Kuznet’s Inverted U Hypothesis

Kuznet’s hypothesis in the effect of economy development, with initial prejudice income disparity rises. Reasons can be described in terms of: There is a clear positive relationship between industrialization and proportionate increase in wealth at initial stages where most wealth is concentrated at the few; while the majority of population including workers largely in traditional sectors receive stagnant wages- incomes.

-Technological Change: Technological advancement and development bring about the creation of new forms of wealth but who benefits most or first may be those with retirement financial muscle and skills.

However, in the later stages of economic maturity and development, the economy:
-Technological progress: Brings about greater efficiency, and hence improved wages for a higher percentage of citizens.
-Social safety nets: The progressive taxation, social programs and welfare measures offered by the government eliminate inequalities.

-Education and skill development: Investing in keeping education and skills enhances a better skilled human resource, and income equality is also promoted.

India’s Economic Context

-Post-Independence Growth: India has seen a very dynamic economic growth ever since getting its independence at the beginning of 1947.

-Initial Inequality: In the early days of planned development there was slight increase in inequality as those who benefited from industrialization were specific sectors and regions.

-Recent Trends: Top management pay has been ascending in India during the last several decades. This is mainly due to factors such the globalization, liberalization and advancement in technology which e has enhanced the growth of some sectors and geographical locations than others.

Nature of economic activities on the Kuznet’s Curve

Based on the available economic status of India, it is at the rising stage of the Kuznet’s curve.

-Increasing Inequality: Growth has been sizeable but not necessarily inclusive. Income inequality has risen and the number of people falling into poverty and inequality is quite significant.

Going to enter the decline: India would likely be among the first to enter the decline part of the curve. The policies of inclusive growth, social safety nets, and skill development will bring that about.

In general:

In its economic performance, India has truly shown quite outstanding growth but remains yet to be done as regards rising inequality. This calls for focus on policies which would bring forth equitable wealth distribution, enhance strength in the social safety net, and also the development of human capital that leads to going down the curve.