• Roushan

Social exclusion and economic disparity in India

Actualizado: 16 may 2021


The article attempts to understand the rising economic inequality and social exclusion in India through the economic, social, and political lens. Data on development indices indicate India's entering a time of great peril especially since the advent of the covid 19 pandemics. It also debunks the idea that covid is alone responsible for this unprecedented economic crisis, given Indian economy is highly informal and investment in human capital is far from adequate especially in the health sector and the Indian economy started showing signs years before so the pandemic has just exposed and exacerbated the crisis which stayed all along. The article is analytical and suggestive, challenges and a way forward have been discussed at length.


Indian economy contracted severely due to the pandemic which brought India to its knees. According to cmie data, the unemployment climbed all-time high at 24% in May due to economic distress caused by Covid 19 pandemic but it has been crippling all along, data shows that despite India's rapid growth before 2019, formal sector jobs grew sluggishly. Formal sector job growth was 21.2% in 2016-17 to just 21.6% in 2017-18 and 21.9 percent in 2018-19. According to Forbes world’s billionaire list 2021, India added 38 billionaires in the list, India has the third highest number of billionaires, Indian billionaire’s combined worth has doubled in 2020. The increase in billionaire’s worth is a global scenario with almost every country having more billionaires now than in 2020 (forbes). According to the Oxfam report, India’s case is unprecedented with a 35% increase in their total wealth amid the worst economic crisis whereas 12.2 crore people lost their jobs out of which 75% were employed in the informal sector. (Oxfam)


According to an Oxfam report titled ‘inequality virus’, the top 10% of India's population sits on 77% of the nation's wealth. The wealth of India's richest 1% is more than 4 times the total wealth of the poorest’s 70%. India’s health spending is the fourth lowest in the world (oxfam). Insufficient health spending causes a great divide between private and public healthcare systems. In India, private hospitals are better equipped and organized whereas public hospitals lack basic medical facilities thus private hospitals are the most sought but charge exorbitantly high though. There is a “high out-of-pocket expense” for health in India which pushes a huge population into poverty or extreme poverty and even the 2021 economic survey takes cognizance and suggests more health spending.

Gini coefficient: it is an economic indicator that indicates the distribution of income in a country within the range of zero to one. 0% indicates perfect quality whereas 100% indicates perfect inequality. India’s Gini coefficient was 35.7% in 2011 whereas it increased to 47.9% in 2018, suggesting a significant rise in income inequality.

The new economic policy (1991) created an ecosystem conducive for inequality by not focusing on poverty alleviation and rural development which should have been in fact given due to importance as India has been an agrarian economy with a huge workforce in agriculture and allied activities. India, in the quest to reduce its high fiscal deficit, gave a cold shoulder to the primary sector. India cut subsidies on agriculture inputs like fertilizer and diesel. The new economic policy helped India to get out of the worst economic crisis created by a high fiscal deficit and depleted foreign exchange reserve but it also set the stage for “jobless growth”. IMF & world bank gave India a loan on the condition that India would work for macroeconomic stabilization. There seems an outright assumption that India can fare well without achieving sectoral balance; primary, manufacturing, and service but that backfired, India didn't get “Rostow’s_stages_of_growth” right. India “took off” before attaining the “pre-conditions of the take-off” that India took a huge jump from primary to tertiary

In the post-economic reforms (1991), employment growth in public & private sectors grew only by 0.05% per annum during 1994-2008 despite 7.2% average annual growth whereas the pre-reform growth was 1.20. Overall employment fell 39% (2009-10) to 38.6% (2011-12), despite the 8.9% GDP growth rate. (NSS, 2011-12). (mospi).

Despite the slowdown, billionaires' worth is increasing.

Thomas Piketty explains how economic inequality perpetuates itself in an economy, when the return on investment exceeds the rate of economic growth in the economy, the distribution gets more uneven and wealth gets skewed towards those who control means of productions (Piketty).


Social exclusion is an individual’s failure to obtain adequate basic capabilities, the individual is at the risk of being excluded from unemployment, education. The term social exclusion originated in Europe to describe sections of disabled and deprived groups who were the most vulnerable without financial security, they were not poor but ‘almost poor', a section which hardly affords a bare minimum life for themselves and mostly employed in informal jobs which is a chief characteristic of developing nations per se but you can also find countries which are through developed but witness a high level of informality in the job market especially for "migrant labourers" following, they have huge migrant population coming from third world nations. Economic inequality, thus, is a global phenomenon so is social exclusion. Who is excluded? So, the vulnerable economic groups are called excluded; casual labourers, rural agricultural labourers, children, aged people, specially-abled people. In India informal employment is 90%, (employment with no social security) a big chunk of it includes the excluded population

Types of exclusion and their impacts:

❏ Politicrepresentational exclusion means lack of adequate political represenation, causing discrimination between social groups like transgender had no voting right until much recently in 2019 when the Supreme court of India recognized them as the third gender.

