How Is India Flaring in Achieving SDG 10 on Reduced Inequality?

Abstract

SDG 10 brings the idea of a society where each person enjoys the benefits of economic growth. In recent years, India has experienced one of the fastest growths in the world. However, the nature of economic growth can sometimes be inequality-enhancing. Therefore, in spite of high growth rate, it may not be an easy task for India to achieve the goal on reduced inequalities.

A large and diverse country like India, where inequality takes on many forms, faces a bigger challenge in attaining SDG 10. In India, there are income inequalities and inequalities of access to opportunities by gender, religion, caste and region. However, based on availability of data, five indicators under SDG targets 10.1, 10.2 and 10.4 have been identified to evaluate the performance of India towards SDG 10. Based on SDG index score for reduced inequalities among 29 states, 3 states are categorised as achievers; 20 states are identified as front runners and 2 states are defined as aspirants. Though India has shown progress in achieving goal 10, it has a long way to go in order to achieve equality between top 10% and bottom 40% of the households in both urban and rural areas. It still needs to ensure equal access to opportunities for females, minorities and transgender.

To create equal opportunities for all by 2030, India will need to adopt a more concrete state-specific public ‘Yojana’ (strategy). This may include enhancing coverage of the social security system, introducing and expanding social insurance schemes and establishing special funds for lagging regions.

10.1 Introduction

Economic inequality refers to the unequal distribution of income and opportunity between different groups in society. Inequality can take many forms. Many leading scholars have argued that inequality is multifaceted in nature, as inequality is associated with many high-priority indicators (Scheidel 2017; Piketty 2014; Milanović 2016). Inequality is present in income structure and also can be observed in health status, educational attainment, employment, access to food and water, access to social security, opportunity, choice and many more. Interestingly, aforementioned aspects of inequality are intertwined such as improvement in water and sanitation can mitigate inequality in health status or income inequality can be marginalised by obtaining parity in educational activities.

For the past few decades, inequality has been on the rise across the globe and thus, it has been a concern for almost all countries around the world. Though some countries have reduced the numbers of people living in extreme poverty, economic gaps have continued to grow as the richest amass unprecedented levels of wealth. Since 1980, the share of national income going to the top 1% has increased rapidly in North America (defined here as the United States and Canada), China, India and Russia and more moderately in Europe. On the contrary, the Middle East, sub-Saharan Africa, and Brazil, have had relatively stable, but extremely high levels of inequality. Though rapid economic growth in Asia, particularly in China and India, has lifted many people out of extreme poverty, the richest 1% of the people have been mainly benefitted by the economic gains. Their share of global income is still much higher than their 16% share in 1980, although it has declined at more than 20% since the 2008 financial crisis (World Inequality Report 2018).

There are many research works showing that inequality affects the economic growth. That is why, the relationship between aggregate output and the distribution of income is an important topic in macroeconomics (Galor 2011). In recent years, the impact of income inequality on economic growth has received significant attention in policy circles. The different discourses show that the changes in income inequality have an effect on GDP per capita. However, the degree of effect may differ between rich and poor countries.

There is a major concern regarding poverty and inequality among the policy-makers in India, though the economy has been going through steady growth in the recent years. Ali and Son (2007) mentioned that indeed sustained growth is a necessary condition for reducing poverty, but it is not the sufficient condition because of the presence of inequality. Chandrasekhar and Ghosh (2015) revealed that inequality in India has not shown any nosedive (considering income and consumption) since her independence, even though growth has been commendable. On the other hand, according to the statistics of RIS (2016), although there has been an upward trend in overall inequality, state-level disaggregation shows some states with negative or stagnated inequality during 2000–2010. Such heterogeneity calls for rigorous research to understand the phenomenon more clearly, which can lead to construct better policy framework.

Sustainable Development Goal (SDG) on reduced inequality (SDG 10) recognises inequality within and among nations as a major concern despite progress in and efforts at narrowing disparities of opportunity, income and power. Therefore, SDG 10 sets the targets to reduce the inequality and determines the indicators to measure the gap for each target. Keeping the SDG 10 in the background, Government of India has taken initiatives to reduce inequality. Different programmes have been undertaken as per the comprehensive strategy of social inclusion, women empowerment and access to better social security. In some areas, the progress is visible. Gini Coefficient of income has fallen from 36.8 to 33.6 during the years 2010–2015. The advancement is also noticed at the state level. Some states are already on track to achieve the SDG 10 by 2030. Among 29 states, 3 states are categorised as achievers; 20 states are identified as front runners and 2 states are defined as aspirants (NITI Aayog 2018). However, though there are successes, India will need to make a long jump to achieve the targets by 2030.

