Inequalities Grew Significantly in Post-Reform Period: IMF
In the 1990s,
the top of the population enjoyed a substantially larger share of
the gains from economic growth compared to the previous decade, says
an IMF research paper on India
New Delhi: One of the side effects of economic reforms, launched by
the government in 1991, was the rapid increase in income inequality
with rich getting richer faster than ever before, says an IMF research
“In the 1990s, the top of the population enjoyed a substantially larger
share of the gains from economic growth compared to the previous decade.
This had significant effects on income inequality, which grew within
states, across states, and between rural and urban areas,” said the
IMFs working paper ‘India: Is the rising tide lifting all boats?´
Pointing out that inequalities were much less before the launch of
the market-oriented economic reforms by Manmohan Singh, the then Finance
Minister and current Prime Minister, the paper said: “In the 1980s,
the growth rate of consumption of the bottom of the income distribution
was substantially large than that of the top.”
However, between 1993-94 and 2004-05, it said the consumption of the
richest grew by an average of 3% every year, while for the poorest,
it rose by only about 1%.
Quoting the income tax data, the report said “the incomes of the top
one per cent (of the population) increased by 70%, while the income
of the top 0.01% tripled” during the 11-year period.
Suggesting the economic growth in the post-reform period did not have
any discerning impact on poverty reduction, the paper said that “despite
the pick-up in consumption growth from the 1980s to the 1990s, the
decline in poverty incidence remained roughly unchanged.”
While the poverty rate fell by 9.4% between 1983 and 1993-04, the
decline works out to be 8.4% during the slightly longer period between
1993-94 and 2004-05, it said.
“With real consumption growth significantly higher in urban areas
especially in the 1990s, in most states and in India as a whole the
urban-rural gap widened,” the IMF paper said.
The paper further pointed out that Orissa, which was the poorest state
in 1983, has continued to remain so with the highest incidence of
poverty, “with more than 45 % of the people living below poverty line
Similarly, it added, Punjab, which had the lowest incidence of poverty
in 1983, has retained its position with 8% of the people living below
poverty line during 2004-05.
The report further said that despite recording an economic growth
rate of over 8.5% during the last four years, “India still has the
largest concentration of poor people in the world.”
The issue of rising income inequality in the post-reform period has
assumed importance for the policy makers, with the government and
the Planning Commission focusing on “inclusive growth”.
The need to broad-base the benefits of economic growth has prompted
the government to make “inclusive growth” a key element of state policy,
the IMF report added.
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