Distribution of income is one of the most important aspects of the study of national income.

ACC to Kuznets In the

early stages of economic growth the distribution of income will tend to worsen while at later stages it will improve."
ACC to him there is no evidence of automatic trickle down of benefits of economic growth to the very poor in
developing countries, there is a trickle up in favor of the small middle class especially the rich people.

INEQUALITY OF INCOME

It refers to the situation of an economy in which the income of a small section of a country is much larger than the
average income of that nation and the income of a large section is smaller than average national income.
Income inequality refers to how unevenly distributed income is throughout a society. In India, a committee was
appointed by the government under the chairmanship of Prof. P.C Mahalanobis to publish the report in 1964.

Inequalities can be found in two forms:

(a) earned incomes (functional inequalities): Inequalities which exist due to the differences in wages of workers, and
salaries paid to different category of unskilled and skilled workers, trained staff, specialized and highly educated
persons are termed as functional inequalities.
(b) unearned incomes (incomes arising out of the ownership of private property)

EXTENT OF INEQUALITIES OF INCOME AND WEALTH:

Personal Income Distribution: Personal distribution of income is the distribution of a country's national income among
its citizens. The wide range of variation that one finds between the top and the bottom tenth of the population clearly
reveals the existence of concentration of economic power in the country in its most generalised form. According to a
paper released by world inequality lab In 2022, the top 1% of India's earners received 22.6% of the country's pre-tax
national income, while the bottom 50% received 15%.

Inequalities in Private Consumption Expenditure: Inequalities in Private Consumption Expenditure" refers to the
uneven distribution of spending on goods and services by different individuals or households within an economy.
Generally, higher income earners tend to have a larger private consumption expenditure, leading to greater inequality
in spending patterns. In India, consumption accounts for about two-thirds of GDP, highlighting the need for
redistributive policies to address rising income and consumption inequalities.

Inequalities in Ownership of Land and Property: Inequalities in land and property ownership refer to a significant
disparity in the distribution of land and property, where a small portion of the population holds a vast majority of the
land, often leading to issues like wealth inequality and social injustice. Implementing land reforms that promote
equitable distribution, enhance women's land rights, and provide access to credit and resources for marginalized
communities can help address inequalities in land and property ownership in India.

FACTORS AFFECTING INEQUALITIES:

Uneven land ownership: India's agricultural economy is centered around land, which is fixed in supply and highly
demanded. During British rule, land tenure systems led to unequal land distribution, causing disparities in income and
wealth, particularly in rural areas.
Differences in Ownership of Property in Urban Areas: In urban areas, income inequality is driven by unequal property
ownership, with the wealthy owning large assets and the majority living in inadequate housing, lacking basic
amenities. This disparity deepens the divide in income and living standards.

Right to private property: Inheritance perpetuates income and wealth inequality, as wealthy individuals pass on assets
to their descendants, making them richer by default. In contrast, children of poor families often inherit debts, not
assets, which deepens the cycle of poverty. This unequal distribution continues across generations, widening the
wealth gap.

Differences in Levels of Education and Training: Differences in education and training drive income inequality. Wealthy
families access better schools and professional opportunities, leading to high-paying jobs, while poorer families face
limited education, restricting their children to lower-paying, unskilled roles and perpetuating the wealth gap.

Capital Intensive Techniques of Production in Five Year Plans (F.Y.P.s): The focus on modernization and
capital-intensive production in Five Year Plans limited job creation, as technology replaced labor in many sectors. This
led to an expanding unemployment problem, with insufficient opportunities for the growing workforce, hindering overall
economic development.

Policy of banks and financial institutions: The credit policy favors the wealthy, as they have assets to offer as collateral,
while poor entrepreneurs struggle to access loans. This drives them to money lenders who charge high interest,
limiting their ability to grow or modernize their businesses.

Continuous State of Unemployment and Under Employment: The increasing unemployment in both rural and urban
areas, highlighted by the Mahalanobis Committee, keeps the poor in poverty, pushing them into debt. This rising
unemployment is a key factor driving the widening gap in income inequality.

Paralel Economy Run by Black Money: Black money exacerbates income inequality by allowing the wealthy and
powerful to conceal their wealth, avoiding taxes and regulations. This creates an uneven playing field, enriching a few
while depriving public services and opportunities for the disadvantaged.

Defective fiscal policy: The tax structure unfairly burdens the poor, as the minimum exemption limit remains stagnant
despite rising inflation. While direct taxes are progressive, many wealthy individuals evade them. Indirect taxes,
disproportionately affecting daily essentials, further reduce the poor's disposable income.