Against this backdrop, this chapter attempts to explore the targets and indicators under SDG 10, identify the challenges in implementing the goal, assess the current progress achieved by India at the national level and state level, conduct a cross-country analysis to understand where India actually stands, discuss the lessons that India can take from other better performing countries, and suggest way forward for an inclusive society.

10.2 Synopsis of SDG 10

SDG 10 echoes the necessity of establishing a society where each person will enjoy the benefits of the economic progress equally. Thus, it accentuates on progressively reducing not only income inequalities but also inequalities of outcome. This is possible only by ensuring access to equal opportunities and promoting social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, religion or other status relevant within a society. Since the goal also stresses on reducing inequality among countries, it asks for enhancing representation and voice for developing countries in decision-making in international institutions. With this aspiration, the following targets and indicators were developed by the Inter-Agency and Expert Group on SDG Indicators (IAEG-SDGs) and agreed to as a practical starting point at the 47th session of the UN Statistical Commission held in March 2016.

Box 10.1 SDG 10 in the Global Context^a

Targets	Indicators
10.1 By 2030, progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average	10.1.1 Growth rates of household expenditure or income per capita among the bottom 40% of the population and the total population
10.2 By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status	10.2.1 Proportion of people living below 50% of median income, by age, sex and persons with disabilities
10.3 Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard	10.3.1 Proportion of the population reporting having personally felt discriminated against or harassed within the previous 12 months on the basis of a ground of discrimination prohibited under international human rights law
10.4 Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality	10.4.1 Labour share of GDP, comprising wages and social protection transfers
10.5 Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations	10.5.1 Financial Soundness Indicators
10.6 Ensure enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions	10.6.1 Proportion of members and voting rights of developing countries in international organizations
10.7 Facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies	10.7.1 Recruitment cost borne by employee as a proportion of yearly income earned in country of destination 10.7.2 Number of countries that have implemented well-managed migration policies
10.A Implement the principle of special and differential treatment for developing countries, in particular least developed countries, in accordance with World Trade Organization agreements	10.A.1 Proportion of tariff lines applied to imports from least developed countries and developing countries with zero-tariff
10.B Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest, in particular least developed countries, African countries, small island developing States and landlocked developing countries, in accordance with their national plans and programmes	10.B.1 Total resource flows for development, by recipient and donor countries and type of flow (e.g. official development assistance, foreign direct investment and other flows)
10.C By 2030, reduce to less than 3% the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5%	10.C.1 Remittance costs as a proportion of the amount remitted

1. Source: SDG Knowledge Platform, United Nations
2. ^a https://sustainabledevelopment.un.org/sdg10

Though SDG 10 correctly identifies increasing inequality across borders as a threat to inclusive development, there are two potential challenges in implementing the goal: (1) equivocal conceptualisation and (2) absence of required data. The targets under SDG 10 cover very broad areas and thus, they do not specifically mention about how to reduce inequality within country or across countries. Besides, like the other SDGs, the unavailability of data does not always allow to assess the current situation and estimate the needs in order to achieve the goal.

Inequality takes on many forms in a large and diverse country like India. There are inequalities in income and consumption; structural inequalities which take the form of inequalities based on gender, religion, caste and social groups as well as regional inequalities, all of which manifest in inequalities of opportunities and access. India has a number of legislations and programmes for empowerment and socio-economic development of women and different social groups. There are several programmes in place which aim to provide equal opportunity in education to girls and children from vulnerable sections of the society. The Government of India’s emphasis on the JAM trinity (Jan Dhan–Aadhaar–Mobile) presents a broad strategy of inclusion, financial security and social empowerment. India has several national level schemes like Pradhan Mantri Jan Dhan Yojana, Deen Dayal Upadhyay Grameen Kaushal Yojana and employment schemes like Prime Minister Employment Generation Programme, which are aimed at reducing social, economic and political gaps and progressively achieving greater equality in the country.¹

To measure India’s performance towards reduced inequality, five national-level indicators have been identified, which capture three out of the ten SDG targets for 2030 outlined under SDG 10. These indicators have been selected based on availability of data at the national level and to ensure comparability across States and Union Territories (UTs) (Fig. 10.1).

