Undesirable but prevalent inequalities in India

Image: Jewel Samad / AFP

Oxfam, is a global organisation, with strong roots within India, that works on the ‘injustice of poverty’ and flags issues that enhance this injustice, structurally.[1] Oxfam also recently released a report on Wealth Inequality in India. One of the notable findings of the report is that the richest 21 billionaires own more wealth than 700 million Indians. Another startling finding is that top 1% of Indians now own 40.5% of the wealth in 2021 while the bottom 50% of the population has around 3% of wealth.[2]

This article is an attempt to understand how inequality finds its way into Indian system while the Constitution explicitly warns against such a concentration of wealth. The high concentration of wealth and economic inequality is used interchangeably in this article unless specified otherwise.

The numbers are alarming and there also have been questions raised on Oxfam’s methodology, data collection and calculations that led to these conclusions and findings. However, one does not need any clarification or a special investigation to conclude that staggering wealth and income inequalities exist in the country and in the whole world. The International Monetary Fund (IMF), the international institution for lending, also presents that, contrary to the trends of global inequality, in-country inequality is on the rise- even in developed countries. This means that, while the gap between poor countries and rich countries is decreasing (global inequality), the gap between rich people and poor people in a given country has been increasing.[3] Studies which were not specific to India have also found that the worlds’ 1% of population owns half of the world’s wealth as of 2010. The closest to a government report on Inequality in India we have is the ‘State of Inequality in India,’ released by the Economic Advisory Council (EAC) to the Prime Minister.[4] This report was later said to be prepared by a private firm without any aegis of the EAC or its members. The report took into consideration the Periodic Labour Force Survey’s (PLFS) to gain insight into the data. It stated that monthly salary of Rs. 25,000 is among the top 10% of the total wages earned as per PLFS 2019-20. It also stated that the top 1% earns more than thrice the bottom 10%.[5] So, essentially, even going by the most conservative arguments, inequality in India exists.

Now, onto understanding why inequality is an issue. The conventional philosophy used to be that the creation of wealth will end up removing the inequalities and in alleviation of poverty. This also resulted in emphasis on creation of wealth rather than creating frameworks to distribute it better.[6] More recent and developed wisdom holds that excessive inequality erodes social cohesion and political stability. High levels of income inequality are often related to high inflation and financial instability. Humongous amount of literature exists on that front to support that inequality which is bad for both societies and their sustenance.[7] To put it simply in an example, wealth in India buys a better health insurance plan and thus security or is useful even to fund treatment for an emergency health condition. Lack of the same wealth can result in loss of life and consequent problems for a family, the burden of having spent money of treatment that has gone in vain etc. This results with varied impacts effects different strata of society.

In summary, irrespective of whichever report highlights the inequality, it is a problem and would have to be dealt with if societies are to thrive and sustain.

Now, the last part of the understanding is about what ways inequality propagates itself in India today.

The Ways of Inequality

One of the most important ways in which money is distributed to people, in the current economic system, is the form of wage or salary. Most of population today does work to earn a living or is dependent on work, either done by them or by someone else. The work demands a salary and the salary is the framework in which a majority of income that is generated by the population gets distributed. This is determined by a wage market. This means, the market decides how much wage a person should get for the work they do, on the basis of simple supply and demand. Many studies point out that the inequal wage market where exploitation prevails is one of the most important causes of prevailing inequality.[8]

In India, there is a minimum wage law and minimum wage is usually decided by the state government and there is a floor wage, set by the central government below which no state can or shall set their minimum wage. The prevailing floor wage is Rs. 178 per day, in India. Even for this seemingly low rate of minimum wage, the implementation is abysmal, and the main challenge is to implement this policy strictly. Simply raising the minimum wage would have minimum to no impact since the complexities in implementation would still be prevalent. The government has not yet fully effectuated the already passed labour codes and it is yet to be seen if the labour codes will have any better.

Another important factor which promoted inequality is the lack of education. Since wages are essentially higher for those who are educated, lack of education also takes away the opportunity for the population to get into the salary ecosystem and receivers of some money. Efforts of successive government to prioritise education, earlier resulted in educated people without skill. Presently, there is an imparting of skills via various programmes in the hope that these skills will help people in getting jobs. However, this is being done now whereas the inequality has already made its way into the economic system on a large scale.

Another important factor is the already prevailing gender inequality in India that creeps into the economic system and results in inter-sectional discrimination and therefore different layers of inequality. For example, a woman who goes to work is paid far lesser than her male counterpart and this results in less participation of women in the workforce. This proportionately less participation has the effect of lesser wages for women in workforce. India has passed the Equal Remuneration Act, 1976 –that is 46 years ago, and despite this, the gap between the male and female pay is 28% according to the NSSO report of 2019.

