Mapping Income Inequality in South Asia

South Asia has experienced substantial economic growth in recent years, but the benefits have not been shared equally. South Asia presents a fascinating, yet concerning, case of income inequality and wealth distribution remains highly uneven. The economic landscape of this region offers a compelling example of global income inequality. This brief delves into this disparity, exploring uneven progress, persistent inequality, the factors that contribute to it, and Bangladesh’s comparative position amidst the persisting inequality in the region.

South Asia has had remarkable growth, but not every underprivileged area has benefited from this growth. The gap between the rich and poor is also increasing with many still living in poverty. The social inequalities of this region are rooted in economic disparities which makes inequality even stronger for this region at large. It leads to unequal access to basic services like education, healthcare, and clean water. Consequently, the inability of certain groups to have quality education and health care can be seen that demonstrate how these constraints hinder their chances of moving up socially or becoming rich. Occupational disparity is also a rampant feature in labor markets thereby perpetuating inequality among citizens.

Data source: World Inequality Database (WID.world) (2024)

When we take these standard indicators based on the monetary aspects of life, South Asia has a moderate level of inequality. The ‘Gini Ratio’ of South Asian countries lies between 0.28 and 0.40, which is lower than that of other countries like China, South Africa, Mexico, etc.

The economic growth has not led to a uniform decrease in poverty rates or an increase in the middle-class section of societies. For example, India saw a dip in poverty levels but their population that was middle class increased slowly and some of the largest sections remained low-income earners. Income distribution remains highly skewed across the country despite these positive developments. There is still a large number of people who cannot meet their basic needs due to economic inequalities even though there is improvement in such areas. Many reasons can be attributed to this status quo. Unequal access to education and healthcare often leaves many left behind when it comes to social mobility; thus perpetuating income disparities among different groups within society. Other factors may account for higher earnings being located mostly in central urban areas instead of rural regions. The patterns of land ownership and the absence of land reforms only keep inequality alive and kicking in certain countries. It might be interesting at this point to study some particular countries within South Asia more closely. All nations have their own unique experiences in economic development and inequality among citizens who live within them as well as between them.

The World Bank Report

The World Bank’s report titled “Addressing Inequality in South Asia” carries out a focused analysis of these inequalities by analyzing them and suggesting possible ways through which a society can be made more equal. The report also highlights the need to address the disparities to make South Asian countries more prosperous and inclusive for all their citizens. Significant economic progress has been achieved by South Asia, whose nearly a quarter of its population lives there. For instance, India and Bangladesh have become key players in the world economy with notable improvements in GDP and general living conditions. However, this economic growth has not led to shared prosperity across the board. Rather, some few individuals have amassed wealth at the expense of many others which in turn widens the income inequality gap between rich and poor people. The report provides examples from different countries within southern Asia thereby giving deeper insight into the inequalities being addressed or successfully done away with sometimes referred to as case studies. The findings are supported with data that is presented alongside recommendations and assertions.

There are various examples from South Asian countries that have successfully implemented strategies to reduce income inequality. For example, Sri Lanka’s investments in education and healthcare have resulted in relatively lower levels of income inequality compared to its neighbors.

Factors of Inequality

Income inequality in South Asia has strong links with social factors such as caste, ethnicity, gender, and religion. These social divides create obstacles that hinder marginalized groups from accessing education, job markets and other social networks making the gap between rich and poor continue to widen. An example is found in India where the caste system continues to shape economic opportunities and outcomes. Lower-caste people usually face discrimination which denies them access to quality education as well as good-paying jobs. Similarly, gender inequality remains a critical issue across the region. Women generally earn less than men and are often confined to low-wage informal sector jobs.

Urbanization is central to development because cities are currently known as centers of economic activity and employment creation, unlike rural areas that continue to face limited access to markets and resources. Such unequal opportunities for economic advancement make this urban-rural divide one of the major drivers of income disparity between regions.

Education is a crucial factor in determining one’s economic mobility; however, quality education is not available to all children in South Asia fairly. Children from disadvantaged backgrounds often attend under-resourced schools with a lack of adequate facilities and untrained teachers. This educational divide leads to a huge skills gap that curtails job opportunities among the poor hence reinforcing poverty cycles within societies. Bridging these gaps requires vocational training and skill development programs that are very important but rarely reach those most in need of them due to inadequate funding for such initiatives. Expanding access to quality education and vocational training is essential for enabling all individuals to participate in and benefit from economic growth.

The Perspective of Bangladesh

While Bangladesh has made significant socioeconomic progress, ‘income disparity’ remains an area where the country falls short. The 2022 Household Income and Expenditure Survey (HIES) revealed that the Gini coefficient of income is 0.57, which is worse than the previously calculated index. This may seem surprising given Bangladesh’s large government and non-governmental spending in areas such as newborn and maternal health, food security, basic health service supply, and credit availability. Addressing the structural reasons of inequality is not easy.

Bangladesh’s Perspective Plan 2041 identified four institutional pillars for driving growth and transformation: governance, democratization, decentralization, and capacity building. If pursued methodically, this might help the country gradually close the wealth disparity. The booming economy and the current structure of governance of Bangladesh show that the country has a lot of potential to eradicate all forms of inequality and establish true equality considering all factors. The country is on its way to ensuring income and the benefits of a growing economy reach each level of society.

Labor market reforms target wages as well as working conditions, especially for those who are most vulnerable in society. The measures will engender greater participation by more people into economic processes on fair terms and thereby promote equitable distribution of resources amongst them. Social safety nets must expand to cover economically insecure individuals. This calls for investment into education and health services aimed at improving their quality and accessibility, particularly among marginalized communities. Implement policies to promote gender equality, including women’s participation in the labor force and access to education and healthcare, and strengthen governance and institutional frameworks to ensure the effective implementation of policies aimed at reducing inequality.

Addressing income inequality in South Asia necessitates a multifaceted approach that embraces economic, social, and institutional reforms. The governments of the countries should promote inclusive growth by implementing policies that ensure equal distribution of resources and opportunities. These include investing in infrastructure and services in rural areas to close the urban-rural gap. Huge investments are called for in education systems to enable every child to have access to quality education. This encompasses the improvement of school facilities, training teachers, and expanding vocational training among others.

Expanding social protection measures such as conditional cash transfers, health insurance, and unemployment benefits can act as a safety net for vulnerable populations and reduce their economic vulnerability. Implementing labor market reforms to guarantee fair wages, and decent working conditions, and protect workers’ rights, especially in the informal sector is essential to reducing income inequality. It is important that policies promoting gender equality be put into place like women’s education support, participation of women in the labor force as well as equal pay for work done by men or by either sex which are necessary for addressing income gaps between genders thereby promoting gender equality. Therefore, it is important to establish strong institutions that can effectively implement as well as monitor these policies aimed at reducing income inequality. Transparent and accountable governance can help ensure that resources are used efficiently and reach those who need them most.

Income disparity in South Asia is a complicated and diverse issue that must be addressed together. While the region has made substantial economic progress, ensuring that these gains are distributed equally remains a major concern. South Asian countries can make progress toward a more egalitarian and prosperous future by implementing inclusive policies, investing in education and social protection, and encouraging gender equality.

– Tahia Afra Jannati is a Research Intern at the KRF Center for Bangladesh and Global Affairs (CBGA).

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