Fig. 10.1

Targets accepted by India. (Data Source: NITI Aayog (2018))

Box 10.2 Indicators Adopted by India

SDG global target	Indicator selected for SDG India index	National target value for 2030
10.1 By 2030, progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average	1. Palma ratio of household expenditure in urban Indiaa	1
	2. Palma ratio of household expenditure in rural India2	1
10.2 By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status	3. Ratio of transgender labour force participation rate to male labour force participation rate	1
10.4 Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality	4. Percentage of scheduled caste sub plan fund utilisation	100
	5. Percentage of tribal sub plan fund utilised	100

1. Data Source: NITI Aayog (2018)
2. ^aMeasured as the ratio of the monthly consumption expenditure of the top 10% households to the monthly consumption expenditure of the bottom 40% households

10.3 India’s Headway Analysis

The international community, especially the vulnerable nations—the least developed countries, the landlocked developing countries and the small island developing states—has made significant steps towards lifting people out of poverty. However, disparities among people are still prominent within these countries. Inequality within countries has risen, while income inequality between countries may have been reduced. Inequality impedes the progress through depriving people of opportunity and subjecting many to conditions of extreme poverty. Rising inequalities adversely impact human development. According to the inequality-adjusted human development index (HDI), sub-Saharan Africa loses 33% of its HDI to inequality and South Asia by 25%. That is why, special effort is required to make the economic growth inclusive and reach out to everyone with the benefits of growth.

To achieve SDG 10, higher income growth of the bottom 40% of the population, universality in principle policies, attention to the needs of disadvantaged and marginalised populations, inclusion of all in social as well as political spheres, etc. will be fundamental. To achieve greater equality and promote social, economic and political inclusion of all by 2030, the Government of India has emphasised on the three-pronged Jan Dhan–Aadhaar–Mobile programmes aiming at a comprehensive strategy of inclusion, financial empowerment and social security. As a consequence of cumulative effort, at the national level, progress is observed for the selected indicators under SDG 10. The data indicate that India has shown better performance in all the indicators except indicator 1—Palma ratio of household expenditure in urban India. The ratio is 1.41 for India, where the target is 1.0 (Table 10.1).

Table 10.1 Performance of India on indicators for SDG 10

In case of performance analysis at the regional level, the progress rate varies across states and Union Territories (UTs). The states and UTs have been given an SDG index score based on their performance in the indicators. The SDG index score for SDG 10 ranges between 38 and 100 for states and between 52 and 100 for UTs. Based on the score, the States and UTs have been divided into achiever (100), front runner (65–99), performer (50–64), and aspirant (0–49). Among the states, Meghalaya, Mizoram and Telangana are the achievers, while Dadra and Nagar Haveli, Daman and DIU and Lakshadweep are the achievers among the UTs. Totally 29 states and UTs are front runners and two states are aspirants (NITI Aayog 2018). The majority of the less progressed states and UTs have an issue in common. They have performed poorly in indicator 1 and as a result, have received a lower score (Fig. 10.2).

Fig. 10.2

Index score of States and UTs on SDG 10. (Source: NITI Aayog (2018))

10.4 Where Does India Stand? A Cross-Country Analysis

The twenty-first century has witnessed economic development. Also, it has countersigned the concentration of wealth in a few hands as its necessary condition. In the year 2000, top 1% Indians enjoyed 74,935 USD per capita of wealth where the remaining 99% of individuals had only 1300 USD per capita of wealth. Over time, this gap between the richest and the poorest has proliferated. In 2000, the top 1% of population enjoyed 58 times the wealth of the rest of the population and this gap has widened to 95 times in 2014. Nevertheless, India is not the only country that is facing the challenge of increasing income inequality. During the last four decades, with the increasing economic development and growth, majority of the developing nations have experienced rise in income inequality. For instance, in most OECD countries, income inequality has widened during the past two or three decades. From the mid-1980s to the late 2000s, according to Gini coefficient, income inequality rose by 10%, while the ratio of top 10% to bottom 10% has reached its highest level in 30 years. The rise in income inequality has been far from uniform between countries. A decline has even been observed in some countries. The OECD area experienced a sort of ‘inequality convergence’ from the mid-1990s until the late 2000s since inequality increased in countries such as Sweden, Denmark and Finland and fell in countries such as Turkey, Mexico and Chile. However, on the aspect of income inequality, the Palma ratio² for the latest available year endorses the existence of income inequality across different countries. While countries like Iceland, Norway, Sweden, Denmark, and Belgium have a ratio less than or equal to 1, most of the countries have a ratio greater than 1. There are countries such as South Africa, Namibia, Botswana and Zambia with very high inequality. Besides, the list includes several developed or high-income countries with the presence of income inequality. India has a Palma ratio of 1.5, which confirms the concentration of wealth in the hands of the richest people (Fig. 10.3).

