India and China faces maximum financial inequality among Asia Pacific countries: IMF

The International Monetary Fund (IMF) in its latest report has pointed that India and China are the two among Asia Pacific countries, where the financial inequality is highest, despite the two being among the fastest growing economies. The fund further said that China and India have grown rapidly and reduced poverty sharply; however this impressive economic performance has been accompanied by increasing levels of inequality.

The report talking about India said that differences between rural and urban areas have increased, and have been accompanied by rising intra-urban inequality. Though, the report also said that inter provincial inequality is lower in India than in China, and rising inequality in India has been found to be primarily an urban phenomenon.

The report identified many factors as key drivers of the inequality between rural and urban areas in China and India. In China, rapid industrialisation in particular regions and the concentration of foreign direct investment in coastal areas have led to substantial inequalities between coastal and interior regions. Other factors also include low educational attainment and low returns to education in rural areas.

IMF though also noted that the two countries have introduced a number of policies to tackle the rising inequality. In India, the government introduced the Mahatma Gandhi National Rural Employment Guarantee Act to support rural livelihoods by providing at least 100 days of employment. Programs to improve education include the National Education Scheme and Midday Meal Scheme. The Fund also lauded the JAM (Jan Dhan-Aadhaar-Mobile) initiative and said that 'the JAM trinity initiative helped India in making substantial advances in financial inclusion.