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India still suffers from huge income gap

Apr 29, 2008

Despite India's rapid strides on the economic front, the Arjun Sengupta Committee report reveals 85% of the country's unorganised workforce lives on Rs. 20 a day. Adverse working conditions and lack of basic services further add to their woes.

More than 85% of the working population in India work in the unorganised sector and has to live on less than Rs 20 a day.

According to the Asian Development Bank report published in August 2007, income inequalities in Asia, measured by Gini coefficient, have worsened in the last decade.

Contrary to popular belief, income inequality in India has gone up, both in rural and urban areas, in the last decade. At the all-India level, the Gini coefficient has moved up from 0.43 (1995-96) to 0.45 (2004-05).

Gini coefficient is a variability measure employed by policymakers, economists and academics globally to calculate a nation’s consumption or income inequality. The Gini coefficient has values from zero to 1, with lower coefficient indicating more equal distribution of consumption or income: zero denotes perfect equality and 1 perfect inequality.

Several national commissions, committees and conferences in the last 50 years have documented the socio-economic conditions of workers in the unorganised sector in India.

The latest is the National Commission for Enterprises in the Unorganised Sector (NCEUS), also known as the Arjun Sengupta Committee, which submitted its report to the Government of India in 2006.

Poverty level still high

The Committee's report estimated that there are over 340 million (approximately 34-37 crore) workers in the unorganised sector in India. Out of this, women make up 11-12 crore. The unorganised workforce contributes around 60% to the national economic output of the country.

Yet, in spite of their vast numbers, and their substantial contribution to the national economy, they are amongst the poorest sections of our population.

According to the report card of the National Rural Employment Guarantee Scheme (NREGS) for the period April 2006 to April 2007, the scheme has not faired well especially due to lack of awareness.

The above-mentioned statistics present a different picture than what was being believed earlier that poverty levels were falling rapidly and that per capita incomes had risen by more than 50% in the last six years. It depicts stark differentials between rural and urban incomes and between the rich and the poor as well.

Lack of basic amenities

This glaring income inequality impacts access to education and health and affects the poverty-reducing impact of a given amount of growth.

Increasingly, this gaping disparity in income, expenditure and savings patterns is not just between rural and urban India but also between large and small cities.

Urban households, for instance, earn 85% more than rural ones, but spend three-quarter more and, as a result, save nearly the double of what rural households do.

Much of this difference can be explained by differences in profession and education. Size of a city also makes a great difference to the household income levels.

Unorganised sector work includes agricultural labour, construction workers on building sites, brick-kiln workers, workers in various service industries ranging from transport and courier services to the hospitality industry.

Low wages, long working hours, hazardous working conditions, lack of basic services such as first aid, drinking water and sanitation at the worksite, child labour, sexual harassment characterise the unorganised sector.

Unorganised workforce also does not have the benefit of laws such as the Minimum Wages Act or the Factories Act.

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