World Inequality Report 2022

The  Grim Reality of Disparities In The Post Pandemic Era

The release of the World Inequality Report 2022 has put all nations and their governments in a position of distress. The latest findings have pushed the countries to reflect and speculate on the inequalities that persist within their region. The report aims to do a comprehensive analysis of the inequality dynamics. 

The study has placed India amongst the most unequal countries, with rising poverty and an affluent elite. It  underlines that the top 10 per cent hold 57 per cent of the Total National Income, whereas the top 1 per cent hold 22 percent of it. It is shocking to observe that the bottom 50 percent earns only about 53,610 rupees annually while the top 10 percent earn almost 20 times more. 

The income inequality gap in India under the British Raj was poles apart, with the top 10 per cent having an income share of around 50 per cent. This share was reduced to 35-40 per cent after independence, thanks to the Five-year Plans.

Due to poor economic conditions in the post-colonial period, India undertook deregulation and loosening controls through its liberalisation policies. However, The report claims that these policies have led to one of the most drastic increases in income and wealth inequality in the world. It says that while the top 1% has benefitted from these economic reforms, the growth among low and middle-income classes has been comparatively slow with persisting poverty. The report also highlights gender inequality. India’s female labour income share is equal to 18 per cent, which is remarkably lower than the average in Asia. It is one of the lowest in the world. 

The COVID pandemic and the subsequent lockdowns further exasperated the inequalities and widened the socio-economic divide. The pandemic hit all world regions, but it hit them with varying intensity. It is clear that the countries were not prepared with a better digitised economic setup. Europe, Latin America, and South and Southeast Asia recorded the largest drops in the National Income in 2020 (between -6% and -7.6%) while East Asia, where the pandemic began, succeeded in stabilising its 2020 income at the level of 2019.

 Countries having higher rates of disparities because of their sheer structure and political, social and economic fabric in the post-colonial era have suffered more due to the pandemic. The repercussions of the COVID waves have intensified the already existing inequality of opportunities. India has observed a falling labour force participation. Being unemployed or shifting to less paying, less productive jobs adversely affects an individual’s lifetime earnings. This casualisation of the workforce weakens the avenues for upward mobility for entire households. Moreover, The despair of the thousands of migrant workers who had to walk back to their homes is a stark reminder of the magnitude of economic disparities. 

The education gaps induced by the pandemic are bound to leave a lifetime impact on opportunities. Children and adults are victims of the Digital divide, with no or very little access to smartphones and other devices. This barrier has deprived them of foundational skills, making it challenging to climb up the social mobility ladder. 

The waves of the COVID pandemic that ravaged all nations resulted in varied health outcomes across different socio-economic groups. In India, the areas where the government was working to reduce inequalities had fewer confirmed cases of COVID. However, The hospital infrastructure, vaccines and doctors could not match the large population affected by the virus, deepening the disparities. Thus, it is necessary to have universal health coverage to stabilise such inequalities. 

The World Inequality Report observed a decline in public wealth and a rise in private wealth for more than a decade, which was aggravated due to the covid outbreak. Emerging economies like China and India have seen a large increase in private wealth in recent decades. The private wealth in India has increased from 290 percent in 1980 to 560 percent in 2020. The Middle East and North Africa (MENA) have the highest percentage of inequality in the world, while Europe has the lowest inequality levels. 

The poorest half of the global population hardly has any wealth. They own just 2% of the total, whereas the top 10% of the global population own 76% of all wealth. If we compare the wealth inequality in India with that of other major economies, India has a relatively large gap between the top 1% and bottom 50%. This gap is wider than the one prevailing in the economies of France and China and is just marginally behind Russia. 

The inequalities prevailing across the globe have posed a multiplicity of challenges. India is still perpetuating disparities that have been engraved in the economic structure by the British. The areas which were better off in the colonial period continue to grow even today, while the ones that did not get much attention are yet to develop to their fullest potential.

The rich are accumulating wealth at the cost of the environment and minority groups. According to the  Multidimensional Poverty Index (MPI) prepared by Niti Aayog, one in every four people in India is multidimensionally poor. Such unsustainable socio-economic growth and negligence of ecological imbalance have given rise to multiple inequalities. We are not moving fast enough to transform into a renewable source economy. 

The monopoly in various sectors, like the telecom sector, has been a loophole for exploitation. Such industries need healthy competition for better customer services and give a chance to local enterprises for sustainable and equitable economic growth. There is also a need to unlearn normalising inequalities for better socio-economic integration of the society. 

The world needs a robust approach to combat disparities and adjust to economic changes, especially in the post-pandemic period. The quality of data released by the government in the last three years regarding inequality has worsened, which has made it quite challenging to assess recent inequality changes. 

The report says that the ones accumulating a lot of wealth must pay back through taxes as they might be doing it at the cost of others. Progressive taxes can generate significant revenues for governments as the wealth concentration is very high. Next, there should be a balance between socialism and capitalism. We cannot incline fully towards one end. Welfare measures undertaken should honour people’s interests to lessen the impact of marginalisation.

The present Economic Model should be substituted with the ‘Nordic Economic Model’ of Europe to make the wealth distribution fair and equitable. This model is followed by the Nordic countries and consists of corruption-free governance, the fundamental right to quality education & healthcare, high taxes for the rich and proper implementation of welfare policies. Lastly, we must move towards adopting the 4P Model of Capitalism. The 4 P’s stand for Purpose, People, Planet and Profit. The government must ensure that the corporate sector adheres to this model. All the factors should be given adequate attention and placed on an equal pedestal. 

If the disparities are left unaddressed, we are heading towards a much bigger virus outbreak, the Virus of Inequality. This report is a wake-up call for all. The nations must aim at revising, realigning and recalibrating their welfare policies and socio-economic agendas to address disparities and promote parity.