“India is more unequal today than in the Raj era”

New Delhi: India's wealth concentration has now become more unequal than in the British colonial era, as income and wealth of the top 1% of the country's population have reached historic highs, a report by the World Inequality Lab shows.

The top 1% of the population controls 40.1% of the national wealth in 2022-23, compared to less than 15% at the time of independence. The share of this top 1% of the population in national income jumped to 22.6% in the 2022/23 financial year, said the report published on Wednesday.

“After independence, inequality fell until the early 1980s, after which it began to rise and has skyrocketed since the early 2000s,” said the Paris-based organization’s report, “Income and Wealth Inequality in India, 1922-2023”.

“The 'Billionaire Raj' is now more unequal than the British Raj,” said the report, co-authored by economists Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty and Anmol Somanchi.

Between 2014-2015 and 2022-23, the increase in inequality at the top of the income bracket in terms of wealth concentration was particularly pronounced. By 2022-2023, the income and wealth shares of the top 1% (22.6% and 40.1%) globally are at their highest historical levels, and India's income share of the top 1% is among the highest in the world and is even higher than in South Africa, Brazil and the United States, the report said.

In terms of income inequality, India is perhaps only behind Peru, Yemen and a few other small countries. “Although there is no reason to believe that inequality will slow on its own, the evidence suggests that it can be kept under control through policy measures,” it said.

The paper emphasized that there is evidence that the Indian tax system may be “regressive from a net worth perspective.”

A restructuring of the tax code to take into account both income and wealth, as well as public investments in health, education and nutrition are needed for the average Indian to benefit meaningfully from the wave of globalization, it said. The paper proposed that a 2% “super tax” on the net worth of the 167 richest families would raise revenue equivalent to 0.5% of national income in 2022-23.

The concentration of income among the top 10% of the population follows a similar trend to the concentration of income among the top 1%. Between 1950 and 1980, the income share of the top 10% of the population fell from 40% at the beginning of independence to just under 30% in 1982. In the wake of the liberalization reforms of 1991, the income shares of the top 10% began to gallop, reaching 60% by 2022 .

Published March 20, 2024, 10:35 p.m IS