Ever rising price level: Inflation generally increases prices over time, with rare exceptions. This trend, recognized
globally, contributes to the uneven distribution of income, as the poor struggle more with rising costs than the wealthy.

REGIONAL IMBALANCES: Regional imbalances refer to the unequal distribution of economic resources,
opportunities, and development across different regions within a country.

Despite the Five Year Plans aimed at balanced growth, regional inequalities have worsened over time. States like
Punjab Haryana Gujarat and Maharashtra have developed faster than states such as Uttar Pradesh MP Rajasthan
Orissa and Bihar, leading to disparities in income, agriculture, literacy, and industrialization, which threaten national
unity and integration.
Measures to reduce regional imbalances:

(i) Larger portion of the funds of the Central Government are given to the poorer and relatively backward States
ii) Special Area Programmes have been launched to focus the problematic areas (in backward States) like desert
development programme, dry farming, draught and flood prone area programmes
iii) Special emphasis on promoting developed agricultural practices like the use of H.Y.V. seeds, fertilizers, machines,
etc.
iv) to promote pace of industrialization in backwards areas, infrastructural facilities are developed, investors are lured
to come and set up industrial units by providing them various facilities and tax concessions.

GOVERNMENT POLICY MEASURES:

LEVELLING DOWN UPPER SECTIONS OF SOCIETY:

1. Redistribution of land in rural areas: reforms with regard to imposition of maximum ceilings on land
ownership, has led to more fair distribution of land among small & marginal farmers. ​
2. EXTENSION OF PUBLIC SECTOR: IT HELPS TO REDUCE THE OWNERSHIP OF MEANS OF
PRODUCTION IN THE HANDS OF FEW PRIVATE PLAYERS. Industrial Policy Resolution, 1948 IS THE
INITIATIVE TOWARDS THE SAME WHICH declares the Indian economy as Mixed Economy, where the
public and private sectors would work together.
3. Nationalisation of banks: Nationalisation of banks in 1969 and 1980 helped in restricting the accumulation
of financial resources in private hands.
4. Fiscal policy: Fiscal policies can reduce wealth inequality by imposing progressive taxation and charging
higher taxes from the wealthy, limiting their accumulation of capital, and reallocating resources to improve
access to education, healthcare, and social mobility.
5. Monopolies and restrictive trade practices act: this act was passed in 1969 for curbing corporate
monopolies and promoting competition. Industrial licensing policy was also introduced in 1953 to cap on
production capacity of the private sector.

Poverty alleviation programmes:

1. Employment generation schemes: Various employment schemes for rural and urban areas, along with job
reservations, support SC/ST/OBC communities' economic inclusion.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Provides 100 days of guaranteed
wage employment per financial year to rural households.
Pradhan Mantri Mudra Yojana (PMMY): Facilitates self-employment by providing collateral-free loans up to
₹10 lakh to small businesses.

2. Fixation of Minimum Wages : The government ensures no worker earns below the minimum wage,
regularly adjusting it to match the rising cost of living.
Minimum Wages Act, 1948:
Unorganised Workers Social Security Act, 2008: it includes life insurance and pension schemes aimed at
enhancing social security26.
(3) Government Transfers: Subsidizing and rationing essentials like food, fuel, and healthcare, along with the
Food Security Bill, aim to uplift the poor's economic and social status.
PM Fasal Bima Yojana: Crop insurance scheme for farmers
PM Ujjwala Yojana: Provides free LPG connections to women from below-poverty-line families.

( 4) Fiscal Policy of Government : This policy exempts low-income earners from income tax, provides
pensions to elderly poor, and offers scholarships to SC/ST/OBC and underprivileged students for higher
education.

(5) Promotion of Micro, small and Medium Industries : Measures to promote MSMEs, including priority
government purchases, aim to boost income levels of lower-income groups and support industry growth.
MUDRA (Micro Units Development and Refinance Agency): Offers loans up to INR 10,00,000 to established
MSMEs through three plans: Shishu ,Kishore and Tarun.
Prime Minister's Employment Generation Programme (PMEGP): A credit-linked subsidy scheme designed to
create new micro-enterprises.

(6) Announcement of Minimum Support Prices(MSP): The government announces MSP for crops to ensure
farmers receive fair prices, even if market rates fall below cost of production.

(7) Social Security Benefits: These benefits provide relief for accidents, sickness, maternity, and death, while
workers injured on duty in factories or government sectors receive adequate compensation.
Indira Gandhi National Old Age Pension Scheme (IGNOAPS): Provides financial assistance to elderly
individuals. ₹200 for ages 60-79 and ₹500 for ages 80 and above
Atal Pension Yojana (APY): Offers a guaranteed monthly pension ranging from ₹1,000 to ₹5,000 based on
contributions made.