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NDTV
4 days ago
- Business
- NDTV
Beyond Utopia: Is India Tackling Inequality?
With $4.19 trillion (current prices), India has surpassed Japan in terms of GDP in the year 2025, as per the IMF. Now, India ranks fourth in the world, just below Germany ($4.74 trillion) with a small margin. It is expected to surpass Germany within two to three years if India continues its growth trajectory. It is undoubtedly a remarkable feat for India. However, there is one concern raised in public discourse that needs to be addressed: 'Is India's growth inclusive or unequal?', and, 'Should India do more to eradicate inequality?' This question is frequently raised by a section of economists. In this article, an effort is made to understand this inequality, its trends, and how to tackle it based on secondary data and reports available, while considering all opinions. The most common index to measure inequality is the Gini coefficient (values between 0 to 1, where 0 represents perfect equality and 1 shows extreme inequality). As per the Economic Survey 2024-25, inequality has shown declining trends. The Gini coefficient for rural areas declined to 0.237 in 2023-24 from 0.266 in 2022-23, and for urban areas, it fell to 0.284 in 2023-24 from 0.314 in 2022-23, based on consumption expenditure. Historically, the Gini index has fluctuated between 31.6% (the lowest in 1993) and 35.9% (the highest in 2017) between 1977 and 2021 (World Bank). However, some experts believe that the expenditure-based Gini coefficient does not represent the true picture, as households or individuals with low incomes tend to spend more than they earn, whereas high-income groups spend much less in percentage terms, resulting in long-term wealth inequality that remains uncaptured in the data. Other reports on this matter also need to be considered, as findings vary. According to the 'Pandemic, Poverty, and Inequality: Evidence from India' report by Bhalla Surjeet S. et al. (2022), "Real inequality, as measured by the Gini coefficient, has declined to near its lowest level reached in the last forty years—it was 0.284 in 1993/94 and in 2020-21 it reached 0.292.". The percentage of total consumption at the national level by the top 10% income group changed from around 28% to 32%, while for the bottom 40%, it remained around 9% between the 1980s and 2013, as per the 'Inequality and Locational Determinants of the Distribution of Living Standards in India' report by the IMF in 2021. Other literature also shows that inequality has declined in recent years (Ghatak et al., 2022 and Gupta et al., 2021). A report titled 'State of Inequality in India' (Kapoor and Duggal, 2022) states that 6%-7% of total incomes are earned by just the top 1% and expresses concerns over the concentration of growth benefits without percolation to the poorer classes. In contrast, some studies report stark inequality based on different parameters or data sets, such as unequal median-to-top pay ratios among NIFTY50 companies, flight usage data, the Forbes list, or even food-delivery app usage data. Most reports on inequality in India are based on expenditure data, but a few also derive estimation for income or wealth inequality. One of the world's leading voices on inequality, the World Inequality Lab (WIL), provided various estimates for India in its report. According to the report, the top 1% hold 40.1% of wealth, the top 10% hold 65%, and the bottom 50% hold just 6.4%. In terms of income, the top 1% earn 22.6%, the top 10% earn 57.7%, and the bottom 50% earn just 15% of the total income share for the year 2022-23. Although after liberalisation, between 1990 and 2022, the average real growth rate in income in India became 3.6% per year, significantly higher compared to 1.6% between 1960 and 1990. But most of the income share increased for the top 1% and declined for the bottom 50%. Now, the question that arises is, is India unique in its inequality? The answer is no. The same report by WIL shows that India's income share held by the top 10% (57.7%) is in the middle with respect to other developing countries like South Africa (65.4%) and Brazil (56.8%), but higher than the USA (48.3%) and China (43.4%). Another report, 'Trends in Income Inequality and its Impact on Economic Growth (2014)' by the OECD, states, "Today, the richest 10% of the population in the OECD area earn 9.5 times the income of the poorest 10%; in the 1980s, this ratio stood at 7:1 and has been rising continuously ever at the bottom grew much slower during the prosperous years and fell during downturns, putting relative (and in some countries, absolute) income poverty on the radar of policy concerns." This proves that inequality is a part of growth for most countries and is inevitable for free market-based economies. Before delving deeper into the reasons behind inequality and strategies to tackle it, there must be clarity of thought. No matter what economic or market system a country has, inequality is a reality. No matter how hard a nation tries, inequality will persist. Except in the utopian communist system, which exists only theoretically or in propaganda literature. Such systems do not make everyone equally rich but equally poor, as experienced by many economically failed countries. Does this mean we