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Q.1) Recent Oxfam report has highlighted grave situation of rising inequality in India. In this context discuss causes
and impact of income inequality. (10 Marks, 150 words)
How to approach the question
Introduction
● Definition of Income inequality and introduce Oxfam report regarding it
Body
● Write about causes of Income inequality
● Write about Impact of Income inequality (at India level, Global level)
● Write about Suggestions to reduce inequality
Conclusion
● Conclude suggesting the importance of reducing income inequality

Answer:
INTRODUCTION
Income inequality of a country refers to unequal distribution of wealth and income among its citizens. Recent Oxfam
report titled “Inequality Kills’’ points out a stark income divide worsened by the COVID-19 pandemic in India as well
as worldwide.
BODY
There are multiple factors responsible for High Income inequality in India. Some of them are: -
Causes of Income Inequality: -
• Rising Unemployment among Youth: Recent PLFS estimates suggest that unemployment is increasing
especially among youth and there is a reduction in participation in organized sector employment
• Rising Inflation: Inability of RBI to check the inflation under 6% as per its mandate. Besides, COVID-19
exacerbated the worsening situation in the country
• Tax revenue structure: Gross tax receipts of the central government for previous year reveal that 52% of tax
revenues are from indirect taxes indicating regressive taxation i.e., poor are taxed more than rich
• Low Female labor force participation: Patriarchal nature of Indian society is directly responsible for low
female labor participation in urban as well as rural areas increasing dependent population
• Digital divide: 65% of Indian population lives in rural areas which suffers lack of digital connectivity and unable
to participate in labor market
Impact of Income Inequality
Income Inequality affects socio-economic aspects of the population of the country and COVID-19 worsened its effect
in India as we introduced one of the earliest and most stringent lockdowns and brought the economy to a standstill,
triggering unemployment, hunger, distress, migration etc., Some of major impacts are: -
• Increase in Billionaires as well people below Poverty Line (BPL): 2021 saw 40% increase in the number of
billionaires in India and 5 cr. Indians have been pushed to BPL during same time
• Skew in Share of Country’s wealth: As per one estimate, over 75% of a country's wealth is in the hands of the
top 1% of a country's population.
• Blow to Gender Parity: Due to ongoing pandemic, women collectively lost Rs 59.11 lakh cr. in earnings in
2021.
• High Fiscal deficit and Decline in Social sector expenditure: High income inequality coupled by COVID-19
Pandemic have led to Increasing fiscal deficit and decline in Social sector expenditure. For example, In FY-21
Health sector saw a decline of 10% in expenditure from FY-20.
• Increased Vulnerability of Informal sector: High income inequality indicates high number of people working
in Informal sector (80% of our workforce is Informal). The Informal sector was hit hard by COVID-19 restrictions
i.e. 120+ million people lost their jobs working in the Informal sector.
• Increased Regional disparities: Income Inequality in India is susceptible to regional disparities and due to
COVID-19 restrictions, Low income states were severely affected than high income states of southern India

DMP 2023_DAY 9 1
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Thus, Income Inequality is a socio-economic phenomenon which affects several aspects of a country and to mitigate
its effects. Some of the following measures can be taken:-
• Evidence based policies: Indian governments must invest in evidence-based and powerful policies to save lives
and invest in our future instead of Knee-jerk reaction measures. For e.g. Increase capital expenditure and
reduce populist expenditure to control fiscal deficit.
• Restructuring Tax Structure: Central as well as State governments should design their tax structure such that
overall tax structure becomes progressive
• Social Expenditure: Increase healthcare expenditure as it enables more people to be productive and ready for
labor market
• Controlling Inflation: RBI and Central government should commit to their targets of controlling inflation in
pursuit of growth
Conclusion:
India is one of the countries which fare worse in World bank’s GINI Index as well as Oxfam report. To achieve the ideal
of ‘New-India’ by 2025, the Government needs to work not only on wealth generation but also on distribution of
wealth among its population.

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