Course Code: ECOM525 Course Title: managerial economics

Course Instructor: Tanima Dutta Academic Task No.: 02

Academic Task Title: Indian Economy case Date of submission: 18.12.2023

study
Student Name: Gaurav Raj, Sangeeta, Section: Q2345
Manoranjan, Nishant Sharma
Student’s Roll No: 47,48,49,50 Student’s Reg. No: 12320231,
12320283,12320297,12321335
Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by
students as specified at the time of assigning the task by the instructor)

Learning Outcome :- I would especially like to thank my teacher Dr. Tanima Dutta who provided
me with this great opportunity to do this amazing Assignment on “Indian Economy”. This
assignment helped me to get more knowledge and its sources all helped me to understand the
database and how to interpret it.
Declaration:
I declare that this Assignment is my work. I have not copied it from any other student’s work or
from any other source except where due acknowledgment is made explicitly in the text, nor has any
part has been written for me by any other person.
Evaluator’s comments (For Instructor’s use only)

General Scope of Best

observation improvement part

Evaluator’s Signature and Date:

Peer Rating:-
S.NO. NAME REGISTRATION ROLL PEER
NO. NO. RATING
1. Gaurav Raj 12320231 47 07
2. Sangeeta 12320283 48 10
3. Manoranjan 12320297 49 10
Kumar
4. Nishant 12321335 50 10
Kumar
 Income Inequality in India

INTRODUCTION
Every successful endeavor begins with a vision but is rarely in focus; India's biggest phase of
evolution towards development is obscure with the nation's stark diversities staring at it. It is
undeniable that India has demonstrated its resilience by achieving notable economic booms,
despite the deficits of 1991, 2008, 2012, and 2021. However, the jewel in the crown has been the
last decade of the Indian Economy where we witnessed a significant amount of uprising in
innovation and a huge surge of startup companies despite the structural challenges, everlasting
endeavoring corruption, diminished social welfare, and standard of living. It is critical to
recognize that India's development journey is complex and multifaceted, influenced by
components like demographic dynamics, regional disparities, socioeconomic inequalities, and so
on. And while these differences come with unique challenges, they also present tremendous
possibilities for inclusive growth and sustainable development.
To mark the magnitude of income and wealth inequality challenges in India it is worth
examining the Forbes Billionaires Report 2022, according to which the 10th richest person in the
world ranks from India. Additionally, as per the latest data available on World Development
Indicators, India is the 5th largest economy in terms of GDP ranking of countries at the current
US dollar in 2021 stated by the Ministry of Finance, India (posted by PIB Delhi on 13th March
2023). Meanwhile paradoxically despite these economic achievements there are States in India
with 51.91% of the population that come under multidimensional poverty (National
Multidimensional Report 2021 NITI Ayog).
In recent decades, India has made incredible strides towards becoming one of the world's most
quickly developing economies, notably in the technology sector. However, this expansion has
been accompanied by rising income and wealth gaps, raising questions about the country's
inclusion and sustainability.
India, a nation of vibrant contrasts, stumbles on a seemingly impossible paradox: its economic
juggernaut roars ahead, yet millions remain trapped in the shadows of wealth inequality. This
 chasm, far from shrinking, widens with each passing year, casting a long, dark shadow over the
nation's aspirations.
Consider this the top 1% of India's population now holds a staggering 40% of the nation's wealth,
while the bottom 50% scrape by on a mere 3%. This isn't just a statistic; it translates to reality,
where gleaming skyscrapers pierce the sky while millions struggle to put food on the table.

OBJECTIVE
➢ To assess historical overview on income and wealth disparity.
➢ To examine Wealth and Income Inequality trends in India over the last few decades.
➢ To investigate the primary causes of wealth and income disparity in India.
➢ To analyze the present and the future consequence of wealth and income disparity in India.
➢ To provide suggestions for policy makers to address the income and wealth inequality while still
maintaining the inclusivity of the economic growth.

