A lack of clarity on inequalities

A report commissioned by PM-EAC does not engage with difficult questions or lack of data

Areport prepared by the Institute for Competitiveness — it was commissioned by the Prime Minister’s Economic Advisory Council (PM-EAC) — has grabbed headlines because of what can be described as very populist recommendations. These include enacting an urban employment guarantee programme and introducing a universal basic income programme. To be sure, such concepts are not being raised for the first time, but this is the closest they have got to the realm of policymaking under the present government. The report makes recommendations in passing, without any talk about their fiscal implications. What is even more intriguing, however, is the fact that even though the report is titled The State of Inequality in India Report, there is hardly any analysis of what has happened to inequality in the recent past. “As the report states, there isn’t quite a conclusion,” Bibek Debroy, the chairman of the PM-EAC has rightly noted in his preface.

One of the reasons the report cannot give recent estimates of consumption inequality in India is the fact that the government junked the findings of the 2017-18 Consumption Expenditure Survey (CES). However, there should at least have been an attempt to look at asset inequality, for which data up to 2018 is available in the National Statistical Office (NSO)’S All-india Debt and Investment Survey. While the conduct and publication of a CES is essential to measuring consumption inequality and arriving at a poverty line, many economists, including Thomas Piketty, have been arguing that the government should also provide disaggregated income tax data for researchers. It is a well-accepted fact that the richest (say CEOS) hardly partake in NSO surveys. The other aspect of inequality that needs urgent attention in India is the one between firms. Policies such as demonetisation and rollout of Goods and Services Tax pushed the formalisation process in the Indian economy, which tilted the scales in favour of large firms. The pandemic’s economic pain has only strengthened this trend. While independent economists have been arguing on these lines, the lack of data on informal sector enterprises — this is also a delayed NSO survey — has prevented a comprehensive and objective analysis of the question. This finds no mention in the report.

When perhaps the most important advisory body on economic policy commissions a report on inequality, one expects it to try and engage with some of the more difficult questions and come up with ideas which trigger an interest and debate at the highest levels of government. On that count, this report disappoints.