The Growing Divide: A Deep Dive into India’s Inequality Crisis

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Inequality in India is rising sharply, with the wealthiest individuals accumulating a significant portion of wealth through crony capitalism and inheritance. While the rich grow richer, the poor struggle to earn a minimum wage and access quality education and healthcare, which suffer from chronic underinvestment. Wealth concentration follows the caste hierarchy, with savarnas monopolizing wealth and Dalit Bahujan Adivasis being marginalized. Inherited wealth and caste privilege continue to shape power and influence, while historically marginalized communities face systemic exclusion and intergenerational poverty. This extreme inequality reinforces their oppression and precariousness.

On march 2024, the World Inequality Database released a report titled “Economic Inequality in India: The “Billionaire Raj” is now more Unequal than the British Colonial Raj” which comprehensively analysed wealth and income inequality in India from 1922 to 2022.

Among the 92 crore adults (aged 20 and above) in India, the average annual income in 2022-23 is Rs. 2.3 lakhs, which translates to less than Rs. 20,000 per month or Rs. 800 per day (assuming 25 working days per month). However, this average is misleading as most Indians earn significantly less. For instance, someone earning Rs. 24,000 per month earns more than 90% of the population, meaning that 82 crore adults earn less than Rs. 2.9 lakh per year.

The median annual income in 2022-23 is Rs. 1 lakh, meaning anyone earning more than Rs. 8,750 per month (Rs. 350 per day) earns more than the bottom 50% of the population, which consists of 46 crore people. For this bottom half, the average annual income is about Rs. 71,000, or less than Rs. 6,000 per month (Rs. 250 per day). The middle 40% of the population, about 36 crore people, have an average annual income of Rs. 1.6 lakhs, equating to Rs. 13,000 per month or Rs. 550 per day.

In contrast, income distribution in India is highly concentrated at the top. The top 10% (9 crore people) earn an average annual income of over Rs. 13 lakhs. The top 1% (90 lakh people) earn over Rs. 53 lakhs annually, and the top 0.1% (9 lakh people) earn over Rs. 2 crores. At the pinnacle, the top 0.01% (around 10,000 people) earn more than Rs. 10 crores annually, and the top 9,223 individuals earn an astounding average of Rs. 50 crores.

According to Forbes billionaire rankings, the number of Indians with a net wealth exceeding $1 billion (Rs. 8,300 crores) increased from just 1 in 1991 to 162 in 2022. Their total net wealth grew from less than 1% of India’s national income in 1991 to 25% in 2022, surpassing the entire Union budget of India. Among these ultra-wealthy individuals, savarnas are significantly overrepresented, making up 90% of the total. STs have no representation, OBCs own about 10% of the billionaire wealth, and SCs only a meagre 2.6%. Interestingly, during the Modi years (2014-2022), the OBC share in billionaire wealth fell below 10% from 20%, while the savarna share rose to 90% from 80%.

Inequality in India declined after independence until the early 1980s, but has been rising sharply since the early 2000s. In 2022-23, the top 1% of the population (just 1 crore people) controlled 22.6% of the national income and 40.1% of the national wealth. This extreme concentration of wealth and income among a tiny fraction of the population is likely the highest since 1922, surpassing even the inequality seen during British colonial rule. The report describes the present as an era of “Billionaire Raj,” dominated by India’s modern capitalists. India’s top 1%’s share of national income is among the highest in the world, exceeding that of South Africa, Brazil, China, the UK, and the US, making India one of the most unequal countries in the world. Meanwhile, 46 crore people, or 50% of the population, account for only 15% of the national income.

Now let us examine wealth inequality in detail. Physical assets like land and buildings constitute almost 90% of total household wealth. Since 1991, wealth concentration has increased, paralleling the trend in income inequality. The top 10% of the population saw their wealth share rise from 45% in 1961 to 65% in 2022-23. In contrast, the shares for the bottom 50% and the middle 40% have significantly declined over this period.

The top 1% of Indians have an average wealth of Rs. 5.4 crores, which is 40 times more than the average wealth of Indians (Rs. 13 lakhs). The bottom 50% have an average wealth of Rs. 1.7 lakhs, while the middle 40% have Rs. 10 lakhs. At the very top, about 10,000 of the wealthiest individuals own an average of Rs. 2,260 crores, accounting for 16% of national wealth, which is more than twice the wealth owned by the bottom 50 crore Indians.

To be in the top 50% of the population, one needs a wealth of Rs. 4 lakhs. To reach the top 10%, Rs. 22 lakhs is required, Rs. 81 lakhs for the top 1%, and Rs. 275 crores to be among the 10,000 wealthiest people (top 0.001%). The bottom 50% of the population holds just 6% of national wealth, while the top 1% owns 40%, more than five times that of the bottom half. Less than 1 crore people at the top own more wealth than the 85-crore people at the bottom. Furthermore, Forbes’ annual rich lists indicate that the net wealth of Indian billionaires has increased by over 280% between 2014 and 2022, a rate that is 10 times faster than the growth of the national income, which was 27.8% over the same period.