Reason for Economic Inequalities in India:-

➢ Informal employment like tasks at home, hawking and vending on the side of the road, and
contract work are all included. Greater economic inequality and an increase in informal
employment are frequently associated. The reasons for this rise in income inequality due to the
expansion of informal jobs are: associated with low wages, jobs are unstable in nature, jobs are
not at all supportive of accumulation of human capital and growth of career.
➢ Effects of globalisation on income disparity are possible. Numerous commodities and services
now have different production processes because of globalisation. For instance, a cell phone. The
process of internationalizing production drives up the demand for skilled labour, widening the
wage gap between skilled and unskilled labour.
➢ Underemployment and unemployment, result in low labour productivity. Low labour
productivity is a sign of slow economic growth, which is what mostly drives poverty and
inequality among vast populations. In reality, there are connections between poverty,
unemployment, and inequality.
➢ Workers in the organised sector receive greater earnings during times of inflation, somewhat
offsetting the impact of price increases. However, the pay for employees in unorganised
 businesses (such as agriculture and small-scale and cottage industries) does not rise. As a result,
their real income decreases.
➢ The category's underdevelopment is a result of poor policy implementation by the
government. In the case of the Freeship card programme, students from the SC community
receive full government funding for their tuition, but when students inquire as to whether their
card is acceptable at their college, the answer is no. Additionally, there isn't a list specifically
stating which universities are permitted or what a student should do when colleges reject card.
These students cannot receive a quality education as a result.
➢ Higher education, for instance, students who want to pursue an MBA need to give 10s of tests
like the CAT, XAT, NMAT, CMAT, SNAP, IIFT, and others since our system does not want to
operate on the basis of "ONE NATION, ONE EXAM." And this result in a 1–2-year period of
preparation during which pupils are unable to learn anything beyond entry requirements.
Additionally, students have to pay between 10k-25 k as their exam fees and between 25000 -
75000 for the application fee. What about the bottom 50% who, in this case, cannot even receive
a top-notch education? How are they supposed to pay for coaching and fill out several papers
when they don't have the money for their fundamental needs?
➢ Income tax rates in India are relatively high. High tax rates promote tax avoidance and evasion
and create a parallel economy. The unofficial economy in this country is just as robust as, if not
more robust than, the official economy. High tax rates contribute to income and wealth
distribution inequalities. This is due to excessive income concentration in a small number of
hands brought on by widespread tax evasion. With indirect taxes, the government receives the
most money. Due to the government's increasing reliance on such taxes, such levies have also
over time increased inequality.
➢ Effects, In a nation like India, where economic inequality has broad ramifications and hinders
the socio-economic advancement of the nation. Expanding economic inequality concerning: it
immediately contradicts the notion of equality held by our nation. Can see social unrest as a
result of the widening economic gap, and protest movements can gain momentum. The country
can experience a state of system devastation when the connection between various classes is
severed. Forces of secession will be directly fuelled by economic inequality.
DATA SUPPORTING ARGUMENTS
India: Extreme inequality in numbers

In research from WIB (2022). The adult

population of India earns an average national
income of €PPP7,400 (or INR204,200). The
bottom 50% gets €PPP2 000 (INR 53,610),
while the top 10% make €PPP 42 500 (INR
1,166,520), which is more than 20 times. The
bottom 50% share has decreased to 13%, while
the top 10% and top 1% hold respectively 57
and 22% of the nation's total revenue.
 In India, the average household has an income of
INR983,010 (as opposed to €PPP81,000 in China).
With an average worth of €PPP4,200, the bottom
50% own virtually nothing (6% of the total,
INR66,280). In comparison to the top 10% and 1%,
who own respectively €PPP231,300 (65% of the
total) and over €PPP6.1 million (33%),
INR6,354,070, and INR32,449,360, the middle
class is similarly comparatively poor (with an
average worth of only €PPP26 400 or INR723,930, 29.5%of the total).

Income inequality between the rich & poor and the gap between the rural and urban

The table makes it clear that there is an

unequal distribution of money across the
various social stratum in India; 22% of the
population owns 61% of the country's
income. More significantly, the income of
wealthy class households is 20 times more
than that of middle class and poor class households, which together make up 60% of India's
population yet receive only 36% of the country's income. If we divide income disparity into
deciles, the situation seems even worse.
 In deciles, we find that the top 20% of the
population receives 58% of the income, while the
bottom 20% must make do with just 3%. It implies
that those in the top 20 percentile are more than 19
times wealthier than those in the lowest 20
percentile. In India, the top 10 % of earners are 41
times wealthier than the bottom 10%, as can be
seen by comparing their incomes. If we use the
fifth decile is the median class, we can see that its
members are 5 times wealthier than those in the
lowest decile and 8 times wealthier than those in the top decile

Households' sources of income inequality

75% of Indian households derive
their income from daily or monthly
wages from employment. The fact
that nearly 50% of Indian households
derive some of their income from
agriculture is another noteworthy
aspect of their source of income.
Family businesses provide income
for about 20% of households. On the
other hand, wealthy households often
find their income from sources that
are high yielding, while poor households typically find their income from sources that are less
yielding. Additionally, it has been discovered that 57% of wealthy households get money
through a job, while 10% of poor households receive income from this source. Another
interesting contrast. The households' perspective on this element of income distribution in India
is that having a median wage of Rs. 37,920, paid families are better off than poor families. The
typical salary for agricultural labour is Rs. 10, 577. This demonstrates that Wealthy households
with salaried income are around four times wealthier than the underprivileged households that on
farming for their income.

Socio-led Economic Inequality

The average household income in India is ($9, 435/month). The ST and SC groups' annual
incomes are respectively 0.7 and 0.8 times lower than the average income for all of India. OBC
and Muslims both have household incomes that are roughly 0.9 times higher than the national
average. The average household income for the Forward Castes (FC), with a small difference
between Brahmin and Non-Brahmin households, is 1.4 times the average income for all of India.
Based on average income, there is sequential inequality with the following rankings: ST SC
Muslim OBC OVERALL FC (Non-Brahmin) FC (Brahmin) Others trend.

• Urban-rural inequality: The urban-rural gap is an important source of wealth inequality.

Rural unemployment is 7.8% and urban unemployment is 3.9% (CMIE, 2023). This
inequality limits job opportunities and economic development in rural areas.

