Causes of the Widened Gap between the Poor and the Rich in India - Essay Example

Student’s name Institution Course Lecturer Task: Causes of the Widened Gap Between the Poor and the Rich in India Date There is a high poverty gap between the rich and the poor in India. These have made India to have nearly a third of the estimated world’s poor despite have having very few great billionaires. In the 2010, the World Bank reports showed that thirty two point seven percent of its total population was living below the International poverty line of US$ 1.25 per day while a further 68.7% lived on less than US$ 2 per day. Data from United Nations Development Programme for the same year showed also that nearly 30% of the Indian population lived below Indian national poverty line. This information shows that there is high poverty in India. Despite India, having high poverty there is a small clique of few very rich individuals. Presence of a small group of very rich people in India has made the existence of income and economic inequalities in India. This has caused what Branko Milanovic 2011 (a World Bank economist) calls ‘The haves and the have-nots.’ This inequality in India has continued to rise and hence widening the gap between the rich and the poor. This widening gap has various economic, political and social challenges to the government and the people of India in general. For instance, it is not health to economic growth of the country since most resources must be channelled to correcting the inequalities and supporting the majority poor instead of investing in economic growth and development. A wide range of factors has caused this widening gap between the rich and the poor in India. Some of the factors that have contributed to the widening gap between the rich and the poor include the following: The rapid population increase There has been high increase in population in India for the last decades. India has a population of over 1.21 billion people. Majority of the increase in population of India has been among the poor people. This high increase in population has contributed to the increase in the gap between the rich and the poor. This is because high population comes with a lot of demanding needs to the population. The high population has increased spending among poor people. Many funds are being channelled by the poor people in sustaining their families thus not savings for future investments, Nagaraj (2012). With high population, there is a tendency of presence of high dependency rates, high education costs, and high parental costs among other expenses. The high dependency rates reduces funds that could be saved for investments and thus making the Indian poor people to continue being poorer. On the other, the rich educated and elite Indians usually have small families and hence low number of dependence. This makes them have low spending needs than the poor. Low spending gives them room for high savings and thus able to invest more on income generating projects. They thus invest in property, big booming businesses and industries. This in turn gives them more wealth and thus becoming richer. High population is thus one of the reasons for the widening gap between the rich and the poor. This is despite it providing market for the various products and enriching the country in terms of labour force. Increased unemployment The high population growth rate in India has not been going hand in hand with the increase in job creation in India. There have been consequently increases in unemployment, underemployment and disguised unemployment. These increases in the various types of unemployment in India have contributed to the widening poverty gap in India. According to Indian government statistics, in the financial year 2011-2012 only 35.5 % of the population was involved in gainful employment for better part of this year. This shows that the reset 64.5% partial or totally depended on this few for their daily needs. The unemployment rate among males and women are the same while in urban areas the unemployment rates is higher among the male. The high unemployment rates means that many people are not able to earn incomes and salaries. The working few are forced to spend nearly all their incomes on the dependencies. The working few and the dependencies are thus forced to life poor lives due to the low family per capita income. There is thus no savings, no investment and thus high tendency of occurrence of the vicious cycle of poverty. The unemployment among the majority of the India’s population makes it hard to break the poverty gap between the rich and the poor. The poor are forced to remain poorer while the rich continue enriching themselves and hence this gap is widening. Unequal land and property holding Unequal land and property holding among the poor and the rich has continued to widen the poverty gap in India, Alok Goyal (2009). The colonialist perpetuated this problem and the eventual leaders who took over after independence who did not implement the ambitious land reform program intended to reduce landlessness among the majority poor people in rural areas. This is because land and asset are the main factor of production and thus inequality in their ownership means there will always be existence of wealth inequality. In India, there is an unequal and unjust land holding which contributes highly to income and wealth disparities in rural areas. Few rich farmers in the rural areas have big land holdings while a majority of the other farmers owns small tracks of land that in many occasions uneconomical. This nature of land ownerships makes the few rich farmers to reap high commercial benefits from their farms while the majority poor producing only for subsistence and may be for small scale sales. The high scale landowners thus highly benefit from profits realized from their farms, which they further invest in more income generating projects and thus benefitting more. The small-scale farmers who are also the majority earn less and therefore have little room for enlarging their wealth. This has seen the widespread poverty among the small scale and landless farmers, labourers and their dependents. The land ownership system in India is therefore one of the factors contributing to the widening income inequality among the rural areas of India. This factor is attributable to historical evolution of India. Property and assets in India has also been historically accumulated on few people. This has thus make it easy for a few people to maximise their use to enrich themselves while the property less people having nothing to use in both income and wealth generation. High differences in wages and salaries The high wage and salary difference in India has contributed to widening poverty gap in India. The employment sector in India has high disparities in earnings paid to the top earners and the bottom earners. A study by McCartney, Matthew (2008) shows the increasing wage