"Around the world, the effects of alarmingly high economic inequality are spilling over into politics and society," wrote Prof K Basu. "Economic insecurity is a driving force behind violent conflicts in the Middle East and the rise of fascist elements in some European countries, not least Hungary and Poland." Even in the US "economic marginalization has led to a strengthening of chauvinist and supremacist identities and other social problems and such as the opioid epidemic." The solution is to "improve education and health, as well as redistributive taxation". But inequality is not the same as "economic marginalization". There is huge inequality between the richest billionaires and ordinary millionaires but surely they will not resort to "violent conflicts" and do not need "redistributive taxation". The policy of income distribution to reduce inequality between individuals is also applied to states in India. Revenue collected through taxation is distributed by the central government according to need, with poorer states getting more money. For every Rs 100 that Maharashtra pays in taxes it gets back Rs 15 from the center, while Bihar gets Rs 400 back for Rs 100 it pays, wrote P Chakravarty.
Despite such redistribution the gap between rich and poor states is widening in per capita income, education level and longevity. A study by P Chakravarty and Prof V Dahejia showed that the 3 richest states in India are 3 times richer than the 3 poorest states, which they call the 3-3-3 puzzle. With free movement of business and people within India one would expect that investment would go to places where land and labor costs are less, which should lead to a gradual convergence. The difference has been growing since economic liberalization, probably because wealthier states have better infrastructure, more educated people and higher consumption. The richer states have low fertility rates while the fertility rate of Bihar was 3.3 in 2016, the highest in India, UP 3.1, and Madhya Pradesh 2.8. Surprisingly, West Bengal has a fertility rate of 1.6, which is much below replacement level. Must be due to poor governance. The government has set up a Finance Commission which will decide how revenue is to be distributed in future. Southern states fear that they will get less money when they pay a higher share of taxes and have controlled their population growth, so northern states will be rewarded for their bad behavior. Trouble is that Indian politicians consider taxpayer money as their own. Thus, the Prime Minister showered Rs 530 billion to Bihar to tempt Chief Minister Nitish Kumar to dump Lalu Yadav he has refused to help Andhra Pradesh, prompting Chief Minister Chandrababu Naidu to walk out of the NDA coalition in parliament. Only some of the poor deserve help in India. Selective redistribution.
Despite such redistribution the gap between rich and poor states is widening in per capita income, education level and longevity. A study by P Chakravarty and Prof V Dahejia showed that the 3 richest states in India are 3 times richer than the 3 poorest states, which they call the 3-3-3 puzzle. With free movement of business and people within India one would expect that investment would go to places where land and labor costs are less, which should lead to a gradual convergence. The difference has been growing since economic liberalization, probably because wealthier states have better infrastructure, more educated people and higher consumption. The richer states have low fertility rates while the fertility rate of Bihar was 3.3 in 2016, the highest in India, UP 3.1, and Madhya Pradesh 2.8. Surprisingly, West Bengal has a fertility rate of 1.6, which is much below replacement level. Must be due to poor governance. The government has set up a Finance Commission which will decide how revenue is to be distributed in future. Southern states fear that they will get less money when they pay a higher share of taxes and have controlled their population growth, so northern states will be rewarded for their bad behavior. Trouble is that Indian politicians consider taxpayer money as their own. Thus, the Prime Minister showered Rs 530 billion to Bihar to tempt Chief Minister Nitish Kumar to dump Lalu Yadav he has refused to help Andhra Pradesh, prompting Chief Minister Chandrababu Naidu to walk out of the NDA coalition in parliament. Only some of the poor deserve help in India. Selective redistribution.
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