Finance:Income inequality in India

Short description: Overview of India's income inequality

The index works by "assessing long-term progress in three basic dimensions of human development: a long and healthy life, access to knowledge and a decent standard of living."

Poor kids from a razed construction workers' slum look at their well-to-do neighbours in Kondapur.

Income inequality in India refers to the unequal distribution of wealth and income among its citizens. According to the CIA World Factbook, the Gini coefficient of India , which is a measure of income distribution inequality, was 35.2 in 2011, ranking 95th out of 157. Wealth distribution is also uneven, with one report estimating that 54% of the country's wealth is controlled by millionaires, the second highest after Russia, as of November 2016. The richest 1% of Indians own 58% of wealth, while the richest 10% of Indians own 80% of the wealth. This trend has consistently increased, meaning the rich are getting richer much faster than the poor, widening the income gap. Inequality worsened since the establishment of income tax in 1922, overtaking the British Raj's record of the share of the top 1% in national income, which was 20.7% in 1939–40.According to Oxfam India's report of 2023, "Survival of the Richest: India Story," just 5 per cent of Indians own more than 60 per cent of the country’s wealth, while the bottom 50 per cent of the population possess only 3 per cent of the wealth. It also says that between 2012 and 2021, 40% of wealth generated in India has gone to just 1% of the total population and 3% of the wealth has gone to bottom 50%. The number of hungry Indians increased to 350 million in 2022 from 190 million in 2018, while the number of billionaires has increased from 102 in 2020 to 166 in 2022. The covid pandemic reduced the income of the poor, but the wealthy did well. The combined wealth of India's 100 richest is now above $600 billion, which is equivalent to India's Union Budget for 18 months. According to Union Government 's own submission to Supreme Court of India, widespread hunger has caused 65% of deaths of children under the age of 5 in 2022.Saurabh Mukherjee, the founder and CIO of Marcellus Investment Managers, along with his colleague Nandita Rajhansa, has coined the term "Octopus Class" to depict 2 lakh families or around 1 million people in India who control 80% of India's wealth. This class has consolidated financial, social and political power and has continuously pushed its 'tentacles' in every profitable activity they are interested in, aided by liberalisation and consequent growth of globalised economy since 1991.

Income gaps

According to Thomas Piketty, it is difficult to accurately measure wealth inequality in India because of large gaps in income tax data. Official data from 1997-2000 contained many inconsistencies, while no data was published between 2000-2012. Then, in 2013, official income tax figures showed that only 1% of Indians paid tax that year, while only 2% filed a tax return. This lack of reliable data makes it essentially impossible to make significant, numerical conclusions about income inequality in India.

Since much of the population is not represented in income-tax databases, most of the calculations (such as NSSO) are based on consumption-expenditure data instead of income data. According to the World Bank, the Gini coefficient in India was 0.339 in 2009, down from previous values of 0.43 (1995–96) and 0.45 (2004–05). However, in 2016, the International Monetary Fund, in its regional economic outlook for Asia and the Pacific, said that India’s Gini coefficient rose from 0.45 (1990) to 0.51 (2013).

According to the 2015 World Wealth Report, India had 198,000 high-net-worth individuals with a combined wealth of $785 billion.

Class divide

Year	Minimum Net Worth (000 rupees)	Population
1687	117	7000
1700	124	6,172
1725	124	6,820
1750	120	7,469
1775	120	8,117
1800	129	8,765
1825	128
1850	128	4,605
1875	136	2,667
1900	228	3,104
1925	759	4,109
1950	2,057	4,968
1975	6,784	12,561
2000	49,457	43,267
2021	160,062	147,717

Credit Suisse’s Global Wealth Databook for 2014 reports that the bottom 10% of the Indian society owned merely 0.2% of national wealth, while the richest 10% have been getting steadily richer since 2000.

Social Class (%)	Wealth Share (%)
Bottom 10	0.2
10 - 20	0.4
20 - 30	0.8
30 - 40	1.3
40 - 50	1.8
50 - 60	2.6
60 - 70	3.8
70 - 80	5.7
80 - 90	9.4
Top 10 Top 1	74 41

Causes

N. C. Saxena, a member of the National Advisory Council, suggested that the widening income disparity can be accounted for by India's badly shaped agricultural and rural safety nets. "Unfortunately, agriculture is in a state of collapse. Per capita food production is going down. Rural infrastructure such as power, road transport facilities are in a poor state," he said. "All the safety net programmes are not working at all, with rural job scheme and public distribution system performing far below their potential. This has added to the suffering of rural India while market forces are acting in favour of urban India, which is why it is progressing at a faster rate."

Impact

India's economy continues to grow with its GDP rising faster than most nations. But a rise in national GDP is not indicative of income equality in the country. The growing income inequality in India has negatively impacted poor citizens' access to education and healthcare. Rising income inequality makes it difficult for the poor to climb up the economic ladder and increases their risk of being victims to poverty trap. People living at the bottom 10% are characterized by low wages; long working hours; lack of basic services such as first aid, drinking water and sanitation.