Inequality in South Asia, Why It Matters and How To Address It

Inequality in South Asia, Why It Matters and How To Address It

Q. “While South Asia is not the poorest region in the world, it accounts for many worst human development outcomes as far as inequality is concerned.” Discuss in the context of the recent World Bank Report ‘Addressing Inequality in South Asia’ and analyse why inequality matters and what can be done to address this.

A. Inequality in South Asia

1. Worst Human Development Outcomes in Basic Education

• Education level, location and class of parents incfluence child's access to education
• Poor lack access to basic education
• Poor also lack access to good quality education
• Schooling is highly unequal among the rich and the poor in many South Asian nations:
• For instance, report indicates educational attainment in terms of ratio of richest to poorest quintile is really high in nations like Bhutan (5+), Afghanistan (4) and Nepal (3+).

2. Adverse Outcomes for Human Development in Health Care

• Health outcomes of the poor in South Asia are the worst worldwide
• For instance, report says the infant mortality rate (deaths per 100 births) in South Asia nations is high:

20: Maldives
20+: Colombia, Peru
40: Vietnam, Phillipines
40+: Nicargua
50: Indonesia
50+: Guatemala
60: Ghana, Nepal, Bangladesh
60+: Kenya, Zambia
70: Uganda
80: India, Brazil
80+: Bolivia
90+: Pakistan
130: Nigeria
India had the dubious disinction of having the most stunted children in terms of growth (60+) while Dominician Republic had the lowest (15+) in a comparison of South Asian and African states.

3. Monetary Indices and Non Monetary Indices Show Inequality

• Share of poorest 40% of the households in total consumption display inequality in South Asia is moderate by global standards
• Comparisons elsewhere based on income per capita yet comparison valid
• Some countries like India have massive income inequalities as well. India's billionaire wealth amounts to 12% of the 2012 GDP-this is a large ratio compared to other similarly economically developed nations
• Dismal non-monetary indices:
• Highest rates of child and infant mortality in many parts of the region
• More than 50% of poor children below 5 years of age in Bangladesh and Nepal have stunted growth
• This proportion is 60% in India
• India and Pakistan have highest infant mortality rates and under 5 child mortality rates. Of 1000 children born in poorest population of Pakistan, 94 will pass away within 12 months and 120 within 5 years

4. Data Shows Poverty Gains Not Sustained

• World Bank data shows poverty gains were not sustained between 2004-2005 and 2009-2010
• While 40% of India's poor moved above poverty line, 11% entered the middle class but as much as 14% of non poor group fell into poverty
• Only 36% of children of farmers employed as skilled/semiskilled/white collar workers
• 40% of children of unskilled workers followed skill based occupations

5. Moving Out of Poverty Easy

• Upward economic mobility on the rise as poor in South Asia have equal chance of stepping out of poverty as they do in the US, says the report.
• Mobility among SC, ST and OBC higher than upper caste Hindus in India, says the report
• Upward mobility also on the rise among minorties; Muslims have mobility of occupational profiles akin to higher caste Hindus
• Driver of upward mobility is the increase in number of non farm jobs in rural India

6. Differing Consumption Patterns for the Rich and Poor

• Based on NSSO survey data, the report found average net worth of top 10% of the population was 380 times as much as bottom 10% in India
• This worth could support comsumption for 23 years for those in the top rung and less than 3 months for those in the bottom one
• 40% of Indian billionaire wealth inherited and 60% from rent thick sectors such as real estate, infrastructure and construction in India

7. Disproportionate Rise in Income Share in Many Countries

• Income share of top 0.01% in India was less than 0.4% in 1980 yet rose to 2% by 1990s
• Income share of top 0.1% at this time was 3 to 4.5% indicating growth is geared towards ultra rich
• Slope of poverty decline in India the gentlest among all nations in South Asia upto 2010

8. South Asia Households Receive Different Shocks; Differential Responses of Rich and Poor

• South Asia exposed to:

-Individual shocks
-Economy wide shocks

• Includes natural calamities, spikes in food price as well as armed conflicts
• Health related issues affect the rural population the most.
• Poor have to borrow and sell agricultural assets while rich rely on savings and profits

9. Government Occupies Intermediate Place Regarding Support

• South Asia home to good social protection programmes example Benzair Income Support Programme
• But tax avoidance and regressive subsidies continue to persist leadingt to income inequalities in South Asia

10. Standard Measures Such as Gini Coefficient Not Effecttve

• Report found access to healthcare and education to be better indicators of existing inequalities
• Gini measure not all encompassing;does not give the complete picture

11. Smallest and Richest Countries Have Better Indicators

• Average consumption per capita is increasing across the region, but only in the smallest and richest countries namely Bhutan and Maldives do the disperson in consumption per capital across households increase as well.
• Variations in health outcomes are on the rise while gaps in education outcomes are stable/decreasing

