ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Reducing each country’s Gini index by 1 percent per year has a larger impact on global poverty than increasing each country’s annual growth 1 percentage point above the forecasts, suggesting an important role for inequality on the path to eliminating extreme poverty.

Detailed explanation-2: -It is well known that economic growth and inequality play a major role in generating changes in poverty. Indeed, high, sustained growth is essential for poverty reduction if the distribution of income remains more or less constant (Deininger and Squire 1996, Ravallion 2002).

Detailed explanation-3: -Income inequality can be reduced directly by decreasing the incomes of the richest or by increasing the incomes of the poorest. Policies focusing on the latter include increasing employment or wages and transferring income.

Detailed explanation-4: -Governments can intervene to promote equity, and reduce inequality and poverty, through the tax and benefits system. This means employing a progressive tax and benefits system which takes proportionately more tax from those on higher levels of income, and redistributes welfare benefits to those on lower incomes.