As more and more scams are unearthed about the manner in which facilities for the Commonwealth Games in Delhi have been built and continue to be constructed, the moot question that was raised during the Asian Games nearly three decades ago remains as relevant as ever: Who does the government spend money for — those who have or those who don’t? The answer is apparent.
Indian society was always unequal. But, in recent years, as the country’s gross domestic product (GDP) has grown faster and more consistently than before, there is little or no evidence to indicate that economic inequality has come down. On the contrary, there are indications that India has become more polarised, perhaps more vertically (that is, across income and expenditure classes) than horizontally (namely, across geographical regions). Economists have debated this issue endlessly, but even if the poor in India have not become poorer, the gap between the rich and the poor has continued to grow even as politicians mouth empty slogans about the need for “inclusive growth”.
It is often argued that economic growth invariably results in inequality widening but that poverty cannot be alleviated without growth — the analogy drawn is about a small cake being cut for a growing number of people vis-à-vis baking a bigger cake. It is also claimed that China has not just grown faster than India but that China is more unequal than India. Both these contentions can be challenged and, in fact, have been in a book, Awakening Giants: Feet of Clay with a subtitle Assessing the Economic Rise of China and India, that has been written by Pranab Bardhan, professor of economics at the University of California, Berkeley, and recently published by Oxford University Press.
Less than two years ago, at a fancy function in a five-star hotel where a television channel was awarding state governments which had performed well in terms of human and social development, one of the judges of the competition made a brief intervention. Former Governor of the Reserve Bank of India and Rajya Sabha MP Bimal Jalan stated that the total value of the assets of the country’s top five billionaires (in US dollar terms) equalled those of the bottom 300 million people. He was no party-pooper that evening for scarcely an eyebrow was raised before the booze started flowing.
When, in May 2006, the report of the National Commission for Enterprises in the Unorganised Sector headed by Arjun Sengupta claimed that 78 per cent of those who work in the unorganised sector in India live on Rs 20 a day or less, there was a huge hue and cry from economists who questioned the methodology and the authenticity of the data that was used to arrive at such a conclusion. In December 2008, an expert group headed by the former head of the Prime Minister’s economic advisory council, Suresh Tendulkar, estimated that roughly a quarter of the country’s urban population live on Rs 19 a day while close to 42 per cent of the rural population consume goods and services worth roughly Rs 15 a day.
Has it become boring and unfashionable to repeat certain facts about the world’s largest democracy, where one out of three computer software engineers in the world has originated and a country where one out of three of the planet’s malnourished and illiterate also reside? Economic writer and columnist Swaminathan Anklesaria Aiyar had argued that if the poor were really concerned about inequality, they should have celebrated the erosion in the wealth of the rich on account of the worldwide recession. But his logic is somewhat convoluted.
Prof Bardhan points out that inequality in India is not merely higher than in China but possibly “in the Latin American range” as official data from the Government of India (notably, from the National Sample Survey Organisation) is largely based on distribution of consumption expenditure and not income. This clearly under-estimates inequality as the rich tend to save much more than the poor.
He has further argued that the temporary reduction in the net worth of sections of India’s corporate oligarchy — after all, we just went through a slowdown not a recession, didn’t we? — has not at all reduced its corrupt grip on the country’s political life or brought down the power of large landlords or the elite that captures local governance and misappropriates funds and services meant for the poor.
If one considers factors such as inequality in the distribution of land and capital, access to education, healthcare and employment opportunities and mobility across generations and social groups, Prof Bardhan believes that India’s performance is inferior to that of China. He writes that while regional disparity in income or consumption is greater in China than in India, over the last two decades, China’s backward regions have grown at rates almost comparable to its advanced regions and regional earning disparities may be narrowing (though not yet per capita income disparities).
In India, on the other hand, the poorer states (largely concentrated in the central and eastern regions) have grown much more slowly than richer states (mostly in the west and the south), implying that relative inequality has increased. In his book, Prof Bardhan explains why the impact of growth on poverty reduction has been weaker in India than in China, “probably on account of initial conditions, including larger inequality (of opportunity) in India, owing to inequalities of land, education and social status”. The penultimate sentence of the chapter on poverty and inequality reads: “The link between economic reform and inequality is… ambiguous and difficult to disentangle from the effects of other ongoing changes”.
We in India may aspire to hold our heads high in the comity of nations but we cannot also ignore the fact that not just China, but other countries that were historically unequal, such as Mexico, Brazil and Chile, have been far more successful than India has been in reducing poverty and inequality.

Paranjoy Guha Thakurta is an educator and commentator