Question

What are the policy implications of widespread poverty and inequality in indian economy?

Answer 1

To begin the discussion, on poverty, inequality and inclusive growth, two important points need be stated: (i) Poverty, inequality (and hence need for inclusive growth) and unemployment are inter-related issues. One cannot be appreciated without knowing the dimensions of the other; and (i) we need to distinguish between the concept of absolute poverty and the concept of relative poverty. As to the first, it need be made clear that a simple increase in the GDP may not be a sufficient condition (although a necessary condition) to enable all sections of the society – asset owners and asset – less to share in the fruits of growth. On the contrary, empirical evidence has clearly demonstrated that the benefits of growth are unevenly distributed (especially when an economy is in the transition from a low-income category to a high-income category). With a time lag as the growth process continues, the distribution of income begins to become evener. This relationship between growth and distribution of income has given rise to Kuznets’ famous hypothesis reflected in Kuznets’ inverted U-shaped curve. 

Answer 2

The policy implications are dependent on the following:

• Structure of GDP Growth

• Employment

• Education

• Health and shelter.

Explanation:

• The total growth of the GDP of an economy is measured by the growth of the GDP of the income classes. Hence the structure of the GDP growth is important.  

• The rate of growth of employment is overshadowed by the growth in the labour force. This has resulted in major unemployment in the country.  

• There has been an implementation of many Poverty alleviation programs and other employment and promotion of self-employment programs.  

• The provision of shelter and education facilities with loans is available to the people.