Inequality of income - Unfavourable for sustainable growth

It is all very well for to hope that India's GDP grows at 9% plus on a consistent basis. But it does not make sense if the benefits of this growth are not felt by all sections of population.  

That is one big problem that Asian countries including India and China face. Developing Asia's rapid growth in recent years has given rise to a widening rich-poor divide.

 

The Asian Development Bank has stated that if inequality in the Asian region had remained stable over the past two decades, growth over the years would have lifted 240 m people more out of poverty. This would be the equivalent of 6.5% of developing Asia's population in 2010.  

But instead, inequality widened even as Asia's economic growth took off. The share of income going to the richest households has increased in the past decade. Close to 20% of total income has now been cornered by the wealthiest 5% in most countries in the region.

Income inequality brings with it considerable perils. For one it can be a harbinger of social unrest of the kind we have been witnessing in the Arab world.  

It also leads to more pressure on the government to pursue  populist polices many of which tend to be ineffective. All these then serve to malign growth itself.

 

That is why Asian governments need to focus more on productive areas. These include education, health care, infrastructure and creation of quality jobs if growth has to be all encompassing.  

However, with Indian government finances in a state of disarray one wonders when the government will get its act together in this regard.

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