Savarnas, who make up just over 25% of the population, own nearly 55% of the national wealth, making them the only caste group whose wealth share exceeds their population share. In contrast, the wealth shares of SC and ST are less than half of their respective population shares. Other Backward Classes (OBCs) hold just under 35% of national wealth, which is about three-quarters of their population share.

Pai and Vats (2023) reveal that a very small segment of Indians dominate consumer transactions. Their data shows that only 1% of Indians (1 crore people) account for 45% of flights, 2.6% (4 crore people) invest in mutual funds, and 6.5% (5 crore users) handle 44% of digital transactions on the Unified Payment Interface (UPI). Additionally, 5% of users (29 lakh people) make a third of the orders on Zomato. The entire consumer and digital ecosystem are primarily designed to cater to the top 5% of the population.

The Indian government imposes minimal taxes on its wealthiest citizens and allocates very little funding to public healthcare, making it one of the lowest healthcare spenders globally. Instead of investing in a robust public health system, it has favoured the growth of a powerful private health sector. Consequently, quality healthcare has become a luxury accessible only to the elite. Despite being a leading destination for medical tourism, India’s poorest states suffer from infant mortality rates higher than those in sub-Saharan Africa. Additionally, India accounts for 17% of global maternal deaths and 21% of deaths among children under five years old.

Life expectancy at birth is significantly lower for the bottom 20% of households in India, at 65.1 years, compared to 72.7 years for the top 20%. Dalit women, on average, die 14.6 years earlier than savarna women. Tribal populations in India have a life expectancy approximately three years shorter than the non-tribal population, with 42% of tribal children suffering from malnutrition. Despite 75% of the population living in rural areas, only 31% of hospitals and 16% of hospital beds are located there. According to a World Health Organization (WHO) report, the lack of adequate public health infrastructure and the high cost of private healthcare are impoverishing over 5 crore Indians annually.

According to the Oxfam report 2023, India has the highest number of poor in the world, with 23 crore people living in poverty. Wealth inequality has deprived 70% of Indians of a healthy, consumable diet, leading to 17 lakh deaths annually from malnutrition-related diseases. Even the median wage earner, who earns more than the bottom 50% of the population, earns just enough for basic sustenance, and losing a week’s income could push them to starvation. Wages for the bottom tier have stagnated, and rising inflation has led to reduced consumption and eroded household savings. A 1% increase in food inflation can cause a 0.5% rise in undernourishment and a 0.3% rise in infant and child mortality rates. The bottom 25% of the population spend more than 53% of their income on food, making them highly vulnerable to acute malnutrition due to food inflation. This inflation forces them to cut back on essential expenses for health, education, clothing, and shelter.

Another major issue is the lack of quality education for the majority of the population, which is made deliberately expensive so that it will remain accessible only to the elites. According to the 2011 census, nearly 30% of Indians were still illiterate. In recent years, the government has cut funding for social justice schemes, such as scholarships for students from marginalized communities. Additionally, public universities across the country have seen massive fee hikes. Dropout rates among primary classes doubled in 2021-22. The dropout rate at the secondary level is 15.6% for the general category but significantly higher for marginalized communities: 22.5% for SCs, 26.9% for STs, and 20% for OBCs. The unavailability of schools within 5 km makes it difficult for girls to attend school, putting ten million girls at risk of dropping out. More than half of children between 14 and 17 years old are unable to access secondary education in India.

In India, the majority of workers are in the informal sector, lacking job security, fixed salaries, or legal protections. According to the NCRB, an average of 115 daily wage workers died by suicide each day in 2021. Inequality is further exacerbated by caste and gender, with marginalized castes earning 55% less than savarnas, and women earning only 63 paise for every rupee earned by men. Additionally, rural workers only earn half as much as their urban counterparts.

Official statistics reveal sluggish economic growth during the Modi years, with real year-on-year income growth rates declining from over 6% in 2015-2016 to 4.7% in 2017, 4.2% in 2018, and a dramatic drop to 1.6% in 2019. This downturn occurred before the COVID-19 pandemic, which further caused incomes to plummet by 9% in 2020. Unemployment rates, especially among youth (15-29 years), saw a significant rise from 2011-12 to 2017-18. Real wages across various sectors have stagnated over the past decade. Between 2014 and 2022, the primary beneficiaries of government economic policies have been the super-rich, particularly the top 1% and above. Wealth concentration at the top has significantly increased, making India’s recent economic system resemble a “conclave economy.” In such a system, decision-making and economic benefits are concentrated among a small, exclusive group of elites who wield disproportionate control and influence over economic policies, resources, and opportunities, often to the exclusion of the broader population.

