Economic survey bats for growth to pull people out of poverty than greater focus on inequality


2021-01-30 00:25:26

NEW DELHI: India should pay more attention to economic growth as a primary means of decreasing poverty rather than expending more resources on curtailing inequality as redistribution will be better achieved if the size of the pie increases, the economic survey has said.
The survey says that unlike advanced economies, in India economic growth and inequality “converge” in terms of their effects on socio-economic indicators. It is economic growth that makes a much larger impact on poverty alleviation.
Responding to the economic thinking that inequality is an essential feature of capitalism, the survey says in India income per capita at the state level –and inequality — converge. It strongly bats for growth being more effective in pulling people out of poverty than a greater focus on inequality.
More specifically, the survey says the consideration of French economist Thomas Picketty that higher inequality leads to adverse socio-economic outcomes but income per capita, a measure of economic growth, has little impact.

“Across Indian states, it is observed that both inequality and income per capita correlate similarly with socio-economic outcomes. In these figures, inequality across Indian states is measured as the Gini coefficient of consumption…the results remain robust to using other measures of inequality,” the survey says.
The survey does so by examining the “correlation of inequality and per-capita income with a range of socio-economic indicators, including health, education, life expectancy, infant mortality, birth and death rates, fertility rates, crime, drug usage and mental health.”
The survey says for a developing economy, redistribution is possible only if the size of the pie grows, even as it acknowledges that more even distribution of wealth is important.
The survey says savings and borrowing practices vary across income groups as the rich tend to save more. “…inequality of income does not reflect the true inequality that individuals and households as consumers encounter.”
Saying that divergence in assets among the rich and poor do not necessarily correlate strongly with the divergence in consumption, the survey argues inequality of opportunity is “much more objectionable” than inequality of outcomes.



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