India’s economic mobility and its impact on inequality (Mint)

Mains Paper 3: Economy
Prelims level: Economic Mobility
Mains level: Key sources of economic mobility and its dimensions

Context

• There has been a phenomenal rise in economic inequality in India.

Major highlights

• A 2018 Oxfam study reports a significant increase in the consumption Gini index in both rural and urban areas from 1993-94 to 2011-12.
• According to the Global Wealth Report (GWR) 2017 by the Credit Suisse Research Institute, between 2002 and 2012, the share of the bottom 50% of the population in total wealth declined from 8.1% to only 4.2%. In the same period, the share of the top 1% of the total wealth increased from 15.7% to 25.7%.
• A recent survey pointed out that the mobility rate for the population is remarkably low. In 7 years, at least 7 in 10 poor households remain poor or remain in an insecure non-poor state.
• In a mobile economy, the households move more freely throughout the income/consumption distribution.

Key importance of the mobility

• Long-term welfare effects of rising inequality depend crucially on the level of economic mobility.
• Economic mobility or the lack of it can accentuate the adverse effects of inequality.
• An economy with much economic mobility will result in a more equal distribution of incomes and consumption than an economy with low mobility.

What are its key dimensions?

• Muslims are more vulnerable to falling below the poverty line over the seven-year period compared to Hindus or other religious groups.
• Compared to upper-caste groups and OBCs, SCs and STs are less likely to escape poverty and more likely to move into poverty.
• Between upper castes and OBCs, the latter is more likely to move into poverty and less likely to become secure non-poor.
• Rural households are more likely to remain in poverty compared to urban households.
• Inequality in India can be characterized as chronic since households belonging to the lower rungs of the economic ladder are likely to find themselves caught in a poverty trap.

Way ahead

• Poverty reduction efforts should focus on ways to improve the permanent economic status of households through the acquisition of assets and capabilities, rather than dealing with temporary volatility.
• There is also doubt on the efficacy of existing affirmative action and social programs to improve the economic status of marginalized groups in the country.

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Prelims Questions:

Q.1) With respect to “Hyper-Spectral Imaging Satellite (HysIS)”, consider the following statements:
1. It is an earth observation satellite built around ISRO’s Mini Satellite2 (IMS-2) bus launched by PSLV-C43.
2. The primary goal of HysIS is to capture High Definition images of Earth’s surface and life of the satellite is five years.
3. It has been jointly designed and built by India and Russia.

Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. All the above
D. 1 and 2 only

Answer: D
Mains Questions:
Q.1) What are the key sources of the India’s economic mobility? What are its key dimensions?