According to the World Inequality Report, Indian men earn 82% of the labour income whereas women earn 18% of labour income. Therefore, within this economic inequality, women suffer the extra poverty the gender-based discrimination imposes on them.[9]

Indian Constitution and Concentration of Wealth

The Indian Constitution was not merely a political document ensuring basic rights. It has the features of an economic document (document with a socio-economic vision) too, woven into various articles. Article 19 (d)-granting the right to move freely throughout India, Article 19 (e) – to reside and settle in any part of the territory of India, Article 19 (g)- to practise any profession, or to carry on any occupation, trade or business- combinedly indicate that the Constitution, in itself, enshrines a framework where people had/have the freedom to trade, to engage in a business or to practice a profession, anywhere subject to reasonable restrictions.

Within the Directive Principles of State Policy (DPSPs, Chapter IV), Article 39 states that the state should direct its policy towards securing the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

The relevant portion of Article 39, for this article, is as follows:

39. Certain principles of policy to be followed by the State. —The State shall, in particular, direct its policy towards securing—

(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;

(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;

(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment

While the constitution was getting drafted, this article saw particular efforts from socialists like Prof. KT Shah, a member of Constituent Assembly elected from Bihar. These efforts were towards wording (defining) the article with specific definitions.[10] Shah moved an amendment to substitute the draft Article 31(iii)- the current 39(c) with the following:

“That there shall be no private monopolies in any form of production of material wealth, social service, or public utilities nor shall there be any concentration of means of production and distribution in private hands and the State shall adopt every means to prevent such concentration or accumulation.”

 He gave an explanation that if the original article remained as it was, it is liable to be interpreted in a way not at all intended perhaps by the draftsmen. On the contrary, another member Naziruddin Ahmad, elected from West Bengal, argued that the word concentration be substituted with the word ‘undue concentration’ since unless a communistic society was/is being established, a concentration of wealth was inevitable. He submitted that “earning of a good businessman, that of a lawyer of eminence, that of a minister of eminence and that of a common man in the street or a chaprasi[11], cannot be equal.”

Another socialist Professor Shibban Lal Saxena, a member elected from the United Provinces supported Prof. KT Shah’s amendment and urged Dr.BR. Ambedkar to at least to incorporate the spirit of those amendments somewhere within the Constitution.

Dr. BR. Ambedkar however stated that since the original article does not prevent the interpretation of Prof. KT Shah, there was no need for the amendment.

However, the Constituent Assembly debates show that there was apprehension about the (state not doing enough to avoid) the concentration of wealth and natural resources getting distributed in a manner that does not endorse community ownership. One might argue that the world has come a long way since the Constituent Assembly debates and the Constitution makers clearly left it for the population of the future to decide the economic system for themselves. Such argument holds its own strength. Economic systems are indeed dynamic, and they demand a constant evolution of legal frameworks. However, the important aim of economic system is not its own development and growth but the welfare of the people. The economic system cannot be for the detriment of the people in a country that is governed by a constitution with social and economic justice as its pillars.

Judiciary’s role

A critique of the Supreme Court has always existed within academic discourse that have concluded that, while the judgements from the apex court are appreciably progressive when it comes to the protection of property rights of people against state intervention, same sort of progressive trends were not present when it came to protection of the civil and economic and social liberties of all the Indian people.[12]

For example, in the case of Kesavananda Bharati vs. Union of India(AIR 1973 SC 1461) which dealt with the constitutional challenges to 25^th amendment to the Constitution, the court held that the part of newly inserted Article 31C which stated that no law made to give effect to Article 39 (b) and 39 (c) can be challenged in court on the ground that it does not give effect to such policy, to be unconstitutional.

To give some context, the Indira Gandhi government nationalised 14 banks and a shareholder, RC Cooper, of one of the banks approached the supreme court on the grounds that he was not paid enough compensation and therefore his right under Article 31 and Article 19 (1)(f) were violated. Article 31, which now stands omitted, stated that when land is compulsorily acquired, the compensation shall be paid. In the case of RC Cooper vs. Union of India (1970 SCR (3) 530), the Supreme Court held that compensation is something that is guaranteed by the Constitution of India and therefore, the court can go into the question of whether the compensation was reasonably adequate.

Essentially, Article 31 stated that government cannot take away the lands of people whereas the Supreme Court held that since adequate compensation is guaranteed by the constitutional scheme, the court can question such inadequacy of compensation. The court also said that, any compensation determining law also should not be violative of Article 19 (1) (f).

