Why Equality Is Not the Enemy of Growth — And Why India Can’t Afford to Ignore It

Public debates on economic equality in India are often framed in oddly moralistic terms. Equality is portrayed not as a policy concern, but as a bundle of four alleged sins: a distraction from poverty reduction, a threat to entrepreneurship, an excuse for state overreach, and a politics of resentful levelling down. What is striking is not the disagreement — that is natural in a democracy — but the near-total absence of a pragmatic discussion on what inequality actually does to an economy like India’s.

Set aside, for a moment, the philosophical question of whether equality has intrinsic moral value. Even on hard-nosed economic grounds, the casual dismissal of equality is deeply misguided.

Why poverty reduction and equality are not rivals

The idea that poverty reduction and equality pull in opposite directions is a convenient fiction. In reality, high inequality can directly undermine poverty reduction by weakening what economists call the “growth elasticity of poverty” — the extent to which economic growth translates into income gains for the poor.

When growth disproportionately accrues to the top, impressive GDP numbers yield only modest absolute improvements for those at the bottom. India’s experience illustrates this clearly: decades of growth have coexisted with persistent malnutrition, learning deficits, informalisation of work, and stagnant real wages for large segments of the population.

Unequal societies also tend to underinvest in the public goods that enable durable exits from poverty — health, education, sanitation, and social protection. Growth without distribution thus runs into structural limits. Far from being a distraction, equality often determines whether growth can meaningfully reduce poverty at all.

Inequality, consumption, and investment demand

Distribution matters not just for welfare, but for macroeconomic stability. Extreme concentration of income suppresses mass consumption, weakening investment demand. In economies where growth increasingly depends on human capital and domestic demand, this becomes a binding constraint.

As economic historian “Brad DeLong” has argued in his account of 20th-century growth, high inequality in modern economies is more likely to impede than sustain long-term expansion. Equality is not inherently pro- or anti-growth in the abstract, but under contemporary conditions, it is often a prerequisite for broad-based, resilient growth.

The fragile link between equality and entrepreneurship

The relationship between inequality and entrepreneurship is far more complex than popular rhetoric suggests. While some degree of inequality may incentivise effort, extreme concentration of wealth can choke entrepreneurial dynamism.

In India, barriers to entrepreneurship are often attributed solely to state regulation. But concentrated wealth can be just as distortive. It enables political capture, regulatory bias, and incumbent protection — shutting out new entrants as effectively as bureaucratic red tape. When access to credit, education, networks, and legal protection is tightly tied to inherited wealth, entrepreneurship becomes socially narrow and risk-averse.

More equal societies expand the pool of potential entrepreneurs by lowering entry barriers and reducing the catastrophic costs of failure. They also allocate talent more efficiently, drawing capable individuals into productive innovation rather than rent-rich activities such as lobbying, speculation, and regulatory arbitrage.

Why inequality and state control often reinforce each other

Another persistent myth is that equality necessarily entails greater bureaucratic control. In practice, the opposite is often true. High inequality frequently demands more discretionary state power: subsidies to capital, selective tax enforcement, regulatory forbearance for large firms, and ad hoc bailouts.

By contrast, egalitarian approaches rooted in universalism — universal basic services, public provisioning of health and education — can simplify administration and reduce scope for corruption and patronage. Universal systems are often institutionally cleaner than targeted regimes designed to manage inequality while preserving privilege.

The mistaken fear of ‘levelling down’

The charge that equality is driven by resentment misunderstands both intent and effect. Egalitarian policies are not about pulling the top down, but about preventing inequality from corroding the social foundations of prosperity.

High inequality erodes social trust. India today is arguably less threatened by popular resentment than by a high concentration of capital that seeks to control political and social institutions to insulate itself from competition. When trust is low, regulation multiplies — not because citizens are envious, but because inequality itself generates fear, capture, and defensive governance.

Equality as social insurance for capitalism

A central lesson of 20th-century economic history is worth restating: equality is not an ethic of envy, but a form of social insurance for capitalism. It sustains legitimacy, preserves competition, and protects democratic citizenship.

Public debate often exaggerates resentment against wealth. With few exceptions, most people are not angered by the mere existence of very rich individuals. What provokes concern is the conversion of wealth into disproportionate political power — the hollowing out of agency, dignity, and accountability.

Why silencing inequality debates protects oligarchy

For a social contract to tolerate wealth inequality, it must ensure that such inequality does not distort institutions or dominate public values. In India, the oligarchic shaping of political agendas and policy priorities may pose as serious a threat as populist excess.

The precise policy responses are complex, and the relationship between growth, entrepreneurship, and inequality is contingent. But it is a telling sign of how degraded public discourse has become that these elementary truths need repeating at all. When equality is dismissed in the name of the poor, it is often the interests of concentrated power — not growth or entrepreneurship — that are being protected.