shouldn't strive for equality and inclusivity in growth and development? No, we should certainly aim to maximise equality in a pragmatic way without falling into the trap - the trap of policies that sacrifice growth and turn a nation into a banana republic. As rightly stated in The State of Inequality in India report 2022, "Inequality is not simply a lack of resources…It is living in vulnerability and deprivation with restricted means of upward mobility. Income distribution is not an accurate measure of assessing the degree of inequality, but as a socio-economic inequalities transcend into everyday lives in ways that restrict mobility, limit one's capability to make choices, and intensify their experiences of exclusion and isolation." Thus, it is more appropriate to focus on empowering the economically and socially deprived classes. Certainly, attacking market-friendly policies, businesses, and businessmen won't help in fighting inequality. Often, incentives or tax relief for industries or corporate tax cuts are blamed for inequality and shown as the root cause. But it is essential to understand that these measures promote further investment in the economy and help create employment. High tax rates may seem attractive in the short run, but eventually, the economy suffers in the form of slow growth or business migration in the long run. To counter inequality, the most reliable and potent weapon is the philosophy of 'Antyoday', that is, the upliftment of the poorest and most marginalised members of society. Inequality is triggered primarily by social vulnerabilities in health, education, and skills among the lowest sections of society. If the government keeps uplifting the lowest strata through schemes and policies, the results can be expected to be far more positive compared to policies that may sabotage the growth cycle. Over the last decade, the government has worked in this direction. With initiatives like the 'Ayushman Card' coupled with schemes like 'Poshan,' the insecurity and risk of falling suddenly into the poverty cycle have reduced significantly. Health-related expenses are one of the most common 'emergency expenses' for low-income groups. According to the Economic Survey of India, between FY15 and FY22, the share of government health expenditure increased from 29.0% to 48.0%, and the share of out-of-pocket expenditure in total health expenditure declined from 62.6% to 39.4%. With these kinds of efforts, the government has achieved great success in eradicating extreme poverty (below 1%), poverty (low middle income PPP$3.2 per day, just 14.8% in 2019-20 compared to PPP$1.9 in 2011-12), and multi-dimensional poverty in India. Improvements in access to health and education facilities, along with food security and other basic amenities, bring the poorest of the poor to an equitable platform. An opportunity and chance from which they can at least start dreaming and aiming for higher goals and become part of India's growth story. This is the actual equality for which we, as a nation, should strive. Schemes like 'Start-up India' have paved the path for many first-generation entrepreneurs to build successful startups and unicorns. Merit and equal opportunity-based competition motivate individuals to work harder and take risks to benefit from high returns. Thus, if India maintains its economic growth trajectory while empowering socially and economically weaker sections through quality education, access to health and nutrition and skill development, inequality will be reduced - not in a utopian sense, but in a practical one.
Business Recorder
12-06-2025
- Business
- Business Recorder
Confronting the dearth of educated and trained manpower
EDITORIAL: Among the many glaring challenges that the budget document has thrown up, the enduring burden of unemployment — particularly youth unemployment — stands out as a critical concern, reflecting both a sluggish job market and inadequate policy response to the needs of a growing workforce. As reported by the Economic Survey 2024-25, the unemployment rate stands at 6.3 percent, with the situation especially troubling for youth aged 15-24, among whom joblessness reaches 11.1 percent. This cohort represents nearly 45 percent of all jobseekers, underscoring the scale of the challenge. The crisis is deepened by stark gender disparities — 14.4 percent of young women are unemployed compared to 10 percent of young men — as well as a persistent mismatch between the skills imparted through education and those demanded by the labour market, leaving many young people unprepared for available opportunities. However, far from mounting a focused and determined effort to address unemployment and underemployment, the issue continues to be met with persistent neglect by policymakers. In fact, the scale of the neglect can be judged by the fact that even before meaningful solutions can be crafted, the government has failed in as basic a task as providing an accurate picture of the problem as the unemployment figures cited in the Economic Survey rely on outdated figures from the 2020-21 Labour Force Survey. As reported in this newspaper, the reason given for the failure to calculate more up-to-date figures was the delay caused by the Pakistan Bureau of Statistics undertaking the 7th Population and Housing Census. That