Montek admits income inequalities have worsened

NEW DELHI: Planning Commission Deputy Chairman Montek Singh Ahluwalia admits that inequality in the Indian economic and social system have increased overtime, but says the magnitude of this is less than that of China.

Ahluwalia is of the view that the official statistics as revealed by the National Sample Survey Organisation (NSSO) undermines the magnitude of the poverty and deprivation as it measures inequality using the consumption criteria.

However, if the yardstick is income, the magnitude of inequalities would be larger in view of the fact that savings are effected more by the rich than the poor.

These remarks from Ahluwalia while releasing the survey findings of NCAER-Max New York Life study on 'How India earns, spends and saves'.

The survey findings were released at a function last night, at which other experts participated.

These included Analjit Singh, Chairman Max India, Rajesh Shukla, Senior Fellow NCAER, NS Shastry, Former Head of NSSO, SL Rao, Former Director General NCAER, and Gary  Benett, Managing Director and CEO, Max New York Life.

Ahluwalia said the NSSO data measures only consumption in inequality as it provides only data's relating to consumption distribution.

A more authentic picture can be had from measuring income inequality, and in this sense lauded the effort of the NCAER-Max New York Life survey which gives a picture of how income distribution has changed over time.

Ahluwalia noted that inequality is measured by the Gini's coefficient which was around 0.37 to 0.42.

Ahluwalia said the inequalities in China are much worse, notwithstanding the fact that it is a communist system.

Inequalities in China worsened over a period of time, while those in India have widened though not to the extend they have done in the case of its neighbour.

The Planning Commission Deputy Head agreed with the panelist that inequalities have moved in a narrow range in some of the South Asian Nations, like Thailand.

Ahluwalia also mooted the idea that the population could be compelled into compulsory savings.

For instance, those who do not undertake contractual savings could be compelled to undertake insurance products.

Ahluwalia said the behaviour of a consumer was not always rational in subscribing to an insurance product.

This was true all over the world as much as it was applicable to India.

Ahluwalia said a financially secure country cannot be built on the ways of small population of financially secure households.

If most individuals of financially well protected, the nation will emerge secure financially.