Inequality Kills

On 17th January, 2021, Oxfam International released the report titled- Inequality Kills: The unparalleled action needed to combat unprecedented inequality in the wake of COVID-19.

Major Highlights

  • Inequalities have been deepened in the midst of the pandemic, as a result of violent economic policies contributing to thousands of deaths a day.
  • The proportion of people with COVID-19 who die from the virus in developing countries is roughly double that in rich countries.
  • Women, ethnic minorities and developing countries have been the hardest hit by growing inequality during the COVID-19 pandemic.
  • For 99% of the global population, incomes have fallen and over 160 million more people have been forced into poverty.
  • Extreme inequality is a form of economic violence, where policies and political decisions that perpetuate the wealth and power of a privileged few result in direct harm to the vast majority of ordinary people across the world and the planet itself.
  • Despite the huge cost of fighting the pandemic, in the past two years rich country governments have failed to increase taxes on the wealth of the richest and continued to privatize public goods such as vaccine science. They have encouraged corporate monopolies to such a degree that in the pandemic period alone, the increase in market concentration threatens to be more in one year than in the past 15 years from 2000 to 2015.
  • Inequality goes to the heart of the climate crisis, as the richest 1 percent emit more than twice as much CO2 as the bottom 50 percent of the world.

India Specific Findings

  • It reveals that when 84 percent of households in the country suffered a decline in their income in a year marked by tremendous loss of life and livelihoods, the number of Indian billionaires grew from 102 to 142.
  • More than 4.6 crore Indians meanwhile are estimated to have fallen into extreme poverty in 2020 (nearly half of the global new poor according to the United Nations.) The stark wealth inequality in India is a result of an economic system rigged in favour of the super-rich over the poor and marginalised.
  • Just a one percent wealth tax on 98 richest billionaire families in India can finance Ayushman Bharat, the national public health insurance fund of the Government of India for more than seven years.

Suggestion for the Governments to Reduce Inequality

  • Tax the new wealth made since the start of the pandemic through permanent wealth and capital taxes.
  • Invest the trillions that could be raised by these taxes in progressive spending on universal healthcare and social protection, climate change adaptation, and gender-based violence prevention and programming.
  • Tackle sexist and racist laws that discriminate against women and racialized people, and create new gender-equal laws to uproot violence and discrimination.
  • Define policies that will ensure women, racialized and other oppressed groups are represented in all decision-making spaces.
  • End laws that undermine the rights of workers to unionize and strike, and set up stronger legal standards to protect them.
  • Waive intellectual property rules over COVID-19 vaccine technologies to allow more countries to produce safe and effective vaccines to usher in the end of the pandemic.

Suggestions for India to Reduce Inequality

  • India needs to better track policy impact by improving mechanisms for its measurement.
  • It is time for India to reintroduce a wealth tax to generate much-needed resources to fund the recovery from the pandemic.
  • A temporary 1 percent surcharge on the richest 10 percent population could help raise an additional INR 8.7 lakh crore, which could be utilised to increase the education and health budget.
  • A secondary outcome should be an education system which addresses the needs of everyone, not just those privileged to attend elite private schools or have access to digital technology.
  • While the government is recognising gig economy workers, it also needs to focus on laying the legal groundwork of basic social sector protections for 93 percent of India’s workforce.
  • It is time to reverse privatisation and commercialisation of public services, address jobless growth and bring back stronger social protection measures for India’s informal sector workers.

Asia Power Index 2021

Recently, Sydney-based Lowy Institute released the Asia Power Index 2021. It is being published annually since 2018.

About the Index: The index measures resources and influence to rank the relative power of states in the Indo-Pacific.

It ranks 26 countries and territories.

Criteria: The index evaluates international power in Asia through 128 indicators across the following eight thematic measures:

  • Resources: Economic capability (17.5%), Military capability (17.5%), Resilience (10%), and Future resources (10%).
  • Influence: Economic relationships (15%), Defense networks (10%), Diplomatic influence (10%), and Cultural influence (10%).

Key Highlights

  • As per the index, the COVID-19 pandemic has driven down the power of Asian giants like China and India in the Indo-Pacific region and has weakened their capacity to shape the external environment.
  • The US managed to expand its power through better diplomacy and retained its position as the most influential nation in the region.
  • India is the fourth most powerful country in the region after the US, Japan and China.
  • India saw a loss of ranking in critical parameters like diplomatic influence and economic relationships in the last one year.
  • India also lagged in economic diplomacy, dropping one place and finishing eighth behind Thailand.
  • Japan and India - the two nations with the most potential to contribute to a regional multipolar order - lost more ground in 2021 than China.

World Inequality Report 2022

“World Inequality Report 2022” was recently released by France-based World Inequality Lab.

