Inequality Rising Since 2000s, Top 1% In India Holds 40% Wealth, Says Study

Inequality in India has skyrocketed since the early 2000s, with the income and wealth share of the top 1% population rising to 22.6% and 40.1%, respectively, in 2022-23, according to a working paper.

The paper titled 'Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj' said between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration.

The paper authored by Thomas Piketty (Paris School of Economics and World Inequality Lab), Lucas Chancel (Harvard Kennedy School and World Inequality Lab) and Nitin Kumar Bharti (New York University and World Inequality Lab).

"Between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration."

"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, higher than even South Africa, Brazil, and the U.S.," the paper said.

According to the paper, the Indian income tax system might be regressive when viewed from the lens of net wealth.

"A restructuring of the tax code to account for both income and wealth, and broad-based public investments in health, education and nutrition are needed to enable the average Indian, and not just the elites, to meaningfully benefit from the ongoing wave of globalisation," it noted.

As per the paper, besides serving as a tool to fight inequality, a 'super tax' of 2% on the net wealth of the 167 wealthiest families in 2022-23 would yield 0.5 % of national income in revenues and create valuable fiscal space to facilitate such investments.

The paper said the quality of economic data in India is notably poor and has seen a decline recently.

It said India's top 1% population's income share appears to be among the highest in the world 'behind only perhaps Peru, Yemen and a couple of other small countries'.

"In terms of top wealth shares, we see that both with top 10 per cent and top 1%, India comes out in the middle of the pack, with Brazil, and South Africa standing out with their extreme wealth concentration levels (85.6% and 79.7% top 10% shares, respectively)," the paper said.

The paper pointed out that from 13% in 1922, the top 1% income share increased significantly to over 20% in the inter-war period.

While they experienced a dramatic fall after that, during the 1940s to fall back to 13 per by the time of India's Independence, the paper said after briefly rising during the 1950s, the top 1% income shares consistently fell over the next two decades and reached 6.1% by 1982.

This was likely the consequence of the broadly socialist policy agenda pursued by the Indian government till the 1980s, it noted.

Since the early-1980s, according to the paper, when the Indian government began initiating a broad range of economic reforms, leading up to the liberalisation in 1991, the decline in top 1% income shares halted.

Early-1990s onwards, the paper said the top 1% income shares have consistently increased over the next 30 years to reach an all-time high of 22.6% in 2022.

While the paper's wealth inequality series spans the period 1961-2023, the availability of tax tabulations going back to 1922 when the Income Tax Act was enacted by the British administration, allowed the authors to study the evolution of the top 1% income share over an entire century.