B.Why Inequality Matters

1. Serves as Indicator of Poor Public Services

• Study found poor public services in South Asia where inequalities were high because rich can opt out.
• Public services in this context includes:
- Public transportation
- Basic healthcare
- Drainage System
- Electricity
- Paved roads
- Banks
- Private Schools
- Teaching Quality (Public as well as Private Schools)
• In countries like Bangladesh, Sri Lanka and India, people were not satisfied with the quality of public services and these nations were also characterised by the greatest inequalities

2. Linked to Pervasive Tax Avoidance

3. Sign of Regressive Fuel and Electricity Subsidies

4. Inequality Detrimental to Economic Growth

• Inequality impacts the ability of people to:
• Take collective action
• Establish institutions
• Create chances for growth

5. Income Difference=Differential Access To Basic Needs Like Nutrition, Healthcare and Education

6. Contributes to the Cycle of Poverty

7. Leads to Increased Chances of Conflict

• Inequality causes water crises and conflicts in South India (Bardhan 2005)
• Inequality affects economics of conflicts
• Also underlying factor in social and political conflicts (Horowitz 2000)
• Case 1: Inequality led to birth of Naxalite (Maoist) movement in India: Poverty in terms of percent headcount ratio was 42% in India in LWEA/Left Wing Extermism affected areas as against 28% in other districts in affected states and 21% in other districts in the nation
• Case 2: Poverty and inequalities have led to attacks by insurgents and terrorists especially in case of food and land insecurities and inequality

8. Lowers Opportunities

• Access to basic services such as healthcare and education dependent on factors such as caste, gender or location

C. What Can Be Done to Address It?

1. Mobility As a Panacea

• Mobility of two kinds bridging income and consumption related inequalities:
- Occupational and Geographic
• True social mobility where poorer households can gain income and become richer within single generation a must

2. Role of Urbanisation

• Urbanisation reduces inequalities rather than increasing them: World Bank India Country Director
• Upward mobility was stronger in urban than rural areas:
• Occupations of sons (in percent terms) showed upward mobility more in urban than rural areas wherein:
• 65% of sons of unskilled workers, 80% of sons of farmers, 15% of sons of semiskilled/skilled workers attained upward mobility in urban areas in 2004-2005
as compared to
• 35% sons of unskilled workers, 28% of the sons of farmers and 10% of sons of skilled/semiskilled workers in rural India
• Report also indicated urban jobs are ticket to middle class while rural jobs allow persons to escape poverty
• Urbanisation organic in South Asia

3. Importance of Private Sector Participation

• Private sector can contribute through PPP, economic growth programmes
• They can provide underprivileged and weaker sections of society with better opportunities

4. Value of Hard Work
• Through sustained hard work, poorer sections of society can elevate themselves

5. Entrepreneurship

• Startups create jobs rather than job seekers
• Entrepreneurship ventures help to create better opportunities for individuals and eliminate inequalities

6. Good Policies

• Stress should be on universal health care, sanitation, education, nutrition apart from just job creation
• Policies should look to improve upward mobility and mitigate shocks for the poorest
• Focus should be on increasing equality of oportunity and improving upward mobility through adequate support tather than target levels for some standard indicator of inequalities

7. Need for a Life Cycle Perspective

• Report authors have stressed the need for a life-cycle perspective wherein policy makers and governments see the
• Circumstances(gender caste),
• Opportunities(health, education),
• Mobility (jobs, cities) and
• Support (social protection, tax and tranfers)

8. Use of Innovative Indices

• Authors used the Human Opportunity Index to assess the impact of the inequalities on access to opportunities
• Rather than sticking to Gini coefficient and other such ineffective measures, there is need for more accurate and less symbolic indices

9. Job Creation Plus Migration

• Change in occupational profile can bring about income related changes and enhance elimination of inequalities
• Internal Migration also helped men to find more growth and investment opportunities
• Internal migration improved job opportunities especially for women


The changing face of inequalities in South Asia need to be addressed. Rather than seeing inequality in monetary terms only, there is a need to view it in an all encompassing manner incorporating access to opportunities and basic services as well.

Inequality has a massive impact on human welfare across regions and this is why elimination of this economic and social evil is imperative. The World Bank report provides encouraging data regarding the ease of stepping out of poverty. With adequate support and effective policies, inequality could soon end in South Asia, contributing to the social and economic development of this region and impacting the rest of the world in a positive way as well.

Inequality stems from diverse causes and it has multiple ill effects on the health and welfare of the economy as well as the citizens of a nation. Inequality can only be eliminated if there is concentrated and focused effort at all levels of policy formulation and development ensuring further growth and development.

India and other leading South Asian nations such as Bangladesh, Nepal and Bhutan can only hope to move forward in the world order if inequalities are overcome. This involves eliminating inadequate infrastructure from which inequalities stem. Through joint efforts of both the public and private sector as well as international experts and policymakers, inequality can be combated in this region.
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