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In News
- A new working paper titled Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj, authored by World Inequality Lab (WIL) was released.
The paper
- It sheds light on the trajectory of income and wealth inequality in India.
- Combining data from various sources, the paper provides insights into the dynamics of economic inequality in the country, outlining significant trends and implications.
Findings
Growth in Average Incomes
Between 1960 and 2022, India's average income exhibited notable growth, with a real annual growth rate of 2.6%.
- Notably, this growth rate accelerated to 3.6% per year between 1990 and 2022, marking a distinct shift in economic dynamics.
- The periods 2005-2010 and 2010-2015 witnessed particularly rapid growth, with average incomes rising at rates of 4.3% and 4.9% per year, respectively.
Emergence of Very High Net Worth Individuals
- The period from 1990 to 2022 witnessed a surge in national wealth, coinciding with the emergence of a significant number of very high net worth individuals (those with net wealth exceeding $1 billion at market exchange rates).
- The count of such individuals rose from 1 in 1991 to 52 in 2011 and further to 162 in 2022, underscoring the growing concentration of wealth among a select few.
Inequality
Rise in the Percentage of Income Tax Payers
- The share of the adult population filing income tax returns witnessed a substantial increase following the economic reforms of 1991.
- By 2011, this share had surpassed 5%, and the subsequent decade saw sustained growth, with around 9% of adults filing returns during the years 2017-2020.
Extreme Levels of Inequality in India
- In 2022-23, a staggering 22.6% of India's national income was captured by the top 1%, marking the highest level since 1922.
- Similarly, the top 1% wealth share reached 40.1% in 2022-23, the highest since 1961, surpassing even the levels observed during the colonial period.
- The paper highlights the emergence of what it terms the "Billionaire Raj," characterizing modern Indian society as more unequal than its colonial predecessor.
Extreme Wealth Concentration at the Very Top
- The wealth accumulation process in India exhibits extreme concentration at the pinnacle, with the top 1% wealth share tripling from 1961 to 2023.
- Post-1991, this concentration intensified, with the top 1% shares exhibiting a steep upward trajectory until 2022-23.
International Comparison of Income Inequality
- India's income share of the top 1% ranks among the highest globally, second only to South Africa, underscoring the severity of income inequality in the country.
International Comparison of Wealth Inequality
- While India's wealth inequality is less extreme compared to income inequality, it still places the country in the middle of the pack, with Brazil and South Africa exhibiting the most pronounced wealth concentration.
Challenges and Policy Solutions
Poor Data Quality and Underestimation of Inequality
- The authors acknowledge the limitations of economic data in India, suggesting that their findings likely represent a conservative estimate of actual inequality levels.
Policy Solutions
- To address rising inequalities, the paper suggests implementing a super tax on Indian billionaires and multimillionaires, alongside restructuring the tax schedule to encompass both income and wealth.
- These measures could finance significant investments in education, health, and public infrastructure, fostering more equitable economic development.
Conclusion
- The findings presented in the WIL working paper paint a stark picture of income and wealth inequality in India, highlighting the profound socioeconomic disparities that have emerged in recent decades.
- As policymakers grapple with these challenges, the imperative for comprehensive and equitable policy interventions becomes increasingly apparent, aiming to foster inclusive growth and social justice in the nation.
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