Income inequality in India has increaed since deregulation started in the 1980s, with the top 10 per cent of earners accounting for 55 per cent of the national wealth in 2016, according to a global research report released on Wednesday.
Income inequality in India has increaed since deregulation started in the 1980s, with the top 10 per cent of earners accounting for 55 per cent of the national wealth in 2016, according to a global research report released on Wednesday. The India-specific finding of the ‘World Inequality Report 2018’ authored, among others, by noted economists Thomas Piketty and Lucas Chancel, has a part on the country titled ‘Indian income inequality, 1922-2014: From British Raj to Billionaire Raj?’. Based on the World Wealth and Income Database, which co-author Chancel described at the release here as “most extensive database on income and wealth”, the report said inequality in India has risen substantially since the 1980s following “profound transformations in an economy that centered on the implementation of deregulation and opening up reforms”.
“In 2014, the share of national income captured by India’s top one per cent of earners was 22 per cent, while the share of the top 10 per cent of earners was around 56 per cent. The top 0.1 per cent of earners has continued to capture more growth than all those in the bottom 50 per cent combined,” it said. “This rising inequality contrasts to the 30 years following the country’s independence in 1947, when income inequality was widely reduced and the incomes of the bottom 50 per cent grew at a faster rate than the national average,” the report added. Based on a analysis of fiscal and other data over a long period of time, it said income inequality in India is at its highest since 1922, when the Income Tax Act was passed.
The top one per cent of income earners captured less than 21 per cent of total income in the late 1930s, before dropping to 6 per cent in the early 1980s and after, the report said. However, with the top 10 per cent of earners capturing 55 per cent of the national income in 2016, India is the worst performer on this score among major regions, except the Middle East, the study findings showed. More importantly, the report disputes the discourse that rising inequality is an inevitable fallout of growth in the times of globalisation.
“The fact that inequality trends vary so greatly among countries, even when countries share similar levels of development, highlights the important role of national policies in shaping inequality,” it said. Comparing the China and India growth trajectories since 1980, it said China recorded much higher growth rates with significantly lower inequality levels than India. “The positive conclusion of the World Inequality Report is that policy matters a lot,” Chancel said.
“Since 1980, income inequality has increased rapidly in North America, China, India, and Russia, while growing moderately in Europe. However, there are exceptions to this pattern: In the Middle East, sub-Saharan Africa, and Brazil, income inequality has remained relatively stable, at extremely high levels,” the report said. It also revealed the dramatic decline in the net wealth of governments over the past decades and the decline in public capital, ushering in greater concentration of wealth in private hands.