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Yawning gap between the rich and poor in India
Dec 7, 2016

As per Credit Suisse's Global Wealth Report of 2016, India is the world's second most unequal country in the world after Russia.  More than half (58.4%) of the wealth in the country is owned by the top one per cent of the population.  In fact, the share of wealth owned by this creamy layer has swelled up from 36.8% in 2000 to 58.4% in 2016.

And this gap will continue to widen until steps are taken to curb the movement of black money.  Bringing greater transparency and accountability for every section of the society including businessmen, politicians and bureaucracy is the need of the hour. This will ensure that black money generation is nipped in the bud itself. My colleague Vivek Kaul has discussed in detail about the need for political parties to become transparent in their funding deals. Here's what he had to say

    If Narendra Modi is serious about his fight against black money and moving India towards a cashless society, this needs to stop. If you, I and everybody else, are being encouraged to go cashless, why are political parties still allowed to take donations in cash and not declare the source of funds.

    Since the entire demonetisation issue is more about making a political point, the BJP can take a step forward on this front and promote the usage of Unified Payment Interface for cash donations that are made to a political party. In fact, the BJP should make all donations of less than Rs 20,000 compulsorily to be made through the Unified Payment Interface.

    This will work at multiple levels. The BJP will score political points over its rivals and allow Modi to take a moral high ground again. The economy will become more cashless. Further, there will be less infiltration of black money in political parties, given that those making a donation of Rs 20,000 or lesser can be identified as well.

Demonetization has addressed an insignificant part of the black economy. In the process, the unorganized section of the society, who by default became part of the black economy, has been adversely impacted. However, the bigger players who drive this black economy continue to thrive. At most, the demonetization exercise can hope to achieve is a higher financial inclusion and greater adoption of digital payment systems that will aid in the shift towards a cashless economy. But it remains incapable to stamp out the black economy and the growing wealth inequality in the country.

Data Source: Independent, Credit Suisse Global Wealth Databooks

This Chart Of The Day was published in The 5 Minute WrapUp - No Rate Cut Is Not Disappointing! The Monetary Policy Statement Is!

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