Income inequality, unemployment to give rise to social problems: study

Mumbai: Income inequality in the country is "likely to exacerbate" due to the "government's inability to create jobs", warns a report.

The study, by brokerage Ambit Capital, also said that this combination of joblessness, that has been deteriorating since the last few years, and income inequality poses a higher risk of social tension.

Noting French economist's latest findings that income inequalities have been rising systematically since the 1980s, Ambit said the bottom 50 per cent of the country's population accounts for only 11 per cent of the national income, while the top 10 per cent accounts for 29 per cent.

Even though per capita income stands at USD 1,850, it is "shockingly" low at USD 400 for the bottom 660 million or 50 per cent of the total population, it said.

"This is the same as a citizen of Madagascar and in fact... lesser than a citizen of Afghanistan which has per capita income of USD 561," it said.

At the other end, the top 1 per cent (or just 13 million) of the population has a per capita income of USD 53,700, which is comparable to Denmark's and is higher than the per capita income of Singapore at USD 52,961, it added.

Noting that "the government's inability to create jobs is likely to exacerbate inequalities," the report says "the increasing demand for jobs under the MGNREGA scheme is indicative of the deteriorating jobs potential particularly in the lowest economic strata. The weakness in the blue-collar jobs is also evinced by the stagnant rural wage growth".

Citing insights from academic studies, the report warned that a combination of joblessness and inequality leads to an increase in social problems, such as a surge in crimes.

"Our own experience shows that states like Bihar and Uttar Pradesh with significantly lower per capita income than national average and high degree of inequalities, have very higher levels of crime rates than other states," it says.