In making a distinction between justified and unjustified inequalities the following things need to be mentioned. One, in our economy, where private ownership of resource predominates, the personal incomes for some are constituted of property income besides labour income.
This may be justified. But from the welfare angle even in this regard there has to be limits. Two, the institution of private ownership also includes right to inherit. But the income from the inherited property may not be justified much, as the inheritor has done nothing or little to deserve it.
Hence, inequalities associated with such unequal asset distribution need to be done away with, substantially, if not completely. Three, quite a large part of the differences in the labour-incomes is due to the differences in the nature of work, as also because of the variety of skills required for different jobs.
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Now inequalities based on these have to be accepted so as to attract persons with suitable aptitudes skills for these different occupations. Four, for development to proceed, it is necessary to encourage certain types of skills and discourage others which are no longer needed. Five, inequalities also promote savings, because people with higher incomes have higher propensity to save.
This argument, however, loses its validity if adequate saving is forthcoming from the government and/or the public sector undertakings. So, as long as this is not the case, inequalities of income are helpful for making available resources for investment.
Intolerable Inequalities:
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Beyond the desirable inequalities, there is absolutely no justification for unequal incomes. In a poor country like India, large numbers of people with little or almost no income are unable to meet their bare minimum needs for sheer physical existence.
This severely affects their health and efficiency and also the production. At both the ends, society’s resources are wasted: in the former case because the labour factor does not contribute much, and in the latter case, the resources are misdirected towards socially unacceptable channels.
Government Measures:
As part of the objective of growth with social justice, government has undertaken various measures to curb the evils of inequality. These measures may be categorized under two broad groups, namely, those which are intended to level down the incomes of the few at the top, and those which are directed towards raising the income of the large many at the bottom.
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Leveling Down:
First is the structure of taxation which has some progressive features. These result in higher tax rates at higher incomes and large taxes on luxury items. Secondly, there are measures that aim at the reduction of concentration of wealth in many hands.
In the rural areas it has taken the form of ceiling on land which an individual can hold. Thirdly, there is then a measure of general nature, namely the existence of the public sector. There are, of course, other reasons too for this policy, but the reduction in inequalities is one of the major ones.
Leveling Up:
Firstly, there are various schemes pertaining to the transfer of resources/assets/ incomes to the poor. These are for example: distribution of surplus land under the policy of ceiling on land; subsidies for some items of consumption; subsidised inputs for production such as credit, etc. Secondly, there are special programmes of employment designed for specific and weaker sections of society.
These are, for example, Jawahar Rozgar Yojna, Integrated Rural Development Programme, etc. Thirdly, there is the policy of promoting very small industries and cottage industries aimed at providing employment to poor workers, artisans, etc. and raising their incomes. Fourthly, there is the general policy of extending public utility services with an emphasis on meeting the needs of the low income groups.
These consist of extension of facilities for health, education, drinking water, etc. Fifthly, the policy of reducing the fast growing population among the poor is also helpful, as far as it raises the income-status of the poor and thereby improves the income distribution.