India’s Ascendant Billionaire Raj: Outstripping British-Era Inequality, Urgent Call for Equitable Economic Reforms

As India prepares for upcoming general elections, esteemed economists have unveiled a striking revelation: India’s economic inequality has surpassed levels witnessed during the colonial era under the British Raj. 

A groundbreaking study conducted by economists from the World Inequality Lab sheds light on the concerning trajectory of income and wealth inequality within India.

India’s Inequality Surpassing Colonial Levels

Contrary to the post-independence decline in inequality until 1980, recent decades have witnessed a sharp resurgence, with inequality now exceeding levels observed during colonial rule. Since 2014-15, wealth concentration has intensified, with the top 1% of the population commanding a staggering 22.6% of income and 40.1% of wealth, placing India among the world’s most unequal nations in terms of billionaire wealth concentration.

Image: India Top 1% Richest, Own 39.5% Wealth  

Image Credit: Economic Inequality in India Report 2024 

In India between 1961-2023, the bottom 50% of the population scarcely possesses any wealth, accounting for just 6.5% of the total, while the wealthiest 1% control a staggering 39.5% of all wealth.

Authored by Nitin Kumar Bharti of New York University-Abu Dhabi, Lucas Chancel of Sciences Po Paris and Harvard Kennedy School, Thomas Piketty of the École des Hautes Études en Sciences Sociales and Paris School of Economics, and Anmol Somanchi of the Paris School of Economics, the study draws upon a comprehensive dataset spanning back to 1922, incorporating national income accounts, tax data, billionaire rankings, and socioeconomic surveys.

Expert Commentary

Anmol Somanchi, a co-author of the paper, underscores a fundamental yet often overlooked aspect of one of the world's largest economies: economic inequality. 

Anmol told Kanal, “Our research attempts to provide concrete figures on income and wealth, derived from annual tax tabulations, rich lists, and surveys on consumption, income, and wealth. Our estimates reveal a steep increase in income and wealth inequality in recent decades, now surpassing even the levels observed during the British colonial raj. Much can be done to fight these extremely wide economic disparities. A super tax on the net wealth of Indian billionaires, multimillionaires, which could generate substantial revenue to finance major investments in education, health, and other public infrastructure, could be a good place to start.” 

He further cautions that the staggering economic inequality could adversely impact domestic demand in the long run, thereby impeding economic prospects.

Indications of Conglomerate Capitalism

 The study’s examination of income and wealth dynamics from 2014 to 2022 highlights a concerning trend: the pro-cyclical nature of inequality, which disproportionately favours the super-rich, notably the top 1% and beyond. This trend suggests a shift towards “conglomerate capitalism” in India’s economic framework.

In a staggering testament to India’s evolving economic landscape, the nation currently boasts an astounding count of 271 dollar-billionaires. More astonishing fact is that 94 new billionaires joined this elite club in the year 2023 alone.

Global Perspective

Comparative analysis places India's income and wealth inequality levels within global context, juxtaposing them with countries like Brazil, China, France, South Africa, United Kingdom, and the United States. India emerges with one of the highest income shares for the top 10%, second only to South Africa, and the highest concentration of wealth among the top 1%, at 22.6%.

Taxation System and Tax Data Unavailability

The paper highlights a critical issue regarding India's taxation system, which is progressive concerning income but regressive in terms of wealth. Notably, even the super-rich individuals within the same tax bracket as those with significantly lower income and wealth face similar tax obligations.

A significant aspect of the research revolves around tax data analysis, rooted in a crucial historical context. Since the introduction of individual income tax by the British Colonial administration in 1922, data on individual incomes has been systematically collected and published annually in tabulated form.

However, the availability of tax data exhibits intriguing anomalies over the years. Starting from 1999, the Indian government ceased the publication of tax tabulations for reasons that remain undisclosed. Despite a decade of robust macroeconomic growth from 2000 to 2010, no tax tabulations were made available. Subsequently, in 2016, retrospective data was released, albeit only from 2011 onwards. While data releases resumed for a brief period, retrospective data for 2017 was the last available until mid-2023 when the government once again provided retrospective data covering the years 2018 to 2021.

Urgent Policy Intervention

The study underscores the imperative for immediate policy interventions to address India’s widening economic chasm. A proposed “super tax” targeting India’s wealthiest families could serve as a crucial revenue source for vital investments in social infrastructure, ensuring that the benefits are shared equitably among all segments of society.

Just a few weeks back, renowned economists Jayati Ghosh and Joseph Stiglitz representing the International Commission for the Reform of International Corporate Taxation (ICRICT) have pressed for the implementation of a UN Model Wealth Tax Law as a crucial step towards combating global inequality.

As India stands at a crossroads, grappling with profound socio economic challenges, the voices of economists and policymakers resonate with urgency, calling for concerted action to forge a more inclusive and equitable future for all.