Addressing Rising Income Inequality

Context:
Income inequality remains a critical global challenge, requiring comprehensive solutions. To achieve greater equity, there is a need to shift from the traditional “economies of scope and scale” to an “economy of purpose.”

Key Strategies to Combat Income Inequality

1. Implementing Progressive Taxation:

• Progressive tax systems are essential for redistributing wealth from the wealthy to the less fortunate.
• These taxes fund vital public services like healthcare, education, skills training, environmental protection, and job creation, without targeting the wealthy but promoting social welfare.

2. Enhancing Education and Skill Development:

• Providing access to quality education and lifelong learning opportunities boosts employability and increases earning potential for individuals across different socioeconomic backgrounds.

3. Enforcing Fair Labour Laws:

• Strong labour laws protect workers’ rights, including the enforcement of minimum wages, ensuring safe working conditions, eliminating child labour, preventing exploitation, and supporting collective bargaining for equitable economic growth.

4. Investing in Infrastructure:

• Investing in infrastructure development reduces regional disparities and fosters sustainable growth. Key sectors include environmental protection, water and sanitation, energy, housing, and transportation.

5. Encouraging Contributions from the Wealthy:

• Initiatives such as the ‘Giving Pledge,’ started by Bill Gates and Warren Buffet, encourage the ultra-rich to donate a significant portion of their wealth to public causes. By 2023, over 235 wealthy individuals from 28 countries had pledged over $600 billion.
• Additionally, many developed countries have introduced inheritance taxes for large asset transfers among the super-rich, such as Japan (55%), South Korea (50%), France (45%), and the United States (40%).

Addressing Inequality and Promoting Inclusion in India

• According to the World Inequality Lab, India’s top 1% holds a disproportionate share of national wealth, surpassing the levels of inequality witnessed during British colonial rule.

Shifting to Purposeful Economics

• Addressing income inequality involves not simply raising taxes on the middle class or wealthy but identifying resources to:
  • Alleviate poverty and unemployment,
  • Foster value addition through production and efficiency,
  • Encourage sustainable and quality consumption,
  • Promote inclusion, sustainability, dignity, and justice.

Building Resilience in Uncertain Economic Times

• For India to build resilience, the country should:
  • Formulate policies that ensure growth aligned with justice and hope,
  • Draw lessons from global experiences while capitalizing on India’s innovative potential,
  • Acknowledge that globalisation and market liberalisation are not universal solutions and require careful adaptation.

Embracing a Gandhian Model of Development

• In today’s interconnected world, the Gandhian model emphasises decentralisation, local needs and resources, and the promotion of local production. This model, grounded in the principle that “small is beautiful,” offers valuable guidance for ensuring local employment and prosperity.

Supporting Small and Medium Enterprises (SMEs)

• Investing in SMEs is essential to scale up to global markets. This can be achieved through:
  • Adjusting banking preferences to favour small loans for SMEs,
  • Leveraging digital technology for financial services,
  • Developing district-level production hubs across India, each equipped with a digital platform for networking and supply chain management.

• Future job creation will likely occur in sectors such as food, education, healthcare, and tourism.
• The future economy should adopt a technology-driven model that prioritises inclusion, basic human needs, decentralisation, conservation, and non-violence.
• A shift in lifestyle is required, focusing on happiness derived from “sharing and caring,” rather than from excessive consumption.