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Jan 22, 2022

Poor Country With Affluent Elite, India Is Going Nowhere

India is now one of the most unequal countries for both income and wealth inequality — and has shown the most rapid increases in inequality.
The Dharavi slum in Mumbai. Representative image. Photo: Reuters
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This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been republished here. To subscribe to The India Cable, click here.

The Paris-based World Inequality Lab has become a major source of data on global inequality, based on careful aggregation of national data from a multitude of sources, of both income and wealth inequality, at national, regional and global levels. Their latest World Inequality Report 2022 is an eye-opener, even for those who know that economic inequality has increased massively in recent years. It shows that globally, inequality is now as great as it was at the pinnacle of Western imperialism in the early 20th century. The process began nearly four decades ago, but worsened during the pandemic, which sharply exposed and amplified existing inequalities.

India is now one of the most unequal countries for both income and wealth inequality — and has shown the most rapid increases in inequality. This emerges clearly even though, as the report laments, “Over the past three years, the quality of inequality data released by the government has seriously deteriorated, making it particularly difficult to assess recent inequality changes.” We know that the central government has tended to suppress inconvenient information and manipulate data, refusing to release the results of the 2017-18 national consumer expenditure survey and playing fast and loose with definitions to artificially increase the number of ‘formal’ workers.

Despite these desperate efforts to hide the actual patterns, certain trends are unmistakable. By 2020, the income share of the bottom half of the Indian population was estimated to have fallen to only 13%, while the top 10% captured 57% of national income and the top 1% alone got 22%.

In terms of wealth distribution, the reality is even starker. We know that the past few decades have been a period of increasing wealth concentration globally: the top 1% captured nearly two-fifths of all global wealth growth. The wealth of the top 52 billionaires (which include our home-grown Mukesh Ambani and Gautam Adani) increased by nearly 10% each year between 1995 and 2001. In India, the rate of increase of private wealth and its concentration at the top have been even sharper. The poorest half of the population have less than 6% of the wealth, the top 1% grab more than one-third and the top 10% nearly two-thirds.

The pandemic was a particularly happy period for the extremely wealthy as another recent report on inequality from Oxfam points out — the wealth of the 10 richest men in the world doubled, while 99% of the world’s people are worse off.  One of the biggest increases in wealth was that of Gautam Adani, whose wealth multiplied eight-fold during the pandemic, and Oxfam notes that he made use of state connections to become the country’s largest operator of ports and its largest thermal coal power producer, wielding market control over power transmission, gas distribution, and now privatised airports — all once considered public goods (Oxfam 2022, page 20).

The increase in private wealth has been associated with a decline in public wealth, which is bad news for governments wishing to increase spending on citizens based on returns from public assets. For India, the World Inequality Report estimates that the ratio of private wealth to national income increased from 290% in 1980 to 555% in 2020, one of the fastest such increases in the world, throughout history.

India fares badly on other indicators of inequality as well. Women’s share of labour income, at 18%, is around half the global average, according to this novel estimate. This will come as no surprise to those who know how badly India treats its unpaid and underpaid women workers, even as the economy remains critically reliant on their work.

Another shock is the extreme inequality in carbon footprint within the country. On the face of it, India has very low carbon emissions per capita, at 2.2 metric tonnes per person per year.  But this masks the fact that the bottom half of the population emits only 1 metric tonne per year, while the top 1% richest Indians emit 32.4 tonnes on average. That’s more than three times the annual average carbon emissions of the bottom half of the US population, and more than six times the emissions of the bottom half in Europe. Controlling the carbon emissions of the Indian rich would contribute greatly to reducing overall emissions, something that is rarely if ever mentioned in discussions by Indian policy makers. Globally and within India, inequality is not just killing people but destroying the planet.

We know that inequality is multidimensional: the income poor are more likely to live in poorer areas, to be women or girls, to belong to socially discriminated castes and communities, to be informal workers. More likely, therefore, to be unable to influence policy. No wonder the World Inequality Report finds that India stands out as a poor and very unequal country, with an affluent elite. Unfortunately, history tells us that such countries rarely progress very much. Radical redirection of policies is therefore essential for any real progress to occur.

Jayati Ghosh is a development economist.

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