New Delhi:Â Â Income inequality is rising in India, where the net worth of its billionaires has jumped 12-fold in 15 years, enough to eliminate absolute poverty twice over in the country, says the International Monetary Fund (IMF).
“We are all keenly aware that income inequality has been rising in most countries. In India, the net worth of the billionaire community increased 12-fold in 15 years, enough to eliminate absolute poverty in this country twice over,” IMF managing director Christine Lagarde said.
Delivering the Richard Dimbleby Lecture in London Monday, Lagarde said seven out of 10 people in the world today live in countries where inequality had increased over the past three decades.
She referred to an earlier report by Oxfam which says the richest 85 people in the world own the same amount of wealth as the bottom half of the world’s population.
In the US, inequality is back to where it was before the Great Depression, and the richest 1 per cent captured 95 percent of all income gains since 2009, while the bottom 90 percent got poorer,. Lagarde rued that in the past economists had underestimated the importance of inequality.
“Let me be frank: in the past, economists have underestimated the importance of inequality. They have focused on economic growth, on the size of the pie rather than its distribution. Today, we are more keenly aware of the damage done by inequality.
“Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential,” she said in her speech, a copy of which was made available here.
Lagarde said as the work at the IMF showed, the fiscal system could help to reduce inequality through careful design of tax and spending policies.
“Think about making taxation more progressive, improving access to health and education, and putting in place effective and targeted social programmes. Yet these policies are hard to design and-because they create winners and losers-they create resistance and require courage.
“Nevertheless, we need to get to grips with it, and make sure that ‘inclusion’ is given as much weight as ‘growth’ in the design of policies. Yes, we need inclusive growth.
“More inclusion and opportunity in the economic life also means less cronyism and corruption. This must also rise to the top of the policy agenda,” she said.
And while talking about inclusion in economic life, “we must surely talk about gender”.
“The International Labour Organization estimates that 865 million women around the world are being held back. They face discrimination at birth, on the school bench, in the board room. They face reticence of the marketplace-and of the mind.”
“If women participated in the labour force to the same extent as men, the boost to per capita incomes could be huge — 27 percent in the Middle East and North Africa, 23 percent in South Asia, 17 percent in Latin America, 15 percent in East Asia, 14 percent in Europe and Central Asia.
“We simply cannot afford to throw away these gains.”