Key Findings (Global)

We are still there where we were at the 20th Century

  • Global inequalities today are as much as they were at the peak of Western imperialism in the early 20th century.
  • The share of income presently captured by the poorest half of the world’s population is about half of what it was in 1820, before the great divergence between Western countries and their colonies.

Poorest Half owns 2% of Global Wealth

  • The poorest half of the global population “barely owns any wealth” possessing just 2 per cent of the total, whereas the richest 10 per cent of the global population own 76 per cent of all wealth, it states.

Most Unequal Region

  • The Middle East and North Africa (MENA) are the most unequal regions in the world.

Region with Lowest Inequality

  • Europe has the lowest inequality levels. In Europe, the top 10 per cent income share is around 36 per cent, whereas in MENA it is 58 per cent.

Whole of the Wealth is in Private Hands

  • There is a huge gap between the net wealth of governments and net wealth of the private sector.
  • In the last 40 years, countries have become significantly richer, but their governments have become significantly poorer.
  • The share of wealth held by public actors is close to zero or negative in rich countries, which means that the whole of the wealth is in private hands.

India-specific Findings

India stands out as a “poor and very unequal country with affluent elite”.

Why India as a ‘very unequal country'

  • The top 10 per cent holds 57 per cent of total national income.
  • The top 1 per cent holds 22 per cent of total national income.
  • The bottom 50 per cent share has gone down to 13 per cent of national income.
  • So, India stands out as a poor and very unequal country with affluent elite.

MPI & Poor in India

  • As per the recent Multi-dimensional Poverty Index (MPI) prepared by Niti Aayog, one in every four people in India was multidimensionally poor. Bihar has the highest proportion of people (51.91 per cent of the state’s population) who are multidimensionally poor, followed by Jharkhand at 42.16 per cent and Uttar Pradesh at 37.79 per cent.

Gender Inequalities: The female labour income share is equal to 18% which is significantly lower than the average in Asia and this value is one of the lowest in the world.

What the Report Suggests

  • The report has suggested levying a modest progressive wealth tax on multimillionaires.
  • It says that given the large volume of wealth concentration, modest progressive taxes can generate significant revenues for governments that can be reinvested in education, health and the ecological transition.

Global Hunger Report 2021- A Flawed One: India

In the 2021 Global Hunger Index, India ranks 101st out of the 116 countries. Last year India was ranked at 94th.

  • With a score of 27.5, India has a level of hunger that is ‘serious’.
  • The report was prepared jointly by Irish aid agency Concern Worldwide and German organisation Welt Hunger Hilfe.

Three Dimensions & Four Indicators of GHI

  • The Index tracks four indicators on three dimensions to measure progress toward Zero Hunger by 2030 at national, regional, and global levels.

UNDERNOURISHMENT: the share of the population that is undernourished (that is, whose caloric intake is insufficient);

CHILD WASTING: the share of children under the age of five who are wasted (that is, who have low weight for their height, reflecting acute undernutrition);

CHILD STUNTING: the share of children under the age of five who are stunted (that is, who have low height for their age, reflecting chronic undernutrition); and

CHILD MORTALITY: the mortality rate of children under the age of five (in part, a reflection of the fatal mix of inadequate nutrition and unhealthy environments).

  • Based on the values of the four indicators the GHI determines hunger on a 100-point scale, where 0 is the best possible score (no hunger) and 100 is the worst.
  • Each country’s GHI score is classified by severity, from low to extremely alarming.

Major Findings

  • Although GHI scores show that global hunger has been on the decline since 2000, progress is slowing. While the GHI score for the world fell 4.7 points, from 25.1 to 20.4, between 2006 and 2012, it has fallen just 2.5 points since 2012. After decades of decline, the global prevalence of undernourishment — one of the four indicators used to calculate GHI scores — is increasing. This shift may be a harbinger of reversals in other measures of hunger.
  • Somalia has the highest level of hunger according to the 2021 GHI ranking — its GHI score of 50.8 is considered extremely alarming.
  • It is preceded by five countries with levels of hunger that are alarming — Central African Republic, Chad, Democratic Republic of the Congo, Madagascar, and Yemen — and 31 countries that have serious levels of hunger.

India Specific Findings

  • As per this report, India’s position on the first indicator, child mortality, has improved in 2021 compared with 2020. Position on two indicators, i.e., child wasting and child stunting, has remained unchanged in 2021 compared with 2020.
  • Only 15 Countries Fare Worse than India:These include Papua New Guinea (102), Afghanistan (103), Nigeria (103), Congo (105), Mozambique (106), Sierra Leone (106), Timor-Leste (108), Haiti (109), Liberia (110), Madagascar (111), Democratic Republic of Congo (112), Chad (113), Central African Republic (114), Yemen (115) and Somalia (116).
  • Behind Most of the Neighbouring Countries: Pakistan was placed at 92 rank, Nepal at 76 and Bangladesh also at 76.

