Roadmap for Answer Writing

1. Introduction

• Start by highlighting the growing economic disparity in India despite its rapid economic growth.
• Provide statistics to showcase the severity of wealth and income inequality, such as Oxfam’s 2023 report, which states that 5% of Indians own more than 60% of the country’s wealth, while the bottom 50% possess just 3%.

2. Key Challenges

• Dependence on Indirect Taxes:
  • Explain how a significant portion of India’s tax revenue comes from indirect taxes, which are regressive and disproportionately impact low-income households.
  • Cite the fact that nearly half of India’s tax revenue comes from indirect taxes, which deepens inequality.
• Low Female Labour Force Participation:
  • Discuss the issue of gender inequality in the workforce, with the Global Gender Gap Report 2021 showing a drop in female labour force participation from 27% in 2010 to 22% in 2020.
  • Emphasize how this limits income potential for a significant portion of the population, further entrenching income inequality.
• Inadequate Government Spending on Social Sectors:
  • Mention India’s fiscal constraints that result in inadequate funding for crucial sectors like health and education.
  • Refer to the budgetary allocation for healthcare between 1.2% and 1.4% of GDP in the period 2014-2020 and the fact that 63 million people are pushed into poverty annually due to healthcare costs (Oxfam report).
• Lower Share of Manufacturing in GDP:
  • Explain how the stagnation of the manufacturing sector in India limits upward mobility and leads to low wages in sectors like agriculture and low-end manufacturing.
  • Draw a comparison with China, where a booming manufacturing sector contributed to increased social mobility and reduced inequality.
• Large Informal Economy:
  • Point out that the informal sector, which constitutes a significant portion of India’s economy, has low wages, limited social security, and no legal protection.
  • Discuss how this contributes to income inequality as informal workers often remain in poverty.

3. Impact of Inequality

• Discuss the long-term consequences of inequality on India’s economic growth, social stability, and inclusive development.
• Reference the poverty trap that inequality creates, as lower-income groups face difficulties accessing quality education, healthcare, and opportunities.

4. Solutions (Optional)

• Mention potential solutions to tackle inequality, such as progressive taxation, enhancing female workforce participation, improving social sector spending, boosting the formal sector, and expanding the manufacturing sector.

5. Conclusion

• Conclude by stressing the need for a holistic approach to tackle income and wealth inequality to ensure inclusive and sustainable growth in India.

Facts to Support the Answer

1. Oxfam 2023 Report:
   • “5% of Indians own more than 60% of the country’s wealth, while the bottom 50% possess just 3%.”
2. Global Gender Gap Report 2021:
   • Female labour force participation in India dropped from 27% in 2010 to 22% in 2020.
3. Healthcare Spending:
   • India’s budgetary outlay for healthcare was between 1.2% and 1.4% of GDP from 2014-2020.
4. Out-of-pocket Healthcare Expenditure:
   • 63 million Indians are pushed into poverty every year due to healthcare costs (Oxfam).
5. Manufacturing Sector:
   • India’s share of manufacturing in GDP has remained stagnant, unlike China’s booming sector which has played a key role in reducing inequality.
6. Informal Economy:
   • The informal sector, which constitutes a significant portion of India’s economy, perpetuates low wages and poor working conditions, contributing to inequality.

This roadmap outlines a structured approach to answering the question by introducing the issue, explaining the challenges with supporting facts, and addressing the broader implications of income inequality in India.