India has seen remarkable economic development with the increased integration and interdependence of economies from around the world. Despite this economic advancement, India has experienced growing socioeconomic inequality. As in most countries, India’s economic development is disproportionately favoring the already wealthy. Wage inequality has been the main cause behind this widening gap between classes. In the 1990s, the top 10% of wage earners in India made six times more than the bottom 10% of wage earners. That ratio has doubled over the last twenty years. Some critics argue that India’s increased economic privatization and capitalistic policies have lifted millions of people out poverty in terms of increases in absolute income. However, studies have shown that a widening wage gap is still psychologically demoralizing to lower-class workers even with a nominal increase of their incomes. It sends a message that even though India is experiencing rapid economic developments, poor people will never have an opportunity at upward mobility. The increasing socioeconomic disparity in India is indicative of more than just a widening wage gap. The unequal access to education opportunities and the inadequate funding of social welfare systems has also contributed to the rising inequality in India.
India’s current Vice-President, Hamid Ansari, recently cited inequality as one of the country’s major challenges standing in the way of development goals. Fixing the wage gap is an essential part of mitigating the issues associated with socioeconomic inequality. As education becomes increasingly privatized in India, the costs of sending a child to school are becoming more and more difficult for lower-income families to afford. Without a proper education, the chances of these low-income children ever escaping poverty are slim to none. The process is cyclical and hard to overcome. According to the Organization for Economic Cooperation and Development (OECD), India has the highest proportion of informal workers out of any developing nation. At the same time, India’s tax revenue is only 20% of its GDP, which is the lowest among all emerging economies. The informal economy that thrives throughout India’s slums holds enormous potential for narrowing the country’s socioeconomic gap. If these informal workers and their informal enterprises could be restructured into taxable formalized businesses, the Indian government could increase tax revenues, while at the same time, help lift millions of slum residents out of poverty. As daunting and overwhelming a task this may seem, it does provide a long-term, sustainable plan of action to alleviate poverty and social inequality in India.