Dealing with Inequities in India and China: A Comparative Study of Welfare Provisions

AuthorAsha Gupta
Publication Date01 Dec 2017
Indian Journal of Public
63(4) 649–671
© 2017 IIPA
SAGE Publications
DOI: 10.1177/0019556117726844
1 Former Director, Directorate of Hindi Medium Implementation, University of Delhi, Delhi, India.
Corresponding author:
Asha Gupta, ‘Suvasit’, BQ-2, Shalimar Bagh, Ring Road, Delhi 110088, India.
Dealing with Inequities
in India and China:
A Comparative Study
of Welfare Provisions
Asha Gupta1
Comparative studies of India and China are in vogue all over the world for various
reasons. But not much has been written about the recent welfare provisions in
these countries—both of them have huge populations and vast inequities to deal
with. Both of them had been under planned economies and have been dealing with
economic liberalisation since the 1980s. China started the process a decade ahead
of India. It could do so being run by an authoritarian party, whereas India had to
face a lot of resistance being a democracy. In both the countries, the state had to
come forward to deal with socio-economic and regional inequities enhanced in
the process of neo-liberalism. We find a shift in these countries from welfare to
paternalism, from redistribution in the name to equity to social protection through
social insurance, from government benevolence to contribution-based provisions,
etc. The article seeks to compare and contrast the recent social protection and
welfare provisions that are low-cost but effective on massive scale and draw some
important lessons. An attempt is made to understand the emergence of new laws
and find out how they are conceptualised and operationalised. It also covers the
risks involved in direct cash transfers and redefining the relationship among state,
market and society in ensuring the wellbeing of the most disadvantaged citizens.
The methodology adopted is analytical, comparative and empirical.
India, China, welfare provisions, social insurance, neo-liberalism, inequities
The Context
Of late, the rising inequalities at the world level, in general, and India and
China, in particular, have attracted a lot of attention from the policy-makers and
650 Indian Journal of Public Administration 63(4)
public alike. It has become a cause of great concern mainly because it is supposed
to hamper the pace and sustainability of growth. Today the world over, we find
concentration of wealth and political power in the hands of a small minority.
Women are the worst hurt by market fundamentalism. Capture of power and
politics by the elite has led to inequality. The rich and the corporate sector have
gained at the cost of the poor masses (Oxfam, 2013). In fact, the widening of
inequalities has resulted in the weakening of the growth-related reforms, on the
one hand, and encouraging the governments to adopt populist measures towards
poverty-alleviation and welfare provisions to be able to sustain themselves in
power, on the other hand. The Brazilian case can be cited where the then President
Dilma Rousseff had to face impeachment and the public wrath for decline in
economic growth and expenditure on unsustainable welfare reforms. It was
asserted that the levels of economic inequalities led to sub-optimal investment in
health, education and poverty-alleviation programmes, increasing the risk of
political instability and less inclusive growth (The Economist, 2015).
Though the earlier literature found a positive effect of inequality on growth
(Banerjee & Duflo, 2003) as it provided necessary incentives for growth (Kaldor,
1957) and allowed the accumulation of assets necessary for entrepreneurial activi-
ties (Barro, 2000), the recent research has uncovered some of the negative effects
of inequality on economic growth (Dabla-Norris, Kochhar, Ricka, Suphaphiphat,
& Tsounta, 2015a). To Dabla-Norris et al., a decrease in inequality leads to sus-
tained growth. To them, a 10 per cent decrease in inequality can increase the
‘length of growth spell’ by 50 per cent. If the share of income by the top quintile
increases, the GDP declines, whereas an increase in the share of bottom quintile
results in higher GDP. According to some political economists (Alesina & Rodrik,
1994; Persson & Tabellini, 1994), higher inequality can encourage the rich to block
re-distributionary policies aiming at higher growth. It can also result into economic,
fiscal or political instability (Kumhof, Rancière, & Winant, 2015; Rodrik, 1999).
Rising inequality has become an important political concern worldwide during
last few decades. Although we find rise in inequalities all over the world, we
find it more prominent in emerging economies, especially in thickly populated
Asian giants, India and China. The Asian region grew at the rate of 6 per cent
per annum during 1990–2015 despite the Asian financial crisis and global finan-
cial crisis and poverty fell down in India and China from 55 per cent in 1990 to
21 per cent in 2010. However, we find a rise in inequality in a number of Asian coun-
tries, the average level of Gini coefficient being higher than the rest of the world.
The average Gini coefficient (net of transfers and taxes) rose from 36 in 1990 to
40 in 2013. On population-weighted basis, the net Gini in Asia rose from 37 in
1990 to 48 in 2014 (Jain-Chandra, Kinda, Kochhar, Piao, & Schauer, 2016, p. 8).
It can also be testified from Figure 1.
The rising inequality in Asia is in sharp contrast to its own past record. Prior
to 1990, the Asian economies not only grew at a rapid scale but were also able to
reduce inequality and presented a model of ‘growth with equity’. It also presented
impressive reduction in poverty rates. But since 1990, Asia has seen vast increases
in inequality in terms of income and consumption, opportunities and outcomes.
In recent research based on empirical data, it is found that whereas greater financial

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