Congress Advocates ‘Bottom-Up Approach’ to reduce Inequality

  • March 1, 2025
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Congress Advocates ‘Bottom-Up Approach’ to reduce Inequality

Sub : Eco

Sec: National Income

  • The Congress Party has called for a shift in policy making from cronyism (favoring big businesses) to bottom-up empowerment to tackle inequality and low consumption in India.

Key Concerns

  • Low Consumption Levels: India’s per capita consumption is ₹1,493—less than one-third of China’s.
  • Unequal Consumer Class Structure: 30 million wealthy households (10%) can afford large-scale purchases, whereas 205 million poor households (1 billion people) have no disposable income for non-essential goods.

Proposed Solution: Bottom-Up Economic Empowerment

  • Congress suggests boosting rural incomes as a solution to low consumption.
  • Recommends hiking MGNREGA wages (rural employment scheme) to outpace inflation.
  • Focus on grassroots economic growth rather than benefiting large corporations.
Crony Capitalism: Crony capitalism is an economic system where businesses benefit from political connections rather than market efficiency or innovation. It often involves corruption, favouritism, and monopolies, leading to wealth concentration in the hands of a few.

Issues with Crony Capitalism

  • Unfair Market Advantage & Corruption
  • Distorted Market Competition
  • Reduced Innovation & Economic Growth
  • Public Distrust in Government & Economy

Example: In India, several industrialists have been accused of using political connections to secure land, licenses, and regulatory relaxations, while small businesses face bureaucratic hurdles.

Trickle-Down Approach: The trickle-down theory suggests that economic benefits given to the wealthy—such as tax cuts and corporate incentives—eventually benefit society as a whole by increasing investment, job creation, and wages.

How It Works:

  • Government reduces taxes for businesses and wealthy individuals.
  • They invest more, leading to higher production and employment.
  • Wages rise, and people have more spending power.
  • The wealth “trickles down” to the lower-income groups.

Criticism & Issues:

  • Wealth Concentration: The rich may hoard wealth instead of reinvesting it.
  • Slow Impact on Poor: Economic benefits don’t always reach the lower classes.
  • Increased Inequality: The gap between rich and poor widens instead of shrinking.

Example: Corporate tax cuts of 2019 aimed to boost production and create jobs, however, reduction in taxes had not resulted in promoting growth and investment and also, such reductions decrease the government revenues, thereby squeezing the fiscal space for development programmes and government spending.

Inclusive Growth: Equitable Development: Inclusive growth is an economic model that ensures benefits of development reach all sections of society, especially the poor, marginalized, and disadvantaged groups. It focuses on:

  • Employment generation
  • Access to quality education & healthcare
  • Infrastructure for all
  • Fair distribution of resources

How It Works:

  • Government policies focus on job creation, rural development, education, and healthcare.
  • Investments in small businesses and rural areas create a broad-based economy.
  • Social welfare schemes help uplift the economically weaker sections.
  • A balanced public-private partnership ensures sustainable growth.

Benefits of Inclusive Growth:

  • Reduces Inequality: Ensures economic benefits are shared by all.
  • Boosts Consumption: Higher incomes for the poor increase overall demand in the economy.
  • Sustainable Development: Focuses on long-term stability rather than short-term profits.
  • Stronger Social Cohesion: Reduces social unrest caused by economic disparities.

Example: India’s Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) guarantees rural employment, ensuring wages and livelihood security for millions.

Congress Advocates 'Bottom-Up Approach' to reduce Inequality economy