India ‘poor and very unequal’ with affluent elite: World Inequality Report

The top one per cent of the population in India owns more than one-fifth of the total national income in 2021 while the bottom half earns just 13.1 per cent, said the World Inequality Report. The economic reforms and liberalization adopted by India have mostly benefited the top one per cent, the latest report for 2022 said.

“India stands out as a poor and very unequal country, with an affluent elite,” said the report, brought out by the France-based World Inequality Lab which does work through evidence-based research on the drivers of inequality worldwide.

The report is authored by Lucas Chancel, co-director of the World Inequality Lab and coordinated by famed French economist Thomas Piketty, among others. The report said the one per cent richest people in India hold 22 per cent of the total national income in 2021; the top ten per cent owns 57 per cent of the income.

The average national income of the Indian adult population is € 7,400 or Rs 204,200 that year on the purchasing power parity basis, the report said. However, it categorically clarified that the average national income of a country masks the inequalities.

The income gap between the top ten per cent and the bottom 50 per cent in India is one to 22 in 2021. The report showed that India is one of the most unequal countries in the world.

When it comes to the BRICS nations, South Africa and Brazil have wider income inequalities than India. The income gap between the 10 ten per cent and the bottom 50 per cent stood at one to 63 in South Africa and one to 29 in Brazil. In both China and Russia, it was one to 14.

The ratio in the richest nation, the US, is 1 to 17.

When it comes to the world, the richest ten of the global population currently take 52 per cent of global income, whereas the poorest half of the population earns 8.5 per cent of it.

However, the 2018 World Inequality Report also showed that the share of national income accruing to India’s top one per cent of earners was 22 per cent, while the share of the top ten per cent was around 56 per cent in 2014. This means that income distribution has remained more or less the same since then.

Inequality widens when it comes to wealth in India. The bottom 50 per cent of the households own almost nothing. The middle class is also relatively poor, owning 29.5 per cent of the total wealth as compared with the top 10 per cent and one per cent who hold 65 per cent and 33 per cent of the total wealth respectively.

The Average wealth of India stands at €4,200, which is six per cent of the total. The middle class owns an average wealth of only €26,400 or Rs 723,930. The top ten per cent and one per cent own €231,300 or Rs 6,354,070 and over €6.1 million or Rs 32,449,360.

In a way, inequality in India has widened compared to British rule (since the period power was transferred from the East India company to the British Crown till Independence), said the report. It found that Indian income inequality was very high under British colonial rule (1858-1947), with the top ten per cent of the population sharing around 50 per cent of the national income.

The report said that, after independence, socialist-inspired five-year plans contributed to reducing this share to 35-40 per cent.

Since the mid-1980s, deregulation and liberalisation policies have led to one of the most extreme increases in income and wealth inequality observed in the world, it found.

While the top one per cent has largely benefited from economic reforms, growth among low and middle income groups has been relatively slow and poverty persists.

The report also had adverse comments on the transparency of data released by the government. “Over the past three years, the quality of inequality data released by the government has seriously deteriorated, making it particularly difficult to assess recent inequality changes,” it said.

Gender inequalities

These are very high. The female labour income share is equal to 18 per cent, significantly lower than the average in Asia, excluding China, at 21 per cent.

“This value is one of the lowest in the world, slightly higher than the average share in West Asia at 15 per cent. The significant increase, eight percentage points, observed since 1990 has been insufficient to lift women’s labour income share to the regional average,” the report said.

Carbon inequality

India is a low carbon emitter. The average per capita consumption of greenhouse gas is equal to just over 2 CO2e. These levels are typically comparable with carbon footprints in sub-Saharan African countries. The bottom 50 per cent consume one, the middle 40 per cent 2 and the top ten per cent, 9 CO2e/capita.

A person in the bottom 50 per cent of the population in India is responsible for, on average, five times fewer emissions than the average person in the bottom 50 per cent in the European Union and 10 times fewer than the average person in the bottom 50 per cent in the US.

Since 1995, the share of global wealth possessed by billionaires has risen from one per cent to over three per cent. This increase was exacerbated during the covid pandemic. In fact, 2020 marked the steepest increase in global billionaires’ share of wealth on record, the World Inequality report said.

The share of the global bottom half in income halted its progression in 2020 due to covid. This drop was entirely due to the impact on South and Southeast Asia, and more precisely on India.

“When India is removed from the analysis, it appears that the share of the global bottom 50 per cent in income actually slightly increased in 2020,” the report said.