India rejects GHI Findings

  • The Ministry of Women and Child Development termed the findings of the report “devoid of ground reality”.

The factors that led to the criticism were

  • Unscientific Method: The methodology used by FAO is unscientific. They have based their assessment on the results of a ‘four question’ opinion poll, which was conducted telephonically by Gallup. The scientific measurement of undernourishment would require measurement of weight and Height.
  • Govt.’s Efforts not Considered: The report completely disregards Government’s massive effort to ensure food security of the entire population during the covid period, verifiable data on which are available.
  • Questionable Questionnaire: The opinion poll does not have a single question on whether the respondent received any food support from the Government or other sources.
  • Representativeness in Question: The representativeness of even this opinion poll is doubtful for India and other countries. It is noted with surprise, from the FAO report ‘The State of Food Security and Nutrition in the World 2021’, that other four countries of this region – Afghanistan, Bangladesh, Nepal and Sri Lanka, have not been affected at all by Covid-19 pandemic induced loss of job/business and reduction in income levels, rather they have been able to improve their position on the indicator ‘proportion of undernourished population’.

Global Innovation Index 2021

  • The 14th edition of Global Innovation Index was released on 20th September 2021.
  • The Index is released annually by the World Intellectual Property Organization (WIPO).
  • The Global Innovation Index 2021 captures the innovation ecosystem performance of 132 economies and tracks the most recent global innovation trends.

Source: World Intellectual Property Organisation

Overall Findings

  • The GII 2021 finds that the innovative sectors of the global economy have remained strong, despite severe disruptions.
  • The GII 2021 finds that governments and enterprises in many parts of the world have scaled up their investments in innovation during the COVID-19 pandemic. Meantime, scientific output, expenditures in research and development, intellectual property filings and venture capital deals continued to grow in 2020, building on strong peak pre-crisis performance.

Global Ranking

  • Switzerland topped the table, followed by Sweden, the US and the UK. Angola was at the bottom of the table.
  • Among Asian economies, South Korea jumped to the fifth position, up from 10 last year. China was in the 12th position.

India on the Index

  • India has climbed 2 spots and has been ranked 46th in the Global Innovation Index 2021.
  • India has been on a rising trajectory, over the past several years in the Global Innovation Index (GII), from a rank of 81 in 2015 to 46 in 2021.
  • In Central and Southern Asia, India leads in 46th position, followed by the Islamic Republic of Iran (60th) and Kazakhstan (79th)respectively

Reasons for India’s Improvement in Ranking

  • The consistent improvement in the GII ranking is owing to the immense knowledge capital, the vibrant start-up ecosystem, and the work done by the public and the private research organizations.
  • The Scientific Departments like the Department of Atomic Energy; the Department of Science and Technology; the Department of Biotechnology and the Department of Space have played a pivotal role in enriching the National Innovation Ecosystem.

Note: This year, the NITI Aayog, in partnership with the CII and the World Intellectual Property Organisation (WIPO), is hosting, virtually, the India Launch of the GII and the Global Innovation Conclave during September 21-22, 2021.

Yield Curve

Why is it in News?

Yield curve in the US has inverted for the first time since mid 2007- a shift that has in past signaled recession.

What is the Yield Curve?

  • Yield curve is a plot between rate of interest earned on the bonds on Y axis and maturity period on the X axis.
  • Under normal circumstances there is proportional relationship between interest rate on bonds and its maturity period i.e. short term bonds have low interest rate while long term bonds have high interest rate

Breaking this Concept further:

  • Say at this instant health of the economy is sound, so the Government of the day will not pay high interest rate on the bonds which it issues for short term, but no one knows what will happen to the economy in long terms (say 50 years later), so it is generally seen that the interest rate is higher on long term bonds and lower on the short term bonds.

Graphical Representation of a Yield Curve:

Normal Yield CurveInverted Yield Curve

Under a normal yield curve, it is apparent that when the maturity period is less, interest rate is less. When the maturity period is long, the interest rate is more on the bond but it is reversed in the case of an inverted yield curve.

What happened in the US?

  • Government securities of US for 3 months maturity is paying the interest rate of 2.46%, while for 10years it is paying the interest rate of 2.44%, which is opposite to the normal trend (ideally it shall be more for long duration bonds).
  • Hence, it is evident that a yield curve is inverted in the case of US and inverted yield curve points to recession in the future.

Laffer Curve

  • This curve explains correlation between tax rate and tax revenues.
  • It states that if tax rates are very high, reducing them up to a point optimizes tax revenues as it will lead to lesser evasion and better compliance.

Some Deductions from Curve:

1. If we are to the right of T*, if tax rate decreases, tax revenue will increase.

2. If we are to the left of T*, if tax rate decreases, tax revenue will decrease.