Regional imbalances and income inequalitiies in India: Steps taken by the Government to reduce it.
Regional imbalance is the disparity in economic and social development of two regions. One region/city/area is stronger than another region/city/area. Regions develop when investments are made to set up industries, service sectors, educational institutions, health care facilities etc.
Income inequality is the unequal distribution of household or individual income across the various participants in an economy. Income inequality is often presented as the percentage of income to a percentage of population.
The problem of regional disparities is a global phenomenon and, for India, up to a great extent, an inheritance from the colonial past. For example, in India, the historical factors have guided the development of the port towns of Bombay, Madras, Calcutta and these three cities have in turn worked as nuclei for the development of Maharashtra and Gujarat, and Tamil Nadu and West Bengal respectively which are at present the most industrially advanced states in India. On the other hand, the areas having natural advantages in the form of mineral resources, such as Bihar, Madhya Pradesh, Orissa and Rajasthan have lagged far behind in the process of economic development.
The most important indicator of regional imbalance and disparity among the different states of India is the difference in per capita state income figures. It is revealed from data in 2000-01, that the national average per capita income in India was Rs. 10,254. The states whose per capita income figures were higher than this national average include Punjab, Goa, Haryana, Maharashtra, Gujarat, Karnataka, Tamil Nadu and Kerala.
Among these nine states, Punjab, Haryana, Maharashtra and Gujarat have attained a high degree of agricultural as well as industrial development. Although West Bengal and Karnataka attained per capita income higher than the all India average in 1094-95 but it started trailing behind the all India average in recent years due to its poor rate of economic growth.
Various steps taken by Government to reduce it are:
1.Land Reforms and Redistribution of Ceiling Surplus Land:
In India, income inequalities are mostly resulted from the concentration of agricultural land in the hands of a few big landlords. The Zamindary system prevailing in our country has created a system of absentee landlords in the farm sector who appropriated a major portion of the agricultural produce by exploiting the farmers.
After independence, various legislative measures were introduced for abolishing the system of absentee landlords and other intermediaries and imposing ceiling on land holdings.
- Resource Transfer and Backwardness:
While making necessary award, the Finance Commission in India has been giving due weightage to backwardness of a state as an important criteria for resource transfer from the centre to the states.
Declaration of Backward states and special category states by the government to reduce the regional imbalances.
Under the present system of federal fiscal transfer, the transfer of resources from the Centre to States includes central assistance for State Plans, Non plan transfer as per the recommendations of the Finance Commission, ad-hoc transfer, allocation of fund for centrally sponsored schemes, allocation of both short-term and long-term credit from financial institutions etc.
The share of backward states along with special category states in the Plan outlay as well as in central assistance has been increasing steadily since the First Plan. Accordingly, the share of these states in the total plan outlay had increased from 46 per cent in the First Plan to 51 per cent in the Third Plan and then to 54 per cent in the Fifth Plan.
3. Special Area Development Programmes:
In order to develop hilly areas, tribal areas, drought- prone areas, specific plan schemes have been designed with full central assistance. Besides, other schemes of rural development formulated for the improvement of specific groups such as marginal farmers and agricultural laborers were implemented in the backward regions.
An area based approach of ‘Tribal Sub-Plans’ (TSPs) is now being implemented for the development of scheduled tribes located in the backward rural areas.
In this manner, different special schemes for particular target group located in the backward areas are being included for block level planning for attaining integrated rural development and considerable employment opportunities. All these programmes include SFDA, MFAL, Drought Prone Area Programme (DPAP), Crash Scheme for Rural Employment (CSRE) etc.
4. Incentives for Promoting Investment in Backward Regions:
In order to fight the problem of industrial backwardness of some backward regions and also to promote private investment in backward regions, various fiscal and other incentives have been provided by both the Centre, the States and other financial institution under public sector.
5.Social Security Measures:
Social security measures for the workers are considered as an important step towards reduction of income inequalities. India has adopted some social security provisions for the workers engaged in the organized sector. Workmen’s Compensation Act for providing compensation in case of any injury to industrial workers, Maternity Benefit Act for women workers and Employees
Provident Fund Act for providing the benefit of provident fund to the workers and other employees engaged in organized industries.
6. Employment Programme and Wage Policies:
With the growing menace of unemployment problem in India, the Government of India has introduced some special employment programmes since the Fourth Plan onwards in order to provide some relief and scope for gainful employment to unemployed. These programmes include Crash Scheme for Rural Unemployment, the Drought Prone Areas Programme, Food for Work Programme, self-employment schemes for engineers, employment scheme for educated unemployment etc.
All these programmes were short lived and ad-hoc in nature. During the Sixth Plan period, the Integrated Rural Development Programme (IRDP) was initiated in 1978-79 and after that National Rural Employment Programme (NREP), Rural Landless Employment Guarantee Programme (RLEGP) were also introduced.
More radical socioeconomic reforms seem to be in the offing in India. These are some of the measures that can be adopted to reduce inequalities. But inequalities can be reduced, they cannot be eliminated altogether. In fact, absolute equality is unattainable.
Additional Information
Recommendations
- A composite criteria for identifying backward areas (with the Block as a unit) based on indicators of human development including poverty, literacy and infant mortality rates, along with indices of social and economic infrastructure, should be developed by the Planning Commission for the 12th Five Year Plan.
- Union and State Governments should adopt a formula for Block-wise devolution of funds targeted at more backward areas.
- Governance needs to be particularly strengthened in more backward areas within a State. The role of ‘special purpose vehicles’ such as backward area development boards and authorities in reducing intra-State disparities needs to be reviewed. It is advisable to strengthen local governments and make them responsible and accountable.
- A system of rewarding States (including developed States) achieving significant reduction in intra-State disparities should be introduced.
- Additional funds need to be provided to build core infrastructure at the inter-district level in less developed States and backward regions in such States. The quantum of assistance should be made proportionate to the number of people living in such areas.
- The approach to all such funding should be outcome driven. The strategy should be to define acceptable minimum norms of human and infrastructure development that every block in the country should attain and funding should be driven by the consideration to achieve the norms so defined.
Historically, the prominence of fiscal policy as a policy tool has waxed and waned. Before 1930, an approach of limited government, or laissez-faire, prevailed. With the stock market crash and the Great Depression, policymakers pushed for governments to play a more proactive role in the economy. More recently, countries had scaled back the size and function of government—with markets taking on an enhanced role in the allocation of goods and services—but when the global financial crisis threatened worldwide recession, many countries returned to a more active fiscal policy.
