Abstract
Since the ages inequalities in income distribution have been both a fact and a major cause of concern for world community. India, being a part of this world also suffers from this problem. To solve it India started the process of planning in 1950 and since then planners are making their best efforts to reduce the prevalence of income inequalities. The present study revealed that in comparison to rural areas, the problem of income inequalities has always been higher in urban areas. In rural areas economic growth is proved very important in solving the problem of inequalities but only before the economic reforms. After the economic reforms, economic growth has failed to address the problem of inequality in income distribution. The study has further found that in urban areas, it is not the economic growth but the differential growth of the various sectors which is affecting the level inequalities in income distribution.
Key Words:
Inequalities, Income Distribution, Income Inequalities, Economic Growth, Economic Reforms, Differential Growth.
Table of Contents
Introduction
Theoretical Background
Indian Scenario
Results and Discussion
Conclusion
References
Research Objectives and Topics
The primary objective of this paper is to investigate the responsiveness of income distribution to economic growth in India over more than 60 years of planning, specifically examining how the gains of economic growth have been distributed across different sections of society before and after economic reforms.
- Linkages between economic growth and income distribution
- Critical evaluation of the Kuznets hypothesis in the Indian context
- Impact of economic planning and reforms on wealth concentration
- Sectoral growth patterns (agriculture vs. industry/services) and their influence on inequality
- Drivers of rural versus urban income disparities
Excerpt from the Book
Theoretical Background:
The study about the linkages between growth of income and distribution of income and wealth has always been in the centre of discussion among the economists, social scientists and other social groups. Marx (1990) believes that the distribution of income and wealth must be based on individual needs rather than his ability to produce but accepted that inequalities in distribution of income and wealth (Yi) is necessary for growth of income (Yg) because inequalities in income and wealth improves the propensity to save and capital accumulation which is a pre requisite of economic growth. Diagrammatically it can be explained as;
The same view is shared by Classical economists (Kaldor, Nicoals 1955). They also believed that inequality has positive impact on the growth of an economy because wealth (W) is positively related with savings and every increase in this increases the marginal propensity to save (MPS).
MPS = f (W)
Inequalities in wealth increases the savings (S) as rich people have more power to save which helps in capital accumulation (K) and ultimately the economic growth. This relationship may be represented as;
Yi →↑ MPS →↑ S →↑ K→↑ Yg
In contrast Neoclassical theory ignores the relevance of inequalities on economic growth and states that inequality is irrelevant for the macroeconomic analysis (Kaldor, Nicoals, 1955). Inequality is not a cause but a consequence of growth process and the neo classical theorists changed the very relationship between Yi and Yg from
Yg = f (Yi) to
Summary of Chapters
Introduction: Outlines the fundamental concepts of income distribution as a reflection of social and economic welfare and introduces the objectives of Indian economic planning since 1950.
Theoretical Background: Discusses various economic perspectives on the relationship between growth and inequality, ranging from Classical and Neoclassical theories to the Kuznets hypothesis.
Indian Scenario: Analyzes the historical efforts of the Indian government to reduce inequality and the actual performance of the economy in terms of growth and income distribution across different periods.
Results and Discussion: Presents an empirical examination showing that the relationship between growth and inequality in India follows a U-shape, contradicting the Kuznets hypothesis, and discusses structural factors like sectoral growth imbalances.
Conclusion: Synthesizes the findings, noting that despite decades of planning, income inequality persists and has worsened in some aspects, particularly after the 1991 economic reforms.
References: Lists the academic literature and official sources utilized throughout the analysis.
Keywords
Economic Growth, Income Inequality, Gini-Coefficient, India, Economic Planning, Economic Reforms, Poverty Alleviation, Trickle-down Theory, Kuznets Hypothesis, Agriculture, Sectoral Growth, Wealth Distribution, Liberalization, Privatization, Globalization
Frequently Asked Questions
What is the central focus of this research paper?
The paper examines the impact and responsiveness of economic growth and development on the distribution of income and wealth in India over a period of more than 60 years of economic planning.
Which key topics are covered in the study?
The study covers the theoretical links between income growth and inequality, the historical context of Indian economic policy, the performance of the Indian economy, and the differential impact of growth on rural and urban areas.
What is the primary objective of the work?
The main objective is to identify which sections of society have benefited most from the increase in national income and to determine whether income distribution has improved following the implementation of economic reforms.
What scientific methods are utilized?
The author uses a historical and comparative analysis of economic data, specifically analyzing the Gini-coefficient in relation to GDP growth rates across various economic sectors over different time periods.
What does the main body of the text address?
It addresses the theoretical underpinnings of inequality, the "Indian Scenario" during planning eras, and a detailed discussion of growth performance in rural and urban sectors compared to national growth trends.
Which keywords best characterize the work?
Key terms include Economic Growth, Income Inequality, Gini-Coefficient, Indian Economic Planning, and the impact of the 1991 Economic Reforms.
How does the author's finding on the U-shaped relationship differ from the Kuznets hypothesis?
The author finds that in India, the relationship between growth and inequality is U-shaped rather than the inverse U-shape suggested by Kuznets, implying that inequality initially fell but has since started increasing again.
What role did the economic reforms of 1991 play in income distribution according to the paper?
The paper suggests that the post-reform period witnessed an increasing degree of inequality, largely driven by differential growth in services and manufacturing compared to the agricultural sector.
- Quote paper
- Assistant Professor Dastgir Alam (Author), 2011, Impact of Economic Growth on Income Inequalities, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/178352
