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India ranks 132 in commitment to narrow income inequality

LiveMint logoLiveMint 17-07-2017 Gireesh Chandra Prasad

New Delhi: India has been ranked 132nd among 152 nations in a new index tracking commitment to reducing income inequality. Sweden led the index while Nigeria remained the worst performer.

The index prepared by Development Finance International, Inc. and Oxfam ranks nations on the basis of their welfare spending, the progressive nature of their tax system and prevailing wage inequality in the labour market.

Welfare spending is measured by expenditure on health, education and social protection. In a progressive tax system, the tax burden on corporations and individuals goes up progressively as per income levels, with the idea of taxing assessees based on their ability to pay.

The report highlights India’s less-than adequate spending on welfare measures on account of its low tax to gross domestic product (GDP) ratio compared to that of some other nations as well as the disparity between wages of men and women for the same work. India collects just 16.7% of GDP as taxes, while South Africa manages to collect over 27%, pointed out the report.

The report, the result of investigation into the indicators for a year, says that while countries such as Sweden, Chile, Namibia and Uruguay have taken strong steps to reduce inequality, countries such as India and Nigeria do very badly overall, and among rich countries, the US does very badly.

“The past 30 years have seen a rapid increase in the gap between the richest people and everyone else. In turn, this has exacerbated existing inequalities, for example those based on gender and race. It has led to greater political inequality, as the wealthy increase their influence; and it has led to the declining influence of everyone else, particularly the most marginalized people, which undermines democracies and stifles citizens’ voices,” said the report.

The research findings threw light on income disparity in Asia. “Women are often paid less than men for doing the same job, despite working longer hours. For instance, in India, the wage gap is 32.6%. Even in societies that are considered to have achieved high levels of gender equality overall, there remain significant gender gaps in income and influence,” the report pointed out.

Countries such as Sweden, Chile, Uruguay and Namibia have shown they can buck the trend of growing inequality by taking decisive steps, the report said, adding that unless countries like Nigeria and India take concerted action now, they will fail to end poverty.

“Oxfam calculated that if India were to reduce inequality by a third, more than 170 million people would no longer be poor. Government spending on health, education and social protection is woefully low. The tax structure looks reasonably progressive on paper, but in practice, much of the progressive tax is not collected. On labour rights and respect for women in the workplace, India also fares poorly, reflecting that the majority of the labour force is employed in the agricultural and informal sectors, which lack union organization,” said the report.

It also highlighted the income disparity among workers in the organised sector, especially in the IT industry where the chief executive officer draws remuneration much higher than a typical employee.

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