'Goes back to decline of Kolkata': Sanjeev Sanyal flags India's real problem, and it isn't income inequality

Economist and PMEAC member Sanjeev Sanyal argues that India's main economic challenge is not income inequality, but a spatial divide between the eastern and western parts of the country. "Our real problem - which I keep pointing out - is really a spatial one. The eastern half of India is distinctly poorer than the western half of India," Sanyal told Business World.

He noted that while debates about the North-South divide persist, indicators show an east-west disparity across multiple states. "People go on about the North-South divide, but on any socioeconomic indicator, it's actually an East-West divide. It's quite clear that West Bengal, Bihar or even Eastern UP - even if you look within states - you'll see that the eastern part of it is poorer than the western part. You look at Madhya Pradesh, the eastern part is poorer than the western part. This is true for any big state," he said.

Sanyal attributed part of this gap to historical and infrastructural factors. "Some of it goes back to the decline of Bengal and specifically of Kolkata over the last half a century. But there are other issues as well. The infrastructure buildout in the eastern half has been worse than before."

The economist highlighted that some regions of India have benefited significantly from economic reforms since 1991. "Certain parts of the country have distinctly taken off. And many of those parts were not great performers before 1991. So the dynamics of a market economy have benefited certain parts of the country clearly more than others," he said.

He cited examples of high-performing states, including the four southern states, Maharashtra, and Gujarat. "You had states like Maharashtra, which was always industrial. They have continued to do well. And then you have Gujarat - another high-performance state in recent years. There's, of course, Delhi NCR that has done decently well," Sanyal added.

The economist addressed the discussion on income inequality, noting improvements in living standards and consumption levels since the 1991 reforms. "While absolute poverty is dropping, people are debating what is happening to inequality. There is also evidence from the consumption-based Gini coefficients and other things that even in terms of consumption inequality, India is not one of the more unequal countries in the world," he said when asked about much alleged unequal growth. "While data is not very good on this, income inequality is perhaps not as unequal as people make it out to be." 

"There is an effect of all the government schemes, whether that's food or other kinds of Aayushman Bharat and so on. And so the net result of this is that India's consumption Gini coefficient is actually one of the better ones in the world. It's certainly not as some people accuse being an excessively unequal society," Sanyal added.