To what extent the benefits of economic liberalization were trickled down to the lower strata of the society? Discuss critically.
Published: September 12, 2017
Post independence, Poverty, and slow economic growth were the major issues in front of India. One of the core argument for the economic liberalization was that this will not only boost economic growth but the benefits will be trickled down means growth will percolate down to the poorest people. Similarly as per economist Simon Kuznets, inequality will increase in the initial phase of economic development, however, this will ultimately drop as the economic development in the society increases. That’s why resultant Kuznets curve, a trajectory of inequality is an inverted ‘U’
However as per research paper by Piketty and Lucas Chancel “Indian income inequality, 1922-2014: from British Raj to Billionaire Raj? ” the benefits of liberalization were not trickled down. In fact, the bottom half of the population had higher income growth before liberalization than the growth in post liberalization era. No doubt post liberalization their income increased but at a slower pace than earlier.
As per the paper even middle class hasn’t done too well from liberalization. During the period of 1951 -1980 the average annual income growth for the middle class was 1.9%, which increased marginally and reached to 2.02% during 1980- 2014.
The paper does not deny that overall growth went up after liberalization. Before liberalization average growth for the entire population was 1.7 % which was well below than 3.25%, post liberalization era growth. However, the peculiar fact is that the top 1% of the population captured 29% of the growth in incomes between 1980 -2014.
No doubt post liberalization poverty declined, however, inequality increased during that phase. The policymakers focus should be on creating productive employment and quality education for the reduction in poverty and inequality. Along with that, the government should emphasize on efficient public service delivery.
Model Questions Category: 074 - Effects of Liberalization On Indian Economy