Direct taxes, such as income tax and corporate tax, primarily target the rich (top 10%), while indirect taxes, such as Goods and Services Tax (GST), excise duties, and sales tax, affect everyone, including the bottom 90%. Income tax is progressive, taxing higher income earners more, whereas indirect taxes are regressive, impacting all individuals equally regardless of income. From 2017 to 2020, only 9% (8 crore) of Indians filed income tax returns, as only those in that bracket earned enough to pay income tax.

In 2019, before the pandemic, the Central Government reduced the corporate tax rate from 30% to 22%, with newly incorporated companies paying just 15%. This policy change resulted in a revenue loss of Rs. 1.8 lakh crore. Similarly, in 2020-21, the government lost over Rs. 1 lakh crore in revenue due to incentives and tax exemptions for corporations (an amount exceeding the budget for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)).

To offset these losses, the Union Government increased GST on essential goods and excise duties on diesel and petrol while reducing exemptions. This shift towards higher indirect taxes disproportionately burdens the most marginalized populations. Failing to tax wealthy individuals and corporations fairly exacerbates inequality, forcing the government to raise indirect taxes and cut spending on essential services like public health, education, and social security, which are crucial for reducing inequality.

Consumption taxes like VAT are regressive, as the poor pay a larger share of their income. The bottom 50% of the population pays six times more in indirect taxes, as a percentage of income, compared to the top 10%. Of the total taxes collected from food and non-food items, 64% comes from the bottom 50%. Nearly two-thirds of the total GST revenue comes from the bottom 50%, one-third from the middle 40%, and only 3% from the top 10%. More than 50% of the government’s tax revenue comes from indirect taxes, disproportionately affecting the poor.

The Indian income tax system is also regressive when considering net wealth. A restructuring of tax laws to account for both income and wealth, along with broad-based public investments in health, education, and nutrition, is essential.

Oxfam report shows that just taxing the 160 Indian billionaires can significantly fund essential programs. A 3% wealth tax on billionaires can fund the National Health Mission for 3 years, while a 2% tax on them can fund the Supplementary Nutrition Programme. A 5% tax on the top 10 billionaires can cover tribal healthcare costs for five years. Raising health expenditure to 3% of GDP is achievable by taxing just the top 100 billionaires at 2%. Taxing the wealthiest 100 billionaires at 2% would cover the cost of running Breakfast Scheme for nearly 3.5 years. A one-off tax on unrealized gains from 2017–2021 on just one billionaire, Gautam Adani, could have raised Rs. 1.79 lakh crore, enough to employ more than 50 lakh Indian primary school teachers for a year.

A new progressive tax regime was proposed which taxes only the ‘crorepatis’ and leaves 99.96% of the population untouched, thereby taxing only the very wealthy. These taxes kick in only for those with a net wealth exceeding ₹ 10 crore (only the top 0.04% of adults would fall above this threshold). The total wealth of this top 0.04% is 25% larger than India’s entire economy. In the baseline tax proposal, a 2% annual tax on net wealth over ₹10 crore and a 33% inheritance tax on estates over ₹10 crore would generate 2.73% of GDP in revenue. The moderate tax variant suggests increasing the wealth tax to 4% for wealth over ₹100 crore, alongside a 33% inheritance tax on estates between ₹10 crore and ₹100 crore, and 45% on those over ₹100 crore, yielding 4.6% of GDP. The ambitious tax variant proposes higher rates of 3%-5% for wealth tax and 45%-55% for inheritance tax, potentially generating 6.1% of GDP in revenue.

The revenue from the baseline variant could nearly double the current public education expenditure. The moderate variant could nearly double the combined health and education budget or more than triple health expenditure alone. The ambitious variant could double the combined health and education budget and still leave surplus funds.

Savarnas hold a significantly disproportionate share of national wealth, and Indian billionaires are largely a savarna club. A progressive wealth tax package of the kind proposed above is most likely to benefit Dalit Bahujan Adivasis and the middle classes at the detriment of only a tiny number of ultra-wealthy upper-caste families. In that respect, besides addressing extreme wealth inequality, such taxes could also play a small role in weakening the rigid link between social and economic inequalities in India.

The government should also reduce the GST slabs on essential commodities which the poor consume, and hike the taxes on luxury goods which the top 1% consumes. This will lead to revenue generation, which is progressive in nature and reduce the burden on the poor. The government spending on public healthcare and education needs to be much higher and proper worker protection measures should be implemented to protect the labour rights of the informal sector. The government should stop working for the greed of 1% and work for welfare of the 99%.

“When the people shall have nothing more to eat, they will eat the rich”

Jean-Jacques Rousseau





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