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EDITORIAL ANALYSIS–India’s economic mobility and its impact on inequality

The Editorial covers GS paper3 [Inclusive Growth & Issues]

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Introduction

  • There has been a phenomenal rise in economic inequality in India. 
  • It is important to measure the extent of economic mobility in India, which reflects the number of people moving up and down the economic ladder over time. 

What are the facts?

  • A 2018 Oxfam study reports a significant increase in the consumption Gini index in both rural and urban areas from 1993-94 to 2011-12.
  • According to the Global Wealth Report (GWR) 2017 by the Credit Suisse Research Institute, between 2002 and 2012, the share of the bottom 50% of the population in total wealth declined from 8.1% to only 4.2%. 
  • In the same period, the share of the top 1% of the total wealth increased from 15.7% to 25.7%.
  • A recent survey pointed out that the mobility rate for the population is remarkably low. 
  • In 7 years, at least 7 in 10 poor households remain poor or remain in an insecure non-poor state.

What are the importance of mobility?

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  • In a mobile economy, the households move more freely throughout the income/consumption distribution.
  • Long-term welfare effects of rising inequality depend crucially on the level of economic mobility.
  • Economic mobility or the lack of it can accentuate the adverse effects of inequality.
  • An economy with much economic mobility will result in a more equal distribution of incomes and consumption than an economy with low mobility.

What are the dimensions of mobility?

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  • Muslims are more vulnerable to falling below the poverty line over the seven-year period compared to Hindus or other religious groups.
  • Compared to upper-caste groups and OBCs, SCs and STs are less likely to escape poverty and more likely to move into poverty.
  • Between upper castes and OBCs, the latter is more likely to move into poverty and less likely to become secure non-poor.
  • Rural households are more likely to remain in poverty compared to urban households.
  • Inequality in India can be characterized as chronic since households belonging to the lower rungs of the economic ladder are likely to find themselves caught in a poverty trap.

Conclusion

  • Poverty reduction efforts should focus on ways to improve the permanent economic status of households through the acquisition of assets and capabilities, rather than dealing with temporary volatility.
  • There is also doubt on the efficacy of existing affirmative action and social programs to improve the economic status of marginalized groups in the country.

Source: Live Mint.