Topic 1: Analysing the Income inequality amongst all income earners in India

Why in NEWS?

According to a recent report by the State Bank of India (SBI), India has witnessed a significant fall in inequality over the last decade.

What is inequality?

As per IMF Inequality can be viewed from different perspectives, all of which are related. It majorly categorises inequality in four types:

1. Income Inequality, which refers to the extent to which income is evenly distributed within a population.
2. Lifetime Inequality – inequality in incomes for an individual over his or her lifetime.
3. Inequality of Wealth – distribution of wealth across households or individuals at a moment in time.
4. Inequality of Opportunity – impact on income of circumstances over which individuals have no control, such as family socioeconomic status, gender, or ethnic background.

How is Income Inequality measured?

• Gini coefficient is a typical measure of income inequality. The coefficient varies between 0 and 1, with 0 representing perfect equality and 1 perfect inequality.

What is the Present Status of income inequality in India?

• According to latest report by the State Bank of India (SBI), India has witnessed a significant fall in inequality over the last decade.
• The report claims that the Gini coefficient (a standard measure of inequality) has fallen from 472 in 2014-15 to 0.402 in 2022-23. A fall of almost 15% in the Gini coefficient indicates a significant reduction in inequality.

 

Does the reduction in Gini Coefficient represents the reality?

• The analysis is conducted on data which only represent the tax payers, whereas majority of income-earners fall outside the tax net.
• If we take into account the data from the 2022-23 Periodic Labour Force Survey (PLFS) nearly 80% of income-earners are those who earn less than ₹2.5 lakh per annum, which is the minimum taxable amount. It does not takes into account the self-employed people in agriculture.

 

• The Report uses data from the 2017-18 and 2022-23 rounds of the PLFS (comprising the earliest and latest rounds of the survey), to calculate Gini Coefficient.

 

• Analysis may be partially true but it does not take into account the difference in incomes growth across the different strata of the society. Incomes of the top 10% have grown faster than the bottom 30%, with polarisation largely seen amongst self-employed workers.

 

Knowledge Box:   What does Polarisation mean in economics? Income inequality or economic polarization refers to the gap between the “haves” and “have-nots” in society.

 

Does the finding take into account the possible error in reporting of Agricultural Income?

• Data analysed does not include the seasonal variation of agricultural income. The analysis presented in the report does not adjust for possible errors in self-reporting of incomes. Since incomes of the self-employed in agriculture varies over the year.
• Only those individuals who earn income from work are considered, excluding those who work as unpaid family helpers (a large proportion of whom are women).
• The category of the self-employed includes own-account workers — such as individual farmers, roadside hawkers, etc. — and those who are self-employed but also employ other workers.

 

 

 

What has led to increased polarisation amongst self-employed categories compared to different strata of society?

The analysis shows its related to the rise in women’s labour force participation. It has primarily come about through forms of low-paid, part-time self-employed work.

• Households may be earning more, and women may be working, but this increase in low-paid self-employed work has led to an increase in the gap between the top and bottom of self-employed incomes.
• This has increased polarisation amongst income-earners, even though gaps for wage work both regular and casual have fallen cross the income slab.

Topic 2: Foreign Contribution Regulation Act, 2010(FCRA)

Why in NEWS?

The Foreign Contribution Regulation Act, 2010 (FCRA) registration of two prominent non-governmental organisations (NGOs) — Centre for Policy Research (CPR) and World Vision India (WVI) have been cancelled this month.

 

What is Foreign Contribution Regulation Act, 2010(FCRA)?

• It’s the act which empowers the Union Ministry of Home Affairs (MHA) to monitor the foreign donations to NGOs.
• Through the FCRA, the ministry regulates foreign donations to ensure that such funds do not adversely affect the country’s internal security. It is compulsory to register under the Act.
• The registration is valid for five years, after which the NGO has to apply for a renewal. It is mandatory for all such NGOs to register under the FCRA, initially valid for five years that can be renewed if it complies with all norms. Registered groups can receive foreign contribution for social, educational, religious, economic and cultural programmes.

 

What are the Salient Features of the Act?

• Any organisation of a political nature and any association or company engaged in the production and broadcast of audio- or audio-visual news or current affairs programme have been placed in the category prohibited to accept foreign contribution.
• As per its provision no person who receives foreign contribution as per provisions of this Act, shall transfer to other person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government.
• As per the act foreign contribution shall be utilized for the purpose for which it has been received and such contribution can be used for administrative expenses up to 50% of such contribution received in a financial year. However, administrative expenses exceeding fifty per cent of the contribution to be defrayed with the prior approval of the Central Government.
• There is provision for suspension as well as cancellation of registration granted for violation of the provisions of the Act.
• Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.

Why was FCRA registration for several NGOs cancelled?

• Since 2015, the FCRA registration of more than 16,000 NGOs have been cancelled on account of “violation.” The FCRA registration of nearly 6,000 NGOs had ceased to operate from January 1, 2022 as the MHA either refused to renew their application or the NGOs did not apply.

 

• A 2012 report by the MHA said that there are over 20 lakh registered NGOs in the country and the number of such NGOs registered under FCRA will be less than 2%. The report noted that the NGO sector in India is vulnerable to the risks of money laundering and terrorist financing. Therefore, necessary steps for rigorous enforcement as well as coordination with foreign countries for law enforcement needs to be continued.

Why were CPR and WVI’s registrations cancelled?

• As per Ministry of Home Affairs(MHA), Centre for Policy Research (CPR) diverted foreign donations to fund “protests and legal battles against developmental projects” and misused funds to “affect India’s economic interests.”
• It alleged that the think tank engaged in production of current affairs programmes which violated FCRA norms. CPR had furnished a report on air pollution. The MHA said publishing of current affairs programme using foreign funds is prohibited under Section 3 of the FCRA.
• In case of World Vision India (WVI) the registration was cancelled for alleged FCRA violations from 2012-13 to 2020-21. WVI is the recipient of the highest amount of foreign donations among all NGOs registered under the Act in 1986.