Inequality: C

Clearly, the rich have got richer in the last five years. But have the poor got lesspoor? Datashows that in our socialistic pre-reform days, distribution of consumptionacross income groups was improving continuously. Since 1991, however, the trend seems tobe the other way around. What economists call ‘the inequality coefficient’ hasstarted increasing. The GDP grew by 6.3 per cent in 1994-95, but growth in per capitaconsumptionremained at 1993-94 levels: 2.4-2.5 per cent. Not surprisingly, among all theparameters, our respondents give reforms the lowest grade here. We asked them asupplementary question: "Have reforms helped the rich more than the poor?"Forty-six per cent said yes, 52 per cent felt that reforms have helped both equally, andonly 2 per cent felt that the poor have gained more from liberalisation than the richhave.

Says Bhaskar Ghose, India representative,Bank of New York: "The rich-poor dividehas widened. The reform process has not been in place long enough for its benefits totrickle down to the lowest levels." Adds economist S.P. Gupta: "The nature ofvested interests in the country is fast changing at the detriment of the large rural mass,where the majority of poor are concentrated." Adds J. Rajagopal of Coopers &Lybrand: "The experience worldwide of reforms hasbeen that despite noble intentions,the rich-poor divide increases. Basically the rich have benefited with growing businessopportunities and the middle class with increasing well-paying job opportunities. My ruleof the thumb: the number of beggars at the traffic signals has increased."

 However, Mukesh Gupta, vice-chairman and CEO of the Lloyds Group, disagrees:"I think the status is more or less the same.What has happened is that the divide hasbecome more apparent. It’s not that the poor have not benefited at all. Theirpurchasing power has definitely increased, but liberalisation has brought expensiveconsumer goods to the fold of the rich. This is what makes the divide apparent and, attimes, blatant. But the gap hasn’t increased or decreased to any substantial levelfrom what it used to be."

The bottomline, however, remains that with relative prices of food—includingration shop prices—increasing faster, a very high GDP growth rate of 7-8 per centwill be needed in the next few years to keep the rich-poor divide constant, if not stop itfrom widening.