exercise, however, concluded two years ago, and one would have expected that a challenge as fundamental to Pakistan's economic future as unemployment would have commanded greater urgency by our economic managers. The delay in addressing the data gap underscores a broader inertia in policy thinking around how to confront the unemployment crisis. The least the government could have done for the upcoming fiscal year was to come up with a comprehensive plan aimed at bridging the country's substantial skills deficit. This could have encompassed meaningfully incentivising the establishment of polytechnic institutes and vocational training centres across the country. Moreover, there could have also been a focus on encouraging the corporate sector to take an active role in developing structured apprenticeship and training programmes that equip young individuals with market-relevant skills through hands-on, on-the-job experience. It is vital to understand that without serious investments in technical education and adult vocational training, any attempt to address unemployment in Pakistan will remain superficial. Polytechnic institutes, in particular, have the potential to play a critical role in preparing a workforce aligned with the evolving demands of industry by offering practical alternatives to traditional academic tracks and opening viable employment pathways for millions of young Pakistanis who are currently being left behind by the system. Properly developed, vocational training and polytechnic institutes can prove to be transformative by offering youth a path to economic empowerment and meaningful inclusion in the workforce, while simultaneously boosting industrial competitiveness and productivity. Beyond skills development, any strategy to tackle unemployment must also target the SME sector, which is inherently labour-intensive and largely informal. Here, the priority must be to incentivise its shift to the formal economy, unlocking its access to banking finance, which could prove crucial both for the growth of these businesses and their capacity to create jobs. Simultaneously, investments in labour-intensive sectors such as agriculture, construction and manufacturing are essential to absorb a growing workforce, while encouraging digital entrepreneurship could also serve as a key driver of job creation, particularly among the youth. Ultimately, equipping the workforce with skill sets and education that reflect market demand coupled with fostering an environment conducive to private sector-led job creation will be vital for addressing the country's significant employment gaps. Copyright Business Recorder, 2025
Gulf Today
11-06-2025
- Business
- Gulf Today
Over 1 million Pakistanis went abroad for work in a year, says report
Tariq Butt, Gulf Today correspondent More than one million Pakistanis left the country for overseas employment during the current fiscal year, according to the Economic Survey 2024-25. It highlighted the migration trends across the provinces and regions, with Punjab leading the way by a significant margin. A total of 404,345 individuals from Punjab went abroad for work, making it the largest contributor to the country's overseas workforce. Khyber Pakhtunkhwa (KP) followed with 187,000 workers, while Sindh sent 60,424 individuals overseas for employment. The report noted that 29,937 people from the tribal areas and 29,591 from Azad Kashmir left the country in search of better job opportunities. Smaller numbers were recorded in the federal capital, with 8,621 workers, Balochistan with 5,668, and the northern areas contributing 1,692 workers to the global labour market. The data underscores the critical role of overseas employment in Pakistan's economy, particularly in terms of remittances, and highlights regional disparities in labour migration patterns. Meanwhile, the Economic Survey also said that Pakistan's Information Technology (IT) sector has been declared one of the fastest-growing segments of the national economy. It showed an impressive 23.7% growth in IT exports, which surged to $2.825 billion during the fiscal year. In March 2025 alone, IT exports reached $342 million, registering a robust month-on-month growth of 12.1%. The IT services sector also posted the highest trade surplus of $2.4 billion, underscoring its growing role in the national economy. Freelancers contributed significantly, bringing in $400 million in foreign exchange. Pakistan's startup ecosystem is showing signs of maturity, with more than 1,900 startups having completed training at National Incubation Centres. In a noteworthy development for gender inclusion, over 12,000 women have been economically empowered through various tech and entrepreneurship programmes. The telecom sector also posted strong performance, with revenues reaching Rs803 billion. The number of telecom users in the country climbed to 199.9 million, with a density rate of 81.3%. The sector contributed Rs271 billion to the national exchequer during the fiscal year. To bolster digital growth and cybersecurity, a Pakistan-China IT Working Group has been formed, signalling increasing international cooperation in technology. The survey said that IT remains a major contributor to Pakistan's export growth, with rising global demand for Pakistani software products driving momentum in the sector.
