India as a developing country must continue to focus on growing the size of the economic pie rapidly, at least for the foreseeable future, V Anantha Nageswaran, Chief Economic Advisor in Finance Ministry, has said. 

Growth in the lower rungs of society is a reasonable policy goal even if the upper rungs grow faster, Nageswaran wrote in an essay titled “Perspectives on the Inequality Debate in India”, forming part of a collection of essays released by his office here.

He has also made a case to prioritise poverty alleviation through higher economic growth rather than first focusing on addressing income or wealth inequalities. 

The role of the State thus boils down to ensuring that the disadvantages of non-endowment are minimised or eliminated, I.e creating opportunities for those at the bottom, according to the senior Finance Ministry official. 

As the erstwhile economically deprived sections join the ranks of the middle class en masse, policy attention needs to extend beyond the Roti, Kapada, Makaan (food, clothing and shelter) class to keep the growth engine up and running, the CEA emphasised. 

High growth is imperative for a developing country like India as it increases the size of the pie for shared equitable economic progress. At the same time, equality of opportunity and universal access to basic amenities are non-negotiable as they ensure the dignity of an individual, in turn empowering her to utilise the avenues in a fast growing economy, he added.

Nageswaran does not seem to concur with the popular idea that redistribution is the solution to raising living standards at a large scale, alleviating poverty and inequality at one stroke. He noted there are two problems to such an approach.  

First, the infeasibility of taxing wealth and secondly, India being a lower-middle income country (as per World Bank classification), the average income itself needs to increase several times to afford a decent standard of living for everyone, he pointed out. In this spirit, continuously high economic growth becomes a prerequisite for poverty alleviation, Nageswaran noted. 

Inequality vs Absolute poverty

While inequality is a relative and vexed issue, absolute poverty is a more direct and pressing one, Nageswaran noted. For a developing country like India, where the growth potential is high and the scope for poverty reduction is also significant, being the fastest growing major economy is an achievement as much as the need of the hour, he said. 

This is reinforced when one glances through India’s economic history. The year 1991-92  marked a structural break when the rate of poverty reduction was accelerated, and despite rising inequality, the responsiveness of poverty to growth increased i.e faster growth has also been more pro poor. 

For the average aspirational Indian, progress at the grassroots, like 13.5 crore people moving out of multi-dimensional poverty between 2015-16 and 2019-21, matters much more than the number of billionaires in the country, he added.  

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