Inequality and the Black Economy in India

Introduction

In recent years, India has been grappling with issues of inequality and a growing black economy. To tackle these challenges, the government has adopted a strategy centered around the creation of large conglomerates and focused on supply-side policies. However, this approach has failed to address the underlying issues and has perpetuated the deep divide between the rich and the poor. The lines aims to analyze the government's strategy and propose alternative solutions to promote inclusive growth and reduce inequality.

The Role of Large Conglomerates

The government's strategy to address the growing inequality is to create large tribal models, similar to the chaebols in Korea, such as Adani, Ambanis, and Tatas. The idea behind this approach is to shift the market towards these conglomerates and stimulate economic growth. However, there is a fundamental difference between the growth of chaebols in Korea and Indian conglomerates. While the Korean chaebols grew by developing technology and innovation, Indian conglomerates have primarily expanded through acquisitions. This lack of technological development hinders the long-term sustainability and growth potential of Indian conglomerates.

The Impact of the Unorganized Sector

The unorganized sector, which represents a significant portion of the Indian economy, is increasingly being marginalized by the organized sector. As a result, the market for large conglomerates is primarily derived from this unorganized sector, leading to a concentration of wealth and a widening income gap. The government's strategy of keeping the unorganized sector's production low further perpetuates the divide between the poor and the wealthy, ultimately fueling the increasing inequality in the economy.

The Black Economy and Policy Failure

Another critical issue India faces is the existence of a vast black economy. The black economy is predominantly concentrated in the hands of the top 1% and accounts for a significant portion of income and wealth inequality. The activities within the black economy, such as tax evasion and unproductive investments, result in wastage and hinder the productivity and efficiency of the economy. These activities often go unnoticed, leading to a failure of policies aimed at curbing black market activities. The lack of significant progress in reducing the ratio of the black economy to the GDP over the past 25 years is evidence of the government's failure to address this issue effectively.

Correcting GDP and Poverty Data

To accurately measure the impact of the black economy and the unorganized sector, it is crucial to incorporate them into GDP and poverty data. Currently, these sectors are inadequately represented in official statistics, leading to a distorted understanding of the true extent of poverty and inequality in the country. By incorporating these sectors into the calculations, policymakers can gain a more accurate understanding of the challenges that need to be addressed.

Promoting Inclusive Growth

To promote inclusive growth, it is imperative to refocus the economy towards the unorganized sector, the micro-sector, and agriculture. These sectors have traditionally been neglected and need targeted interventions to unlock their growth potential. By focusing on generating employment and providing income opportunities in these sectors, we can ensure that the benefits of economic growth are distributed more equitably, reducing poverty and inequality.

Mounting Pressure for Inclusive Policies

To bring about the necessary changes in policies, it is crucial to mobilize a broad-based alliance of farmers, workers, and youth. This alliance can exert pressure on the government to shift its focus from supply-side policies to policies that generate additional demand, particularly among lower-income groups. By empowering these groups through increased purchasing power, economic growth can be stimulated, leading to a more inclusive and equitable society

The government's strategy of promoting large conglomerates and focusing on supply-side policies has failed to address the deep-rooted issues of inequality and the black economy in India. To promote inclusive growth, it is essential to refocus the economy towards the unorganized sector and marginalized sectors. By addressing these issues and generating additional demand through targeted policies, we can reduce poverty, enhance productivity, and create a more equitable society. Strong pressure from a coalition of farmers, workers, and youth is critical to drive the necessary change in policies and achieve these goals.