The rapid growth in developing Asian countries including India is widening the rich-poor divide and income inequality could threaten the stability of nations, warns the Asian Development Bank (ADB).
"Asia's rapid growth is leaving millions behind, causing a widening gap between rich and poor that threatens to undermine the region's stability," according to the Asian Development Outlook report released by the ADB.
The report said that income divisions are rising markedly in the region, where the richest 1 per cent of households account for about 8 per cent of total income in the region.
Close to 20 per cent of total income went to the wealthiest 5 per cent in most countries of the region. The share of income accruing to the richest households has increased over time, the report said.
Between early 1990 to around 2010, income inequality coefficient in India rose to 37 from 33. This is much less when compared to the rise in China (43 from 32) and Indonesia (39 from 29).
Unequal access to education, health and other public services contributes greatly to growing inequalities, further hindering opportunities for the poor to raise their living standards.
"Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families," ADB Chief Economist Changyong Rhee said.
The report said that the government should work towards creating more jobs, increased spending on education and health besides others to reduce inequality.
The report further said that the number of people living below the $1.25 a day has reduced between 2005 and 2010.
"Poverty has been reduced across the board - the number of people living below the $1.25 a day poverty line fell by 430 million between 2005 and 2010 - and rising numbers of Asians are enjoying a middle class lifestyle," it said.
The report, however, said that worrying inequality has risen in China, India, and Indonesia - the three most populous nations that have driven the region's rapid growth.
The ADB report projected developing Asia to grow by 6.9 per cent in the current fiscal, slowing from 7.2 per cent in the last fiscal.
The growth should pick up to 7.3 per cent in 2013-14 as the region adjusts towards a more sustainable growth path.
