Why in the news?

The Congress’s party’s election manifesto, the Nyay Patra, has triggered a debate on inequality, concentration of wealth and the measures to address these.

The reason behind the inequality in India:

• • Taxation Disparities: India’s tax-GDP ratio is comparatively low, standing at 17% as opposed to 25% in Brazil, indicating room for improvement in revenue generation. The taxation structure in India leans towards indirect taxes, which contribute significantly (about two-thirds) to overall tax revenue collection.
  • Regressive Taxation Structure: India’s tax system is described as regressive, indicating that it disproportionately impacts low-income individuals compared to high-income individuals. Indirect taxes, which are a significant component of overall tax revenue, tend to burden lower-income groups more than higher-income groups.
  • Lack in Tax Progressivity: There are concerns about the lack of progressivity in India’s direct tax regime, where higher-profit companies enjoy relatively lower effective tax rates compared to lower-profit companies.

Welfare spending is low

• • Low Spending on Welfare and Social Sector: India’s expenditure on welfare and the social sector is significantly lower compared to other countries. Public spending on health remains low, approximately 1.3% of GDP, falling short of the National Health Policy (NHP) target of 2.5% of GDP by 2025.
  • Eventual decline Budget Allocations: Major budgetary allocations for programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), education, and budgets for children have either declined as a proportion of total expenditure or GDP.

Way forward

• Revenue Mobilization and Spending Priorities: There’s a pressing need to improve revenue mobilization progressively, ensuring that the burden of taxation is distributed fairly and equitably.
  • Simultaneously, increasing spending on areas that directly affect the lives of the poor is crucial. This includes healthcare, education, social protection programs, and employment generation schemes like MGNREGA.
• Achieving Policy Targets: Meeting targets set by policies like the NHP requires a concerted effort to ramp up healthcare spending in line with national goals.

Mains PYQ 

Q) Despite the consistent experience of high growth, India still goes with the lowest indicators of human development. Examine the issues that make balanced and inclusive development elusive.  (UPSC IAS/2019)

Q) Critically discuss the objectives of Bhoodan and Gramdan movements initiated by Acharya Vinoba Bhave and their success.  (UPSC IAS/2013)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now