The same Indira Gandhi government, to go around this judgement of the Supreme Court in the case of RC Cooper, brought in the 25^th constitutional amendment. One of the changes the amendment brought in was that the word ‘compensation’ was substituted with the word ‘amount’ in Article 31, indicating that the government now can just give a nominal sum for the land taken rather than compensating. Another change was the insertion of Article 31C. Article 31 stated that no law, that works towards securing the goals specified in Articles 39 (b) and 39 (c), can be challenged in court on the ground that such law truly does no effectuate the goal.

The Kesawananda Bharti judgement went on to declare that the part which negates the judicial review is constitutional. In Minerva Mills vs. Union of India (AIR 1980 SC 1789) too, the court declares Section 4 of the 42^nd Constitutional Amendment as unconstitutional. The 42^nd amendment substituted the shield of Article 39(b) and 39(c) with all of Directive Principles of State Policy and this was declared unconstitutional in the case of Minerva Mills.

While these judgements are important, they cannot be the sole indicators of how the jurisprudence has evolved about concentration of wealth. There are other cases from both High Courts and the Supreme Court that present a progressive trend of interpreting Article 39 (b) and (c). In Group Industries vs. State of Uttar Pradeshv (AIR 1975 All 434), the Allahabad High Court had to deal with challenges to the UP Ceiling on Property (Temporary Restrictions on Transfer) Act, 1972 and the court justified the urban property rate ceiling and stated as follows:

“The object of the Ceiling Bill was furtherance of the directive principles of the State policy as set out in Article 39(b) and (c) of the Constitution and consequently to secure that the ownership and control of the material resources of the community are so distributed as best to subserve the common good and further to secure that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. Placing restrictions on the valuation of urban property which one could legally hold is one of the methods by which concentration of wealth and means of production in private hands can be curtailed and avoided. By providing for a ceiling on the ownership of “urban property”‘ and for acquisition by the State of “surplus land” with power to redistribute such land, the legislature sought to secure that the material resources of the community are so distributed as best to subserve the common good.”

The Supreme Court in the case of State of Bihar vs. Maharajadhiraja Sir Kameshwar (1952 1 SCR 889), dealt with the acts of abolition of Zamindaris in the states of Bihar, Madhya Pradesh and Uttar Pradesh. The Supreme Court, stated as follows with respect to the state’s obligation and the reason why laws that are infringing on the private property are valid:

“Surely, it is to subserve the common good by bringing the land, which feeds and sustains the community and also produces wealth by its forest, mineral and other resources, under State ownership or control. This State ownership or control over land is a necessary preliminary step towards the implementation of the directive principles of State policy and it cannot but be a public purpose. It cannot be overlooked that the directive principles set forth in Part IV of Constitution are not merely the policy of any particular political party but are intended to be principles fixed by the Constitution for directing the State policy whatever party may come into power.” 

In the case of Ahmedabad Municipal Corporation vs Nawab Khan Gulab Khan – (1997) 11 SCC 123) Ahmedabad Municipal Corporation vs Nawab Khan Gulab Khan – (1997) 11 SCC 123) , the Supreme Court used the Article 39 to read right to shelter into Article 21.The case involved the encroaching settlements on the pavement of a road being removed by the local municipality and the residents of those settlements approaching the judicial forums. While keeping in view the financial capacity of the municipality, the Supreme Court ordered for evolution of schemes that can help the residents of the settlements resettle since the municipality had the constitutional obligations under the directive principles of state policy. The court stated as follows:

“The right to life enshrined under Article 21 has been interpreted by this Court to include meaningful right to life and not merely animal existence as elaborated in several judgments of this Court including Hawkers case, Olga Tellies case and the latest Chameli Singh’s case and host of other decisions which need no reiteration. Suffice it to state that right to life would include right to live with human dignity. As held earlier, right to residence is one of the minimal human rights as fundamental right. Due to want of facilities and opportunities, the right to residence and settlement is an illusion to the rural and urban poor. Article 38,39 and 46 mandate the State, as its minimise inequalities in income and in opportunities and status. It positively charges the State to distribute its largess to the weaker sections of the society envisaged in Article 46 to make socio-economic justice a reality, meaningful and fruitful so as to make the life worth living with dignity of person and equality of status and to constantly improve excellence.”

Therefore, while the apex court has given rich jurisprudence on protection of property, the also has been equally rich jurisprudence against the concentration of wealth.

Conclusion

While it is important to urge the government to take note of the DPSPs and take active steps to further the goals enshrined in them, it is equally important to take note of the international situation in which globalisation and the free movement of capital has become a dominant phenomenon. Therefore, any analysis of the inequality question and any effort to answer the inequality question will be haphazard without the consideration of international conditions. Having said that, the emphasis on a different international order or any such thing can be discussed if the national efforts reach their pinnacle. With the lack of effective implementation of labour codes and the spending on education etc not reaching their optimum standards, much has to be done on home front.