In order to lift the poor out of poverty, India must continue to focus on economic growth, stated the Economic Survey tabled in Parliament by Finance Minister Nirmala Sitharaman on Friday.
Economic growth has a greater impact on poverty alleviation than inequality, it said, adding that while the policy does not imply that redistributive objectives are unimportant, it is only feasible in a developing economy if the size of the economic pie grows.
It also mentioned that inequality refers to the degree of dispersion in the distribution of assets, income or consumption and poverty refers to the assets, income or consumption of those at the bottom of the distribution.
The survey examined the correlation of inequality and per-capita income with a range of socioeconomic indicators, including health, education, life expectancy, infant mortality, birth and death rates, fertility rates, crime, drug usage and mental health.
Based on this, the survey concluded that both economic growth and inequality have similar relationships with socio-economic indicators.
"Thus, unlike in advanced economies, in India economic growth and inequality converge in terms of their effects on socio-economic indicators... Economic growth has a far greater impact on poverty alleviation than inequality," it added.
It further said for a developing country like India, where there is significant scope for poverty reduction and growth potential is high, expansion of the overall pie is preferable as redistribution is only feasible if the size of the economic pie grows rapidly.
It mentioned that over time, global commentaries have mostly highlighted a potential conflict between economic growth and inequality and observed that conflict between economic growth and inequality is pertinent once again because of COVID-19 pandemic.
"The policy objective of focusing on inequality may not apply in the Indian context given the differences in the stage of development," it further stated, attributing this to India's higher potential rate of economic growth and the higher absolute levels of poverty.
The Economic Survey, which was tabled in Parliament amid the COVID-19 pandemic stated the Indian economy can contract by 7.7 per cent in current financial year ending on March 31.
Growth in the next financial year could be 11 per cent, it added.
( With inputs from ANI )
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