Income inequality: In India, a CEO earns 416 times more than his employee

The seriousness of India's commitment to end income disparity has been ranked 132nd out of 152 nations owing to low spending on health and education, a crumbling tax system and wide gaps in gender pay.

Prepared by Development Finance International and Oxfam, the first index to measure the commitment of governments to reducing the gap between the rich and the poor is based on three main indicators — government action on social spending, tax and labour rights — areas critical to reducing the gap.

The report, the result of the investigation for a year, says that while countries such as Sweden, Chile, Namibia and Uruguay have taken strong steps to reduce inequality, countries such as India and Nigeria perform poorly overall. Among the rich countries, the United States earns a bad rating.

The World Bank predicts that by 2030, almost half a billion people will still be living in extreme poverty. Back in 2015, 193 governments promised to reduce inequality as part of the United Nations' Sustainable Development Goals (SDGs).

The report raps India particularly hard on the knuckle but not before revealing that in the country, the chief executive officer (CEO) of a top information technology (IT) firm brings in a massive 416 times the salary of his company’s typical employee.

India managed to secure a lowly 149th position on the health, education and social protection spending indicator, ranking below nations like Yemen, Senegal, Congo and Serbia.

Oxfam calculates that if India were to reduce inequality by a third, more than 170 million people would no longer be poor. It also questioned the lack of a concerted effort by the government to tackle inequality.

India secured the 91st rank among nations on the progressive structure and incidence of tax indicator. "The tax structure looks reasonably progressive on paper, but in practice, much of the progressive tax is not collected," the report said. 

While many countries are collecting very little tax overall, India collects just 16.7% of gross domestic product (GDP), while comparable economies such as Indonesia collects 11.9% and South Africa manages to collect over 27%.

Finally, the nation came at the 86th place in the labour market policies to address inequality indicator. On labour rights and respect for women in the workplace, India also fares poorly, reflecting that the majority of the labour force is employed in the agricultural and informal sectors, which lack union organisation.

Gender norms and existing discrimination against working women have now manifested in the form of lower pay for women, often for doing the same job and despite longer working hours. In India, the wage gap is 32.6%, the report says.

The report also noted that some middle-income countries are spending significantly less than nations that are rich today did at a similar point in their economic development. For example, Indonesia is richer today (in terms of per capita income) than the US was in 1935, when it passed the Social Security Act but is today ranked at the 101st position.

This is also true for nations in the Indian subcontinent where all middle-income countries that could be spending far more on health, education and social protection than they are doing, which means they get very low scores on the change readiness (CRI) Index.

Oxfam’s research has shown that since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while the top 1% received 50% of the increase.