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May 27, 2021

Indian Economy|Social Justice

The Great Divide

By Nitin Desai



The Covid epidermic has widened the great divide that separates the living conditions and prospects of the rich and the poor, the urban and rural dwellers, the workers in the organised sector and those in the unorganised sector in India.

A useful starting point for understanding the nature of this great divide between the privileged and the underprivileged is the change in the distribution of income which has been quite drastic since 1990. According to the World Inequality Database the share of the top 10 percent of the income earners, which was an average of 36 percent in the 40 years preceding 1990, has gone up to 57 percent by 2019. The corresponding figures for the middle 40 percent is a decline from 44 percent to 30 percent and for the poorest 50 percent from 20 percent to 13 percent. This growing inequality in income distribution is also reflected in the data on wealth distribution from the All-India Debt and Investment Surveys which show an increase in the share of the top 10 percent of wealth owners from 52 percent in 1991 to 63 percent in 2012.

The top 1 percent of wealth holders, whose share in total wealth went up in the same period from 17 percent to 28 percent, consist mainly of those who have inherited wealth, new capitalists and real estate developers. An analysis of 69 dollar billionaires in 2010 shows that while 17 made their fortune in knowledge based industries like pharmaceuticals and IT, 18 made their fortune in construction and real estate and 7 in commodity trading. India has also seen a sharp increase in the number of highly paid managers.

According to ASI data, since 1990 growth of wage and salary income in the organised manufacturing sector has been largely due to a thirteen-fold rise in managerial remuneration compared to the three-fold rise in workers’ wages. Even amongst workers the rise was much higher for graduates and above than for others. In this same period the share of profits in net value added has virtually doubled and the share of wages declined, due, partly, to the growing use of contract labour in the organised sector. This view of the income and wealth distribution must be seen along with the social dimension.

The privileged classes of rentiers, capitalists and white-collar workers come mostly from the upper echelons of the social system where wealth is inherited and quality education pursued. The under-privileged are workers in the unorganised sector, agricultural labourers, small holders, artisans and the self-employed who eke out a living, for instance as street vendors. They have inherited little from their parents, have not had access to quality education and have often been at the receiving end of caste and religious prejudices. Some of them, very few of them, clamber up the difficult slopes of upward mobility to the join the privileged at their economic height.

The impact of the pandemic on livelihood was felt mainly through the loss of employment, particularly in the first lockdown in 2020 which was announced at short notice with little preparation. According to the much-quoted CMIE survey data, the unemployment rate shot up to 24 percent in April 2020 and 21 percent in May 2020. Millions of workers in the unorganised sector, who lack any sort of job security, were without work. Around 10 million out of the 30 million migrant workers in India trekked back to their village homes, suffering great distress. The unemployment started declining, but the second wave has pushed forward the revival of employment prospects with the unemployment rate rising in April 2021.

The white-collar workers in the privileged class also faced some job losses as the number of salaried jobs in April 2021 were about 15 percent lower than in the pre-covid year of 2019-20. But most of them have enjoyed the benefits of job security and did not face the life-threatening distress that was faced by migrant and unorganised sector workers. If an income distribution assessment for 2020 were available it would show a huge widening of the income gulf between the privileged and underprivileged classes. The divide was much more distressing when it came to health care.

India’s health infrastructure is not adequate even under normal conditions. Public expenditure on health care (1.3 percent of GDP), is below the level in most developing countries, the ratio of doctors and nurses to population is well below the WHO norm and private investment in health care is heavily biased towards specialty hospitals in urban areas. During the pandemic urban dwellers had better access to healthcare facilities, which mattered in the early stages of the pandemic when the primary locus of the virus spread was in the large cities. But this changed and the urban: rural split of cases moved from 70:30 in April 2020 to 40:60 in April 2021.

As the virus spreads to smaller towns and rural areas, the relative neglect of decentralised primary health care has worsened the impact of the pandemic. The media coverage has shown vividly how much more tragic has been the impact of the second wave. The pandemic has demonstrated the reality of the great divide and the threats with which the underprivileged class has to live day after day. The government, chastened by a round of the protests, will follow belatedly what many non-governmental entities and individuals have been doing to provide better care in villages, small towns and to the underprivileged who cannot afford private health care.

But the other dimensions of the great divide will be forgotten and ignored. Once we are past the worst of the epidemic, we will be back to the political strategy of catering to the interests of the privileged class and keeping the underprivileged quiet with handouts in cash and kind. This is because all our political parties are run by members of the privileged class, including those that have a support base amongst dalits, adivasis and minorities. Even the Communist government in Bengal drifted in this direction towards the end of its tenure.

The great divide will not be bridged till someday, one day, we have a political party or a coalition of political parties of the underprivileged, run by the underprivileged for the underprivileged. Till then there is no cure for the great divide. Only palliatives to stave off the social discontent.

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