 and 1999-2000 (NSS Rounds 50 and 55).The inequality measures estimated using the basic data from these rw rounds do not show any significant increase in inequality. In fact, inequality amongst the rural householly shows 2 slight decline aver this period, However, a hin been pointed out by many, these two rounds are not strictly comparable. A key difference between the two surveys is the use of different ‘recall periods’. The 50th round uses (ike all previous rounds) the 30-day recall period for all types of consumption espendiures; respondents at asked to report expenditures incurred over the previous, ‘month. The 55th round uses the same recall p2rind for many items bur it aso introduced a lonsre period (365 days) for consumer durables. Consequently, ‘many poor households who would have reported no call + expenditure over the lat month (in this category of items) end up reporting some expenditure ovr the past year. Deaton and Dreze (2002) point ont shat chis effectively improves the reported expenditur= pattern ot the poor households and gives a misleading picture of redueed inequality. After adjusting the basic recorded dat ofthe 55th round they ind evidence o! marked increases in inequality over these six years “The most ecen avaible estimates show that by 2001 inequliy had ineessd to 36.8. From the distiburtnal information, itis clea that while the owtorn 20 per cont. laste consumption share, the rch 20 pet cent now over 45 per cen ofthe consumpuion share. In the etinuses based on the National Council of Applied Economic Research (NCAER) data set, which collects hous held income information rather than consumption expenditure asisconein the NSS dat, inequality fot 2004 Sane, ‘much higher wit a Gini of 0535, which would place In snons th high squat cous in the wort ' Inequality seems to have risen on se in regional inequality, particulary in intet-stane gee which measures inequality etween states Ia mens inter-state inequality, iis presumed that the daenba within a statis equal and inequality arises duet seen inthe susan income benween sates Nn sac inequaliy Wal ue weadjTae 1970s og ile inter 1980s, Although the gap betwees Z states the composition ofthe state has been sin terms ofthe bene® est and Scanned with CamScanworst performers of growth has changed. Instead of Punjab and Haryana its now Maharashtra and Gujarat which have the highest growth rates. Although, Bihar ‘and Orissa continue to be at the bottom, other poor performers such as Rajasthan and West Bengal have been able to significantly increase the pace of their growth. ‘According to a growing number of studies, the increase in inequality at the all-India evel has been driven ay the widening gop becween rural and urban areas. While inequality in the rural sector stays the same, inequality.in the urban sector shows considerable increase. This pattern is not just true at the aggregate all-India level but most states also exhibit a similar pattern. For some, both rural and urban inequality has increased (Deaton and Dreze 2002). Other studies based on NCAER data suggest even— higher levels of disparity between urban and rural areas. ‘There is some evidence of increase in wage inequalit “too. The Gini coefficient of hourly wages for regular INEQUALITY 1770, to about 75 per cent around 1870, and then fell to 50 per cent in 1970, Such a view could be comforting in the sense that rising inequality need not be a matter of concern (though the time scale is sill a matter of concern) However, this hypothesis has not enjoyed immense support from empirical research, Moreover, the sectoral shift in the Indian context took place in the 1980s, and the rise in inequality can not perhaps be attributed to it It is important to recognize the rising inequality independently and seek proper causal explanations and tot simply view ic as by-product. Ifthe growth process is highly uneven so that only a smaller benefit from it, it can have serious consequences for poverty reduction and further growth in the economy. For example, as Deaton and Dreze (2002) point out, the reduction in poverty over the 1990s was significantly moderated by the rise in inequaliry. For the same level of inequality (same distribution of consumption), the workers seems to have risen in 1999 afier remaining-faidy growth in the 1990s would have implied a much larger stable in the 1980s ly 1990s. The wage gap across various occupations too widened. While the real wages fo reduction in poverty. One can also draw several lessons from recent research agricultural labourers have grown at the rate of 2.5 per ‘on inequality and growth. A traditional view suggests ‘cent per year; the corresponding: growih-rate-for public sector employees is almost double. ‘A similar pattern is observed in the case of the income share of top earners. As mentioned earlier, the income share ofthe top 1 per cent has been rising since the mid- 1980s. Apart from a brief decline in the early 1990s, it shows considerable increase from 1993 onwards. In fact the increase in the share of the ultra rich (the top 1 per cent ofthis 1 per cent) is much more striking, Within the richer section, the ultra rich have experienced a much larger growth in income since the 1990s. This suggests that inequality amongst the rich is also inereasing, Though itis not possible to make sweeping generalizations, there ate enough indications to worry about the growth process ‘becoming increasingly pro-rich in its orientation, ‘As yet there isno clear causal explanation for this ‘parents since he 19908. One asgue tha this is an inevitable consequence of the Vis pow pans dernpmen pes eos une hypodhess postulates that neni shoul follow an inverse-U shape along the development process. The eats of developmen i ained wih peer Urbanization and indusrialization resuling in greater income inequalcy. However, after a sage, asa large proportion of the labour force is absorbed inthe industrial sector inequality stars falling. Unc recently, some of the developed economies ofthe West were believed to have ‘exhibited such a pattern. For example, in the US the share ‘of the top 10 per cent increased fiom 50 percent around that rising income and wealth inequality fosters higher row by generating greater incentives 10 save and invest However, this view has come under scrutiny recent and-a large body of empirical as well theoreti shows that inequalit