ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Factors Contributing to Income Inequalities among Agricultural Households in India

Inequality in agricultural households in 20 major states is estimated and its factors analysed. In most states, farming and livestock contribute over half the total income. Income inequalities, irrespective of farm size, are large, though these have not widened much over time; major sources are non-farm income, land, and farm assets. The relationship between growth in household income and land size is positive; it does not augur well for the government’s professed objective of promoting inclusive development. To bridge income gaps, mechanisms need to be developed to ensure the viability of increasingly small and fragmented landholdings.

(Annex Tables A1 to A5 accompanying this article are available on the EPW website.)

An earlier version of the paper was presented in a National Seminar on “Challenges of Growing Inequalities in India,” organised by the Council for Social Development, New Delhi during 14–15 July 2016 as part of the preparation for the Social Development Report 2018. We are grateful to T Haque and other participants in the seminar for their valuable suggestions.

Kuznets (1955) hypothesised the relationship between income inequality and average income as an inverted U-curve, which suggests that income inequality rises with higher economic growth in the initial stages of development and shrinks subsequently over time. Kuznets justified this argument based on the migration of workers from the low-wage, low-inequality rural sector to the high-wage, high-inequality urban sector. In the context of emerging economies such as India and China, Borooah et al (2015) argues that income inequality may also stem from the removal of economic regulatory controls; the resulting growth may have reduced absolute levels of poverty but, nonetheless, it increased inequality. Although many developing countries have experienced an increase in income inequality, studies have challenged this hypothesis on the grounds of significant differences in the sociocultural, historical, religious, and caste factors that shape household income levels and asset possession. It is also important to distinguish between inequality of outcomes—such as income and assets—and inequality of opportunity, measured through education, access to health and other
services, and gender and caste disparities (Kanbur et al 2014). Economic inequalities often are interlinked with social and cultural inequalities that result from differences in caste, religion, and gender.

Notwithstanding these facts, many have expressed interest in the concept of an equal distribution of income, whether in the context of economic growth, poverty–inequality trade-off, or globalisation (Basu 2006; Piketty 2014). Dev (2017) reported that global inequality is high, ranging between 0.55 and 0.70, and it has increased substantially in most advanced countries because of the growing income share of the top 10%. Also, income inequalities are becoming more pronounced in many developing economies, such as Indonesia, a situation largely explained by gaps in wealth and education (Wicaksono et al 2017). Efforts towards a more equal distribution of income constitute one of the key components of the United Nations Sustainable Development Goals, which all countries aim to achieve by 2030.

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Updated On : 24th May, 2019
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