In its report 'The Inequality Virus' tabled at the World Economic Forum at Davos on January 25, Oxfam reported that during the pandemic the wealth of Indian billionaires grew 35%. Ironically during the same period 84% Indian households suffered varying degrees of economic losses and 75% of the poorest, employed in the informal sector lost their jobs.
India's top 1% holds 4 times the total wealth held by the bottom 70% of the population. Can inequality be more glaring than this? Surprisingly, the GDP, the per capita income, the Sensex and other economic indicators give the impression that the average Indian is well off. This is because our economic models are flawed. They do not give a true measure of economic inequality. This adversely impacts our economic policies.
Take for example the model for calculating per capita income in which the total income earned by all people in a country is divided by the total number of people in that country. This works well in western and developed countries. These countries have a minimum wage of about $15 per hour. The per capita income in these countries is more or less a true reflection of average income earned by a person in those countries.
This model however, does not work in developing countries like India where there is huge inequality of incomes. There is no minimum wage in the informal sector (and 90% of our workforce comes from the informal sector). Therefore the incomes are lop sided.
A suggestion: I suggest that in India and all developing countries the income of the top 1% be excluded in calculating per capita income. This will give a true picture of the economic inequality in a country.
PROF ROBERT CASTELLINO, Calangute