Fig. 10.3

Palma ratio for the latest available year. (Data Source: Human Development Indices and Indicators, 2018 Statistical Update, UNDP)

In India, the analysis of the performance of development expenditure illustrates that though the poor should have been the mostly benefitted, the development spending has benefited the rich more effectively and thereby raised the inequality within country, between states and within states. At the national level, inequality is broadly found to have risen in India during the period 2000–2015. In 2000, the share of top 10% in national income was 39.9% and it went up to 56.1%. In the same period, the national income distribution data show that bottom 50% of people had an average share of 17.3%. The share for bottom 50% was 20.6% in 2000 and it declined to 14.7% in 2015. Therefore, the share of bottom 50% decreased by 5.9 percentage point in this period. Moreover, the share of middle 40% also declined by 10.3 percentage point (Fig. 10.4).

Fig. 10.4

National income distribution for India (%). (Data Source: World Inequality Database)

The national income share of top 1% population has been stable with a slight fluctuation in recent years, however. For India, though the share of top 1% has not increased much, the share is still very high. During the period 2010–2015, the share was estimated to be, on an average, 21.3% for India, where the world average was 20.7%. For the same period, the average share of the richest 1% was lower for both Europe and Asia (excluding Middle East countries). They were 10.1% and 16.5%, respectively. However, it is evident from the analysis that like many other developing countries, the nature of economic growth for India has been inequality-enhancing. The available statistics affirms that there is inequality between income groups and it is in upsurge. The existing interventions have remained unsuccessful at reducing the inequality at an expected level. While poverty has fallen, most of those who have escaped poverty continue to face a high risk of falling back into it. Moreover, those who remain poor are increasingly chronically poor, and may be particularly difficult to reach through the introduction or expansion of safety nets. As a consequence, the income gap between lower and higher income groups is rising (Fig. 10.5).

Fig. 10.5

National income share of top 1%. (Data Source: World Inequality Database)

Despite having short-term and long-term poverty reduction strategies, India has been unsuccessful in reducing inequality at the expected level. One of the potential explanations of this can be the Kuznets inverted-U hypothesis of income inequality. According to Kuznets (1955), as an economy develops, market forces first increase and then decrease economic inequality. Hence, as per capita national income of a country increases, in the initial stages of growth, inequality in income distribution rises and after reaching the highest degree in the intermediate level, the income inequality falls. Since India is in its development stage, inequality is showing an increasing trend. In India, the Kuznets’ ratio and national per capita income data show that the inequality rate has still been increasing. Since the rate is yet to reach the maximum point, it will continue to escalate in near future. While India has a rising Kuznets’ ratio, it has been stable at 1.46 for Sri Lanka for last two decades. Of course, compared to Sri Lanka, India, as a bigger economy and is more diversified. India has a large number of population and there are so many religions, castes and languages. Therefore, India faces more challenges in reducing inequality. However, the Kuznets’ ratio has, on an average, also slumped for high-income countries and lower middle-income countries (Fig. 10.6).

Fig. 10.6

Kuznets’ ratio and recent trend of income inequality (The Kuznets’ ratio is the income share of the top 20% of the population to the bottom 60% of the population.) Note: The data period for this figure is 1981–2017. Since the income distribution data are not available for each year, the authors have divided the period into four different periods: 1981–1990, 1991–2000, 2001–2010 and 2011–2017. For each period, the average has been calculated and used to construct the figure. (Data Source: World Development Indicators and Poverty and Equity, the World Bank)

10.5 Lessons from Other Countries

The current growth model pursued in India (perhaps in other emerging and developing economies as well) will tend to increase inequality and thereby dent the growth impacts on poverty. The main resource of a poor person is labour; ensuring a decent and productive employment is thus a key prerequisite for inclusive economic growth for reducing poverty and improving inequality. According to Beyer (2018)³ economic growth in South Asia (including India) has failed to generate enough employment. They termed this outcome as ‘Jobless’ growth. However, an attempt to change this growth process may not be easy with the advent of automation and artificial intelligence. A better approach may be to use fiscal instruments namely tax financed social protection to smooth consumption of poor, help develop their skills, and address their life cycle risks with the aim to reduce poverty and inequality.

Social protection instrument emerged long ago during 1880s and 1990s. Some of the European countries developed these instruments to tackle rising poverty against the backdrop of industrialisation and rural to urban migration. The programmes were known as ‘poor relief’ programme and countries spent more than 1% of their GDP on these programmes. Gradually the ‘poor relief’ programmes have been replaced with well-designed inclusive social protection system based on the risks associated with life cycle of a citizen. An inclusive life cycle social protection system generally covers risks of various stages of life, such as pregnancy and early childhood; school children; youth; working age and the elderly. The European countries now allocate around 25% of their GDP on inclusive life cycle-based social protection system (Fig. 10.7).