gap in India since it undertook the economic reform in 1991. There is a wide difference in wage levels between the skilled labour force and both the semi skilled and unskilled labour force. This has been caused by the liberalization of the India’s market making production to favour the skilled personnel in the labour market. High disparities in the wages contribute to widening the gap between the rich and the poor. The payment of huge salaries to skilled personnel and managers in various companies usually makes them wealthier and richer. On the other hand, the majority unskilled, semi-skilled and majority of the workers who are illiterate earn less income thus continue to live below or just above the poverty lines. Low incomes among the poor make them not to increase their living conditions since they live by hand to mouth. Investment in income generating activities among this group of workers is low and therefore the probability of increasing their wealth is very low. Some even goes a further extends in living in debts and hence becoming worse off. Low wages in industries and has contributed to widening the poverty gap. Many of the industries and companies in India are largely owned by few rich people with capitalist interests. Many of them have devised various cost cutting measures. One of them is the charging of low wages and salaries to its workers. This has been possible because of the high number of job seekers in India compared to the locally available jobs and the liberalised unorganised employment sector. The charging of low wages and salaries to its workers makes them to accumulate more wealth while workers in the other hand suffering in poverty. The accumulation of more wealth among the few owners of the profitable businesses in India has made them more rich. They have reinvested the profits in other businesses both in India and worldwide. The workers on the other hand, continue to live in the bondage of poverty unable to move out of it due to the low disposable and investment income they get from their employment. This has thus widened the poverty gap between the few rich property and business owners and the majority poor workers. Poor social backgrounds Various social set up have highly contributed to the widening gap between the rich and the poor. Some of these include the law of inheritance, education system, and caste system among others. Indian laws of inheritance have continued to give room for family property and wealth inheritance by the close relatives. This has made it possible for the families of rich families to continue passing its wealth to its heirs and generations that making them to continue being wealthier throughout. Poor people on the other hand have less to inherit and sometimes forced to inherit debts from their families. This hence make them to pay for previous burdens of the families and thus not able to prosper. This kind of inheritance has thus widened the poverty and inequalities among the people. The poor families have been in many times not able to get quality and effective educations. These hence have thus made them illiterate and thus idle and ignorant for centuries. This is attributable to the high education costs and lack of sufficient facilities in majority of the highly populated poor people residence. Lack of education among the majority poor has made majority of them unable to compete with the educated elite in investment and job sectors. This has thus given an upper hand to the educated few in investing in highly profitable fields and grapping majority of the well paying jobs. Illiteracy has also made some poor people unable to start successful businesses. On the other side, the educated people have successful taken advantage of the available opportunities to enrich themselves. The lack of education opportunities is hence one of the social factors that has widen the gap between the rich and the poor. The castle system has contributed to inequality and contributed to the widening poverty gap. This system of leadership is a social problem since it encourages discrimination of some section of the population (Dalit) against various services, investment and employment, Pruthi (2004). The Dalit group is a group considered as outcastes and thus marginalized. Their rights are decided only by birth and fixed. Discrimination of this group has made them to be poor since they cannot get conducive economic climate to establish themselves. They have been forced to live poor lives at the expense of their leaders who live lavish lifestyles while enriching themselves through bribes and corrupt means. The caste system also has seen the discrimination of women in India. There have been high discrimination in both the Hindu and Muslim communities. The dowry system where women pay the dowry has seen them also waste resource and thus become poor. the women discrimination has seen their literacy level becoming too low standing at 39% compared to their male counterparts which stands at 64% of the total male population. These factors have contributed to the high poverty levels among the women in India. These social factors among other social injustices among various classes of people have contributed to the widening poverty gap. The factors mentioned above have jointly contributed to widening the gap between the rich and the poor. Conclusion After over 50 years of independence, India has made great economic progress. There have significant industrial and economic development that has made it closer to self-sufficiency. There have been expanding middle class with an unprecedented access to goods as well as opportunity. Nevertheless, there have been widening poverty gap between the rich and the poor. The high inequality is a threat to the existence of a successful nation both socially, politically and economically. This is due to the negative impacts poor people have to the country. The Indian government should thus come up with clear way forward of reducing the poverty gap between the Haves and Have-notes. Major priorities and reforms that can be implemented to reduce the high wealth inequality may include: reforms in money lending, increasing education opportunities among the poor and women, introducing land ownership reforms and also introducing employment policies that favour the poor among other reforms. References Alok Goyal, M. G. (2009). Business Environment. New Delhi: FK Publications. India, G. O. (2012). second annual report to the people on employment. New Delhi: ministry of Labour and employment. McCartney, M. (2008). Political Economy, Growth and Liberalisation in India. New Delhi: Routledge. Milanovic, B. (2011). Measuring International and Global Inequality. Princeton: Princeton University Press. Nagaraj, R. (2012). Growth, inequality and social development in India: Is inclusive growth possible? New York: Palgrave Macmillan. Pruthi, R. (2004). Indian caste system. New Delh: Discovery Publishing House. Read More