Mint
11-06-2025
- Business
- Mint
Manoj Pant: Let's prepare well for negotiations on trade in services
Here are some facts. Today, the share of services in global trade stands at about 25%. More importantly, it is the only category of trade that has expanded at a rapid pace since the financial crisis year of 2008. In recent years, the share of goods in trade has fallen by about 5 percentage points and there has been a corresponding increase in the case of services. This pattern is mirrored in India's case. According to the Economic Survey 2024-25, the share of services in terms of export gross value added (GVA) has increased from around 51% in 2014-15 to around 55% now. Further, it is growth in services trade which has kept India's current account deficit (CAD) at a manageable 2% of GDP. It was the General Agreement of Tariffs and Trade (GATT) that led to a decline in global tariffs. Till recently, except some countries in South Asia, import tariffs were in single digits (before Donald Trump took office in the US). And today, international arguments increasingly revolve around non-tariff barriers (NTBs). Also Read: Services led exports are a mixed blessing for the Indian economy It was a stalemate over NTBs at the World Trade Organization (WTO) that led many countries to take recourse to regional trading arrangements to expand their trade over the last two decades. This has the advantage of going beyond the WTO in new areas. One of these is trade in services. The General Agreement on Trade in Services (GATS) was based on a 'positive list' approach, where countries only need to make offers when they want to. But this has meant very little forward movement here along the lines of commodity trade negotiations under GATT. Another critical hold-back is the lack of reliable data. Unlike commodities, services have no border restrictions like tariffs, but are constrained by internal regulation that can be complex. For example, trade in infotech services is hampered not only by visa systems (as in the US), but also by other regulatory constraints like data adequacy rules, FDI norms and totalization agreements (to avoid double taxation via social security payments). Nor are these regulatory constraints the same across countries. Also Read: Ajit Ranade: India must diversify its exports of manufactured goods Under the WTO, there was an attempt to create a template for international comparison by clubbing services trade under four heads—or so-called 'modes.' Unfortunately, the 'positive list' approach has meant that GATS has been a non-starter. To cut a long story short, as services trade has increased globally by leaps and bounds, countries are increasingly grappling with the issue of codifying trade in services. As the above discussion indicates, the process will have to begin by recognizing the comparability of services across countries. For example, in educational services, we would need mutual recognition agreements (MRAs) to define comparability of degrees. This is easier said than done. In India, education is on the concurrent list for the Centre and states to legislate on, and regional regulations would also have to be considered. An effort to achieve a degree of international comparability has started with the WTO's classification of services into 12 main sectors and 160 sub-sectors. This was mainly done to allow member countries to categorize their services into four 'modes' under the GATS. However, since these multilateral negotiations have ground to a halt, it is now for countries to take this forward under various free trade agreements (FTAs). The difficulty lies in establishing a single measure (like tariffs in the case of commodities) that could establish restrictiveness of services across countries after MRAs are signed. Also Read: Special trade ties with America aren't India's only export game This is particularly important for India, whose global strength seems to lie in trade in services. Yet, due to all the difficulties listed above for codifying trade in services, India's experience has been unsatisfactory. In 2005, such an attempt was made in the India-Singapore Comprehensive Economic Cooperation Agreement, but there was little progress as the issue of MRAs moved nowhere either in banking or in education. Similarly, in the case of India's trade relations with Asean, it was agreed in 2005 that an agreement on trade in services would follow the deal struck on goods, but so far no discussions have been held with Asean countries on this. Also Read: Will the WTO get crushed under an avalanche of bilateral trade deals? As mentioned earlier, the issue is how to generate a single number to define restrictiveness in services that can form a benchmark for further negotiations on trade in services. There have some attempts by both the Organization for Economic Cooperation and Development and World Bank to create a Services Trade Restrictiveness Index (STRI), but as shown in 'Quantification of Services Trade Restrictions: Some New Results' (Pant and Sugandha, March 2022) published in the Economic and Political Weekly, these indices have serious statistical shortfalls that can lead to a complete reversal of sectoral rankings by trade restrictiveness. Yet, this STRI approach seems to offer a way forward for India to hold talks on market access for services. It could feature in talks underway with the US and EU. The STRI can help begin negotiations on broad sectoral lines before proceeding to granular talks on specific regulatory issues. So far, India has focused on Mode 4 (the movement of natural persons) to enhance trade in services. This effort, however, has largely been a failure. As I have argued before, such a narrow approach seems like too weak an attempt at exploiting India's comparative advantage in services. We need a better researched approach. The author is visiting professor, Shiv Nadar University.
Business Recorder
10-06-2025
- Business
- Business Recorder
Finance Minister Aurangzeb presents federal budget 2025-26
Finance Minister Muhammad Aurangzeb is currently presenting the federal budget for the upcoming fiscal year 2025-26, as the coalition government seeks to revive the economy, meet the International Monetary Fund (IMF) measures and provide some relief to the tax-weary masses. The budget, expected to have an estimated outlay of Rs17.6 trillion, comes at a time when the global economy remains engulfed in uncertainty fueled by new trade tariffs being imposed by the United States. Finance Minister Aurangzeb, who is delivering his second budget speech in the National Assembly, will also lay the Finance Bill 2024 in the Senate on the same day, as required under Article 73 of the Constitution. Ahead of the budget address, the federal cabinet approved the budget proposals for the next fiscal year (2025-26). Some areas of interest: GDP growth target External financing estimates Taxation on the salaried group PSDP size and focus Broadening the tax base Defence budget The budget comes a day after the government missed its GDP growth target of 3.6% in the outgoing fiscal year, posting a figure of 2.7%, as revealed in the Economic Survey 2024-25. However, Aurangzeb, during his press briefing while unveiling the Pakistan Economic Survey 2023-24, highlighted a strong 4.8% rebound in industrial activity, pushing the economy's size to $411 billion for the first time and raising per capita income to $1,824.