❏ Economic exclusion means lack of access to labour market and credit and capital assets which do not allow scaling up a small farm production by a poor landless farmer, leaving him to a non-institutional source of loan which charges exorbitantly and is exploitative, often the farmers lose their small land (if they have) to landlords or work as a bonded labourer and this is how poor gets poorer and rich gets richer.

❏ Social exclusion means discrimination against gender, age, ethnic which reduces the opportunity of access to social services and limits labour market participation, India fell 28 positions on the 2021 global gender gap index. According to the 2017 Indian exclusion report, the rate of landlessness is highest amongst Dalit at 57% and around 40% displaced were Adivasi.

Indian inclusion report by Centre for equity studies (2019-20):

The report finds four main parameters along which citizens have faced exclusion: citizenship, childcare, employment, and healthcare. Children under the age of 6 are the most excluded, 90% of children from marginalized groups between 6 months to 2years don't receive adequate nutrients.(Exclusion-Report-2019-20). It is noteworthy that Per capita health spending correlates to per capita GDP, investment would be a double-edged sword.

Rural India is an epicenter of poverty & economic equality

Around 66% of India’s population lives in rural India and a significant part of this population lives in poverty following underdevelopment and underutilization of human and physical resources and regional imbalances per se between rural and urban India as the world says India is a land of contradiction. According to the ICE 360° Household Survey conducted in 2016, of the bottom 20% of India’s income quintile, 89% live in rural areas. 20% of rural households with self-employment in agriculture earn less than poverty line income, says the National Sample Survey Office (NSSO report). Agricultural labour productivity (ratio of agriculture output to agriculture inputs) is not up to par for good reasons; economic exclusion, disguised unemployment, small landholdings, lack of technology, labour intensive approach, and lack of scientific knowledge about fertilizers and organic techniques of farming.

But on this front after years, things are turning around for rural India gradually but significantly, govt of India has been pushing for rural development through its central schemes. In FY 2020, agriculture had witnessed 20% GDP contribution, a 3% jump from the last year, and has been the highest in the last 17 years (economics survey, 2021). This happened at a time when every sector was reeling with the pandemic to even survive and registering a negative growth whereas agriculture showed around 3.2% positive growth rate and came out as the most resilient sector. It will be critical how the agriculture sector continues to unfold for instance unless the growth in the sector is not reflected in the wage of agricultural labourers, it’d further deepen economic equality.

Way forward:

❏ Investment in social infrastructure will be increased, especially health. India's health investment is so poor just 1.26% of the GDP whereas an average country has 6-7% as it will reduce “out of pocket'' expenses on health. Per capita spending correlates to per capita.

❏ Reduce overdependence on agriculture and strive for structural change in employment.

❏ Taxing billionaire (cess) and doing direct cash transfer to migrant workers for soothing.

❏ Social impact and regular evaluation could be a good way to break down the issues and give a required policy response.

❏ Social safety net for informal sector workers.

❏ Rural development, creation of sustainable villages by empowering rural people.

❏ Urban employment guarantee programme to redress rising urban unemployment particularly after the second wave of the pandemic urban unemployment is more than rural unemployment pushing urban poor into the spiral of extreme poverty.

❏ Increasing the number of days (100) of assured employment under the MGNREGA will stop migration to some extent.

❏ India has not fully developed its manufacturing sector which is not at par, even with the “make in India initiative” the contribution stayed stagnant which is worrying.


Social exclusion and economic inequality go hand in hand, excluded groups are pushed to the wall by inaccessibility or limited accessibility to nutrition, health, education, etc. distribution of wealth is highly skewed. The Gini (inequality in income distribution) points out an increasing income inequality in India which is just ranked after Russia, the world's most income-unequal nation.

Indian exclusion report precisely identified the four factors that potentially cause social exclusion. The relationship between income inequality and social exclusion is interconnected. During 1951-81, the belief was, high growth causes a 'trickle-down effect’ although it never happened. Trickle-down effect disappears into thin hair.

There is high dependence on the agricultural sector (64%) and reducing this would cause structural change which in turn corresponds to sectoral balance, a much-needed response. The manufacturing sector shows “catch up” and generates maximum employment. According to a NITI Aayog report, income per farmer is around one-third of the income per non-agriculture worker.

Inclusive development will act as a deterrent to social exclusion and economic inequality. It is a long process but once we work to get our fundamentals arrangement right, we’ll start getting our economic indicators better each quarter, exactly as India witnessed the resiliency of the agriculture sector far from expected. We need to understand the importance of each sector, in case of India, it gets even critical following the Indian economy characterized by “jobless growth”, one of the main reasons for “income inequality” as the manufacturing sector which gives maximum jobs has been untapped, (“Forbes world billionaire list”) a jump from agriculture to service, to get employed in these two sectors, one requires education.