Inequality rising since 2000s, top 1 per cent in India holds 40 per cent wealth: study

Report reveals India’s top one per cent income share ranks among the highest in the world behind Peru, Yemen, and a couple of other small countries.

Industrialists Mukesh Ambani and Gautam Adani at the swearing-in ceremony of the NDA government at Rashtrapati Bhavan in New Delhi in May 2022. | Photo Credit: PTI/Manvender Vashist

Inequality in India has skyrocketed since the early 2000s, with the income and wealth share of the top one per cent of the population rising to 22.6 per cent and 40.1 per cent, respectively, in 2022-23, according to a working paper. The paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj” stated that between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration.

In 2014, Prime Minister Narendra Modi was elected on a mandate for development and economic reforms. His critics say his last two terms in office have been characterised by a widening gap between the rich and the rural poor as India’s economy grew at 8.4 per cent, its fastest in one-and-half years, in the final three months of 2023. India’s main opposition party, the Congress has raised the issue of Modi’s government’s closeness to billionaires in rallies ahead of general election starting from April 19.

The paper authored by Thomas Piketty (Paris School of Economics and World Inequality Lab), Lucas Chancel (Harvard Kennedy School and World Inequality Lab), and Nitin Kumar Bharti (New York University and World Inequality Lab) said, “By 2022-23, top one per cent income and wealth shares (22.6 per cent and 40.1 per cent) are at their highest historical levels and India’s top one per cent income share is among the very highest in the world, higher than even South Africa, Brazil, and the US.”

According to the paper, the Indian income tax system might be regressive when viewed from the lens of net wealth. The World Inequality Lab said factors, including a lack of education, have trapped some people in low-paid jobs and depressed the growth of the bottom 50 per cent and middle 40 per cent of Indians.

“A restructuring of the tax code to account for both income and wealth, and broad-based public investments in health, education, and nutrition are needed to enable the average Indian, and not just the elites, to meaningfully benefit from the ongoing wave of globalisation,” it noted. As per the paper, besides serving as a tool to fight inequality, a “super tax” of two per cent on the net wealth of the 167 wealthiest families in 2022-23 would yield 0.5 per cent of national income in revenues and create valuable fiscal space to facilitate such investments. 

In December 2023, the Indian government’s Chief Economic Adviser said subsidised grain distribution, spending on education and health, and direct cash transfers via a rural jobs scheme have helped to distribute income more equally.

The paper said the quality of economic data in India is notably poor and has witnessed a decline recently. It stated that the top 1 per cent of the population’s income share appears to be among the highest in the world “behind only perhaps Peru, Yemen, and a couple of other small countries”. “In terms of top wealth shares, we see that both with top 10 per cent and top one per cent, India comes out in the middle of the pack, with Brazil and South Africa standing out with their extreme wealth concentration levels (85.6 per cent and 79.7 per cent top 10 per cent shares, respectively),” the paper said.

The paper pointed out that from 13 per cent in 1922, the top 1 per cent income share increased significantly to over 20 per cent in the inter-war period. While they experienced a dramatic fall after that during the 1940s to 13 per cent by the time India won Independence, the paper said after briefly rising during the 1950s, the top 1 per cent income shares consistently fell over the next two decades and reached 6.1 per cent by 1982. This was likely the consequence of the broadly socialist policy agenda pursued by the Indian government till the 1980s, it noted.

Since the early 1980s, according to the paper, when the Indian government began initiating a broad range of economic reforms, leading up to the liberalisation in 1991, the decline in the top 1 per cent income shares halted. From the early 1990s, the paper said the top 1 per cent income shares have consistently increased over the next 30 years to reach an all-time high of 22.6 per cent in 2022.

Since India, which won its Independence in 1947, opened its markets to foreign investment in 1992, its number of billionaires has surged. Data from Forbes billionaire rankings show the number of Indians with net wealth exceeding $1 billion rose from one in 1991 to 162 in 2022. Asia’s two richest men, Reliance Industries’ Mukesh Ambani and Adani Group’s Gautam Adani are Indian. The 10,000 wealthiest individuals of the 92 million Indian adults own an average of Rs.22.6 billion in wealth—16,763 times the country’s average—while the top 1 per cent possess an average of Rs.54 million in wealth.

While the paper’s wealth inequality series spans the period from 1961 to 2023, the availability of tax tabulations going back to 1922 when the Income Tax Act was enacted by the British administration, allowed the authors to study the evolution of the top one per cent income share over an entire century. “The ‘Billionaire Raj’ headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces,” the authors said.

(with inputs from PTI and Reuters)