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Addressing Income Inequality in India

Posted in Finance Articles, Total Reads: 2221 , Published on July 04, 2013

India is a huge country, with a population of 1.2 billion. More than 50% of its people are still dependent on agriculture which is growing at a rate of around 3% for the last decade. As the country’s GDP is seen to grow at 7%, it is quite clear that all these 50% people are lagging behind in the growth story of India. According to the World Bank report, the Gini Coefficient had increased from 0.34 to 0.37 over the last decade. The top ten richest people in India constitute to around 5% of the total GDP. What is this paradox? Is pulling these people out of villages and away from agriculture the only way to reduce the income inequality?

Fortunately, the answer is absolutely no. If you look in to history, all the developed countries have grown to what they are today, because they have capitalized on what are their strengths. For example South Korea and Taiwan became Technology leaders in Semiconductors and Electronics, Hong Kong became a major center for Financial Institutions, Singapore became a logistical nerve center for the global supply chain, Japan as an automobile exporter etc. Then what are the strengths of India?

Image Courtesy: freedigitalphotos.net

India has 52% of cultivable land as compared to the world’s average of 11%. All 15 major climatic conditions are present in India. Forty six out of sixty soil types are present in India. India has 20 agro climatic regions. There are 10 bio-diversity regions. The hours of sunshine and length of days are ideal for round the year cultivation. India has the largest livestock population. India has the largest irrigated Land area in the world.

By 2020, India needs 340 million tons of food grains in view of the population growth. The current available arable land of 190 million hectares will shrink down to 140 or 120 million hectares by 2020. India has to work hard to increase the productivity per hectare from 2 tons to 4 tons by 2020.

The gap between the industry and agriculture has to be reduced. Value addition to the produce of the farmers has to be taken up on a national scale, which would bring additional streams of revenue to these people. For every 20 acres of farm land, a kiosk has t be installed with a computer and internet connection. If every farmer registers himself and his farm in the computer, then the government with its host of research institutions should advise the farmers in knowing the soil conditions, weather conditions, type of crops to be grown and fertilisers to be used.

Once provided with this kind of assistance, the farmers should be encouraged to sell his products at the prevailing market rates through direct participation in the commodity exchanges. For this, mid night oil has to be burnt by the local village administration and various ministries. But this is the only way to increase their efficiency.

The branded agricultural products have only 1% of the market share. There is a huge market lurking out there in the branded food products like pulses, rice, wheat, vegetables, fruits etc. The corporates like Tatas and Birlas should put up the processing and packaging units of them in these interior areas and provide alternate employment to these people in a recession proof industry. Even we can export these processed products instead of exporting raw materials which shall boost our foreign exchange earnings in the long run.

Under the MGNREG (Mahatma Gandhi National Rural Employment Generation Scheme), roads are to be built connecting every 10 villages to the nearby town. This shall allow the farmers to transport their produce to the markets and sell them at remunerative tariffs. All these initiatives does not any  incremental investment from the governments, but only aligning  the existing programmes towards aiding infrastructure building. With this initiative, urban migration can be avoided and urban facilities can be provided in rural areas to improve the quality of life.

This article is authored by Sarat from NMIMS


1) “Target 3 Billion” by Mr APJ Abdul Kalam.

2) Speech by Mr Jay Prakash Narayan, founder of Lok Satta Party

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