India must keep its focus on economic growth, rather than trying to alleviate inequality, says the Economic Survey, arguing given India’s current stage of development, redistribution of wealth is not feasible without growing the overall pie.
Unlike the developed world, in India, economic growth and inequality both have similar correlations with socio-economic indicators such as health, education, fertility rates, crime and drug usage.
The Survey also draws on the Chinese experience to suggest in countries with high growth rates and high levels of absolute poverty, there is no trade-off between growth and inequality. It said questions regarding conflict between growth and inequality become more pertinent “especially because of the inevitable focus on inequality following the COVID-19 pandemic.”
An Oxfam report had showed Indian billionaires increased their wealth by 35% during the lockdown at a time when a quarter of the country was earning less than ₹3,000 per month.
Last year’s Survey had pushed for “ethical wealth creation” as the way forward for India’s economic development, but this year’s Survey considers the criticism that inequality is inherent in such a model. It refutes the argument put forward in many advanced economies regarding the trade-off between growth and inequality alleviation.
The Survey also asks the provocative question, “Is perfect equality optimal?” It argues that “inequality of opportunity is much more objectionable than inequality of outcomes”. In fact, aa perfect equalisation of outcomes “can reduce individuals’ incentives for work, innovation and wealth creation,” it says.