Fig. 10.7

(a) Poor relief budgets in the nineteenth century: 18320/0 and 1880 (% of GDP). Source: Lindert (2004, Growing Public: Social Spending and Economic Growth since the Eighteenth Century; Volume 1: The Story. Cambridge University Press: New York). (b) Spending on social protection schemes in developed countries (% of GDP). (Data Source: Social Expenditure Database, OECD)

Some of the emerging (Brazil, South Africa, Argentina, and Mexico etc.) and developing economies (Bangladesh) are also following the experiences of the European countries (particularly the experiences of the OECD countries) by embracing an inclusive life cycle-based social protection system. The figure below clearly shows that emerging economies are covering a larger segment of their citizen with social protection allocation of reasonable amount of resources. In comparison, India has embraced a ‘poor relief’ social protection system spending around 2.5% of their GDP covering only 19% of their population. It is now time for India to discard the ‘poor relief’ approach and embrace the inclusive life cycle-based social protection system (Table 10.2).

Table 10.2 Beneficiary coverage, spending on social protection and Gini index for selected countries

10.6 Vision for India’s Future: Way Forward for an Inclusive Society

• 1. As mentioned above, India should adopt an inclusive life cycle social protection system in place of their ‘poor relief’ programme over the medium term. At the same time, beneficiary coverage must be increased to at least cover the vulnerable population (as opposed to only poor or extreme poor)—perhaps reasonable approximation is 40–50% of the population with flexibility of variations by regions. The coverage expansion may be justified by two reasons: (1) low-level beneficiary coverage is associated with large underestimation of poor (i.e. known as exclusion errors); and (2) use of low national poverty line excludes large number of genuine poor and vulnerable persons from poverty count. India must also increase spending on inclusive life cycle social protection system to 3% of GDP by 2025 and 6% by 2030 to cover more beneficiaries as well as to increase the size of transfer payments. By 2030, India may aim to adopt a universal child grant and universal social pension for age 65+ population with a provision for self-exclusion.

• 2. Every year, India has been creating 5–5.5 million jobs. But with an average labour force participation rate of 50–55%, India may need to generate 6–6.5 million jobs per year over the medium to longer run (i.e. 2030). This envisages that, every year, one million new entrants to the labour market cannot find productive work. Furthermore, according to an estimate in Envisioning India 2030,⁴ another one million employment per year is needed to absorb some of the workforce who could not find suitable work over the last decade or so. At the same time, India must also try to raise female labour force participation to at least 50% from the current level of 27% for their full use. Adding it all up implies that India must increase employment by 8.5–9 million people per year over the medium to longer run (i.e. 2030).

• 3. Job market is changing fast in India (like other countries). In line with this changing job dynamic, India must create mechanism to train the workforce on ‘future skills’. New courses and training programmes must need to be developed to impart youth training to meet the future demand. Furthermore, ‘new-age learning labs’ in educational institutions for hands-on training on advanced technologies should also be set up.

• 4. Social sector (i.e. education and health) spending in India is low at around 4% of GDP—with around 1% on health and 3% on Education, while East Asian economies spend far more to build the human capital foundation for growth. Thus, India must increase social sector spending, focusing on improving the pupil–teacher ratio by hiring more teachers. India has two million unfilled jobs in the public sector. This huge vacancy may be used to hire more teachers and health workers.

• 5. India is a large populous country with large variations in economic and social development, resulting in divergence between poverty rates and inequality. Special attention must thus be attached to the relatively less well-off (or lagging) regions. India may create a lagging region funds to propel economic and social development of these lagging regions (Fig. 10.8).

Fig. 10.8

Summary of the main life cycle risks and challenges. (Source: Kidd et al. (2017))

10.7 Conclusion

Growing inequality across nations and within nations is a major concern depressing economic growth and growth impacts on poverty reduction, and causing social unrest and conflict. Given the importance to abate the rising inequality trend, SDG 10 attaches special emphasis on ways to reduce the inequality. Like many countries, inequality is increasing in India. Data show that in India, there are both income inequalities and inequalities of access to opportunities by gender, religion, caste and region. Although in recent years income inequality has fallen, India has a long way to go to achieve SDG 10 target for 2030. India must embark on polices and strategies to reduce inequality to attain SDG 10 by 2030. They include diverse sets of policies and strategies encompassing inclusive social protection system, expanding social sector spending and innovative employment-generating schemes.