Inequality has been widening rapidly in the country since the 1990s
Mumbai’s cityscape showing the disparities in India’s largest city. Photo: iStock In 2022, Lucas Chancel, co-director at the World Inequality Lab of the Paris School of Economics, and lead editor of the “World Inequality Report 2022”, told me in an interview that democratic countries emerging out of colonisation in the 1940s and 1960s made significant progress in bridging inequality. On India, he said, “The country came out of colonisation and adopted policies that ensured interventions to regulate the economy and to bridge inequality. A few instances are the five-year plans, high tax rate and strategic economic management policies like inheritance tax (abolished in 1985).” Does this mean democracy helps fix inequality? He answered: “After the 1970s, the view that high tax rates and regulation would not help in wealth generation, saw global acceptance. Hence, inequality does not question democracy or its efficacy, but rather the choices we make under democracy. Inequality hurts democracy, which is why governments need to intervene to fix this trend.”
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In March, Lucas, with Thomas Piketty and Anmol Somanchi of the World Inequality Lab, released a working paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj”. This paper builds on the “World Inequality Report 2022” and updates on inequality in India up to 2022. “Billionaire Raj” sounds a rather elevating phrase to an aspirational Indian since we are high on a dreamy path to become a developed economy. “Fastest growing economy” is already a superlative that has become a poll slogan on the eve of the general elections. To make this growth look inclusive, the government has claimed to have helped 250 million escape poverty (the estimate is for multidimensional poverty, since India does not have an estimate of income poverty since 2012).
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The latest update from the World Inequality Lab dissects this economic growth, its widening inequality and extreme concentration of wealth in a few hands. The paper analyses income inequality in India for 1951-2022. Interestingly, for three decades starting 1951, inequality came down. “The share of national income going to the top 10% fell from 37% in 1951 to 30% by 1982,” says the paper. But after this, income concentration went up. From the 1990s, the share of the top 10 per cent in national income leaped to 60 per cent in recent years. At the same time, the share of the bottom 50 per cent continues to be minimal. In 2022-23, inequality in income and wealth is staggering: the top 1 per cent earn 23 times the average income of an Indian. The richest 10,000 Indians earn an average R48 crore, which is 2,069 times the Indian average. “By 2022-23, top 1% income and wealth shares (22.6% and 40.1%) are at their highest historical levels and India’s top 1% income share is among the very highest in the world.”
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Why were the 1990s a period when inequality seemed to start widening very fast? What are the reasons for inequality to decline in independent India's first three decades? To the latter question, the paper has the answer: “This was likely the consequence of the broadly socialist policy agenda pursued by the Indian government till the 1980s.” For the former question, the paper reasons, “Since the early-1980s, when the Indian government began initiating a broad range of economic reforms leading up to the liberalization in 1991, the decline in top 1% shares halted. From the early-1990s onward, top 1% shares have consistently increased over the next 30 years to reach an all-time high of 22.6% in 2022.”
The number of billionaires in India has been increasing. In 1991, India had just one billionaire. By 2011, the number reached 52 and in the next one decade it more than tripled to 162 in 2022. “Over this period, the total net wealth of these individuals as a share of India’s net national income boomed from under 1% in 1991 to a whopping 25% in 2022,” finds the paper. This level of inequality was observed before 1922, during the British Raj. This is why the authors have named their paper “Billionaire Raj”.
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