• The informal economy accounts for more than 80% of India's workforce and accounts for
a large portion of the population, but wages are low, social security is limited, and
tradition is lacking. This traps people in a cycle of poverty and inhibits mobility.
Interpretation:
These data show that the Indian economy is becoming increasingly unequal. The rich get richer,
the poor get poorer. This inequality has many negative consequences:
❖ Poverty: Millions of Indians live in poverty; They have difficulty meeting their basic
needs such as food, shelter and health.
❖ Conflict: Conflict can lead to strife and strife, placing greater stress on the lives of the
poor.
❖ Labour Inefficiency: When talent and resources are in the hands of a few people, it can
lead to business inefficiency and slow growth.

What is the impact of Income inequality on society?

The widening gap between the rich and poor in India has created a corrupted economy where
financial inequality is becoming increasingly apparent. Income inequality has a profound effect on
society and has been linked to decreased economic growth, increased poverty levels, and greater
social unrest.
The effects of this disparity are being felt throughout the Indian economy. As the rich become
richer and the poor become poorer, the gap between their standards of living increases
exponentially. This inequality is leading to a lack of basic resources, such as adequate health care
and education, for many Indian citizens. It also makes it more difficult for those in poverty to
escape from it, as they are unable to access the same opportunities as those with more money.

Furthermore, research has shown that income inequality can harm economic growth, as people
with less money are unable to contribute to the nation’s GDP. This means that the entire economy
suffers as a result of this disparity.

Policy suggestions

❖ For Firms:
Adhere to a fair wage policy: Ensure fair wages at all levels of the organization and narrow the
pay gap between skilled and unskilled workers.
Invest in skills development: Provide training to poor communities to equip them with the
skills needed to achieve better employment and income.
Promote inclusive business practices: Integrate social responsibility into business models,
focusing on community development and poverty reduction efforts.

❖ For the government:

In social safety nets: Improve existing programs and initiate new programs to provide basic
needs such as food, health and education to vulnerable groups.
Investing in rural infrastructure: Building rural bridges supports the rural economy and
eliminates urban conflict by investing in transport, rain, water and digital connectivity.
Promoting informal employment: Implement policies that encourage the transition of informal
workers to formal employment and provide them with better safety and health benefits. work
conditions.
Progressive tax system: Increase taxation and increase tax rates for the rich to ensure fair
distribution of money and resources.

➢ Spending on social safety, healthcare, and education is shown to reduce inequality.

➢ Investments in free, high-quality public services can help poor individuals save money.
➢ Increased government spending on research and development (R&D) and innovation is
crucial.
➢ Directly reducing income inequality can be achieved by raising taxes on the wealthiest
individuals.
➢ Taxes on the wealthy, if used for public services, can further reduce inequality.
➢ Tax credits for businesses distributing more profits to workers can help reduce income
imbalance.
➢ The fundamental cause of income inequality in India is skill disparity.
➢ Skill matching is a key solution to reduce wage inequality among workers.
➢ Education and training for skill development enable unskilled workers to offer their labor for
higher wages in a globalized market.

CONCLUSION:

Caste still matters a lot in India, and lower castes aren't doing as well. The biggest worry is that
kids from lower castes aren't getting a good education, and things might stay stuck.
Education is costing more because private schools are taking over, but employers need skilled
workers more than ever. This research shows how unfair things are in India, because caste makes
things even worse than just being poor.
Positive discrimination policies, like giving lower castes some jobs just because of their caste,
aren't working well enough. The gap between rich and poor within lower castes is getting bigger.
India's future depends on its people's skills, so we need to invest heavily in education if we want
to be a rich country.
Education can't just be left to the market, we need other ways to make sure everyone gets a
chance to learn and develop skills.
Politicians might think they can save money by cutting education funding, but that will only hurt
our progress. Big income gaps can lead to unrest and instability, which slows everything down.
SUGGESTION

India has a unique geographical, social, political, and economical structure. The only way to move
forward in this scenario is “divide and conquer”. Each state of India needs to be financially
independent to the extent that we start exporting and importing within our own country. Being one
of the most resourceful land areas making each state self-sufficient on their own under the big
umbrella of nation India is not just a utopian epiphany but very much a possibility. This in long
run not only will work as multi-layer fort against any global spill-over effect but also will be the
best example of inclusive sustainability throughout the world.

References

India: extreme inequality in numbers. (2022, May 25). Oxfam International.

Retrieved July 21, 2022, from https://www.oxfam.org/en/india-extreme-inequality-
numbers

World Inequality Lab. (2022). WORLD INEQUALITY REPORT 2022. World

Inequality Report. Retrieved July 21, 2022, from
https://wir2022.wid.world/wwwsite/uploads/2021/12/WorldInequalityReport2022_
Full_Report.pd

Nath, Prafulla. (2015). Increasing Economic Inequality in India and Policy

Suggestion. SSRN Electronic Journal. 10.2139/ssrn.2568782.
https://www.researchgate.net/publication/314377381_Increasing_Economic_Inequ
al ity_in_India_and_Policy_Suggestion