On Swaminomic’s Post on Inequality

This is a reponse to Swaminomic’s post, where he talks about economic inequality in Indian states (link). I will briefly present his views first and then present some flaws in his argument by providing some facts.

He suggests that India should not be worrying about economic inequality as much as worrying about the overall growth because actions to promote overall growth will benefit a state more than just targeting inequality. He argues that according to Gini Coefficient (link), which measures economic inequality in a region, Haryana, Kerala, Maharashtra, Tamil Nadu, Punjab and Gujarat are the most unequal states, but the same set of states are are more prosperous than the rest of the country. Thus, he concludes that inequality is not a good measure to assess well-being of Indian states. He implies that the Gini coefficient is meaningless because overall growth brings more people into a prosperous state and skews the wealth distribution. And also, because of presence of rich folks in Gurgaon, a fairly secure landlord in Haryana is counted as poor in the Gini Coefficient. The wiki article on the Gini Coeffieicnt (link) discusses the weaknesses in the measure. Swaminomic’s post says that some of the weaknesses are applicable in India’s case.

Against the harsh reality of farmer suicides, I am led to believe that the weakness do not play a role. This presentation (link) and this wiki article (link) indicate that Haryana, Kerala, Maharashtra and Punjab see some of the highest cases farmer suicides in the country. The claim that the inequality measure falsely indicates a fairly-rich person as a poor because the presence of richer folks is untrue in these cases. Inequality and poverty are very real in this case. Clearly, spending effort on the overall health has not benefited the very poor. Inequality needs as much attention as the overall economic health. A disguised trickle-down-theory (tried, tested and failed) argument will not convince me.

I do realise that the farmer’s suicide is an incomplete indicator. I am willing to look at other indicators, if any of you can provide them. Given an agriculture-based rural economy, farmers forms a major chunk of the population. So I think it would be hard to find indicators that support the contrary. The post says that GDP is an incomplete indicator, but it uses GDP to make arguments against Gini coefficient as an indicator (I assume. If not, then what?). There is a structural flaw in the argument, too.