Income and Wealth Inequality in India

Income and Wealth Inequality in India

Subject: Economy

Sec: National Income

• Historical Highs:
  • India’s top 1 per cent income share in 2022-23 was 6 per cent.
  • The top 1 per cent wealth share rose to 1 per cent.
  • India’s top 1 percent income share is among the very highest globally, surpassing countries like South Africa, Brazil, and the United States.
• Co-Authored Paper:
  • The paper compares the current “Billionaire Raj” in India to the historical British Raj in terms of inequality.
  • Co-authored by economists Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi.
• Tax System and Wealth:
  • The Indian tax system might be considered regressive when viewed from the lens of net wealth.
  • The paper suggests a restructuring of the tax code.
  • A levy of a “supertax” of 2 per cent on the net wealth of the 167 wealthiest families could yield 5 per cent of national income in revenues.
• Public Investments:
  • Calls for broad-based public investments in health, education, and nutrition.
  • These investments are crucial to enable the average Indian to benefit from globalization.
• Analysis of Income Data:
  • Data analyzed from annual tax tabulations by Indian income tax authorities from 1922-2020.
  • The top 10 per cent income share fell from 37 percent in 1951 to 30 per cent by 1982, then began rising steadily.
  • By the most recent years, the top 10 percent share nearly touched 60 per cent.
• Income Disparity:
  • The bottom 50 per cent receives only 15 per cent of India’s national income in 2022-23.
  • The top 1 per cent earns on average Rs 5.3 million, which is 23 times the average Indian income.
  • In contrast, the richest 10,000 individuals earn on average Rs 480 million, which is 2,069 times the average Indian income.
• Distribution of Income:
  • The top 0.1 per cent in India earned nearly 10 per cent of the national income in 2022.
  • The top 0.01 per cent earned 3 per cent share, and the top 0.001 per cent earned 2.1 per cent of the national income.
• Factors Contributing to Inequality:
  • Public and private sector wage growth might have played a role till the late 1990s.
  • Capital incomes likely played a role in subsequent years.
  • Lack of quality broad-based education focused on the masses has kept the shares of the bottom 50 per cent and middle 40 per cent

The paper emphasizes the need for a restructuring of the tax system, increased public investments, and addressing factors contributing to income inequality to enable broader economic benefits for all segments of society.