e han growth. From 2 political economy perspective, higher inequality leads) _to social conflict and greater. demands for redistribution ‘The effects of these outweigh the positive incentive effects of inequality and the end-result could be lower growth. Tnequality affects growth negatively through various other channels as well. In the presence of imperfect (credit) ‘markets and limited financial development, higher (wealth) inequality leads to underinvesument in physical and human capital and hence lower growth. Given the imperfect nature of markets in India, there is the danger of the full growth potential not being realized in the future iinequatity levels continue to rise, In this context itis important to note that the inequalities with respect to dimensions other than income and consumption expenditure in India are even worse. For instance, the Gini coefficient of adult schooling in India, which can be thought of as educational inequality, was 0.56. for 1998-2000 (arathan 2008). This level is much higher than that in China or Beaail which stands at 0.37 and 0.39, respectively, for 2000; in fact tis one of the worst in the ‘world, Land inequality in eual India was 0.73 in 2003. Given the importance of both physical and human eapital in the growth processes these types of inequalities may act as severe borlenecks for future growth. Scanned with CamScan38 xran SFANT AND CHILD Morratity anes ‘elation between inequality and growth " ways. The process of growth can also have implications for income inequality. The experience of ‘many ‘OECD countries shows that growth does ‘Rot necessarily entail a reduction in ‘inequality. To the extent growth is achieved through trade and skill-biased technological and organizational changes, the growth Process leads to a widening of earnings among different Sections of society. The widening of various wage gaps has already been observed in the Indian context as well. In summary, though not alarmingly high, there is ‘some evidence of rising inequalities in India in the last two decades. It is too early and premature to attribute this rise to the process of liberalization itself, However, inequality deserves a close watch and the rising trend has to be studied carefully. The uneven nature of the growth Process has to be explored further so that policy actions can be taken to ensure relatively even access by different ~ sections of the society to the benefits of growth in a liberalized and globalized India. Amt Mista ano Inpras. Dutta References Abluwalia, M.S. 2000. Economie Performance of States in Post-Reforms Period’, Economic and Polivical Weekly, 6 May, 35(19): 1637-49. Bancrice, A. andT. Piketty. 2005, “Top Indian Incomes, 1922-2000", The World Bank Ezonornic Review, 19: 1-20 Bardhan, P. 2008. ‘Economic Reforms, Poverty, and Inequality in China and India’, in K. Basu and R. Kanbue (eds), Arguments fora Beer rld: Essays in Honour of Amartya Sen, Vol. 2, Oxford, Oxford University Press. Deaton, A. and J. Deeze. 2002. Poverty and Inequality in India—A Re-Examination’, Economic and Political Weekly, September, 37(36):3729-48. Pal, P. and J. Ghosh, 2007. ‘Inequality in India: A Surve).of Recent Trends’, DESA Working Paper No. 45, UN. ‘Sen, Amartya: 1997, (Expanded Edition). On Economie Inequality, Oxford, Oxford University Press UNU-WIDER. 2008. World Income Inequality Database, Version » 2.06, May. ® Infant and Child Mortality In Mother India, her patently West-centric 1927 diatribe” against the idea of independence for India, the American journalist Katherine Mayo pointed to the high levels of infant mortality in the country, which she attributed to the excessive sexuality and premature maternity that Hinduism encouraged in its followers. Seventy-five years later, high infant mortality is used a5 a major indicator, not of excessive and early sex (though demographers do attribute at least some of it 1 excessive and early childbearing—the two are not the same thing at all especially in the age of modern contraception), but of unacceptably slow progress in a country’s economic development whatever its income growth has bess While the infant-mortality rate (or IMR—the number of deaths during the first year of life per 1,000 live births) is a handy figure for all Kinds of evaluations ‘and comparisons, the more useful measure for policy purposes is probably the child mortality rate (the ‘number of deaths in the firs five years of life per 1,000 live births). This is because the years immediately after infancy also represent a particularly vulnerable stage in life, sometimes even more vulnerable than infancy. This is especially so in populations that practise prolonged breastfeeding and that therefore delay exposure t0 the gastrointestinal and other infections that cause such a large proportioi of early childhood deaths. In the following paragraphs, I will, therefore, look interchangeably at levels and trends and differentials in. infaiie avid child mortality in India. According to the best recent figures available, those frost the second round of the National Family Health Survey (NFHS [I—IIPS 2000), atthe end of the 20ch century the IMR for India as a whole stood at around 68 deaths per 1,000 live births. This is a big improvement from the figure uf 134 in the early 1970s. But itis stil a long distance from the single-digit figures for the IMR that characterize a society's teansformation from a condition of high to low mortality During the same period, under-5 mortality was 95 per 1,000 lve births. Thats, the probability of dying before the fifth birthday is stil around 10 per cent for the average newborn in India, More worryingly, there is some indication that gains in lowering infant and child mortality have begun to slow down since.the 1990, ‘These national averages hide gross inequalities in the life chances of infants and children in diffece the country and in different socio-econo: For example, the rural-urban divide coy significant in spite of apparently deteri conditions forthe poor in urban areas ddata set, in the late 1990s, owice as high in rural as in. mortality (deaths between nt parts of mic categories ntinues to be jorating living Inthe NFHS.11 child mortality was nearly urban areas and post-neonatal the ages of 1 month the and.a yea it higher. The national, IMR st the towns and cities, it most be pointed UC that this same scanned with Camscan