A study from the World Inequality Lab (WIL), published in March 2024, found that economic inequality in India is currently at its highest since British rule. The study, authored by four researchers, highlighted how “economic inequality has skyrocketed since the early 2000s,” and pointed out that such high levels of income and wealth inequality makes “the possibility of India’s slide towards plutocracy even more real.”
Shedding light on the disparity in the distribution of national income, the study said that between 2022 and 2023, 2.1% of the national income went to the top 1% in the earning bracket. This is the highest percentage of the national income to have gone to the richest in the country since 1922 (13%), according to the study. Meanwhile, the top 1% in the earning bracket also held 40.1% of the nation’s wealth between 2022-2023, which is the highest since 1961.
The pattern of the national income going to the top earners has varied with time. The study said, “The share of national income going to the top 10% fell from 37% in 1951 to 30% by 1982 after which it began steadily rising. From the early 1990s onwards, the top 10% share increased substantially over the next three decades, nearly touching 60% in the most recent years.”
However, the bottom 50% of the income bracket have not fared so well in terms of national income distribution. The study said that the bottom 50% have received only 15% of the national income in 2022-2023. Meanwhile, the average incomes of the bottom 50% and the middle 40% stand at Rs 71,000 (0.3 times the national average) and Rs 1,65,000 annually (0.7 times the national average). This is in stark contrast to what 10,000 of the richest individuals make in a year - Rs 480 million, which is 2,069 times the national average.
There is also a wavering pattern in the percentage of income share of the 1% from 1992 to 2023. The study said the income share of the top 1% went up from 13% to 20% from 1922 to the 1940s. After that, the income share fell considerably over the next few decades and stood at 6.1% in 1982. The study attributed this to the socialist policies that were enforced by the government. However, things changed when liberalisation policies were introduced in 1991. “This [socialisation policies] included nationalisation of various important sectors (rail, air, banking, oil), strong regulation of markets, and high tax progressivity – top marginal tax rates were as high as 97.5% in 1973. Since the early-1980s, when the Indian government began initiating a broad range of economic reforms leading up to the liberalisation in 1991, the decline in top 1% shares halted. From the early 1990s onward, top 1% shares have consistently increased over the next 30 years to reach an all-time high of 22.6% in 2022,” the study explained.
Wealth accumulation was another parameter the study looked at. It observed that the “wealth accumulation process in India is the extreme concentration at the very top.” From 1961 to 2023, the wealth share of the top 1% increased three times – from 13% to 39%. The study also found that wealth was concentrated even among those within the top 1%. For instance, out of the 39%, 29 percentage points of the wealth belonged to 0.1% of the population, 22 percentage points went to 0.01% of the top earners, and 16 percentage points to the top 0.001%.
The rise in the share of the national wealth of the top 10% from 1991 also came at the cost of the both bottom 50% and middle 40% income earners. The bottom 50% held 11% of the country’s wealth between 1961 and 1981 which fell to 8.8% in 1991 and 6.9% by 2002. There has been no significant increase in the share of the national wealth of the bottom 50% and has been between 6% to 7% over the past two decades.
Similarly, the middle class (middle 40% of income earners) have also “lost out significantly” according to the study. This hit the middle 40% most because of the low wealth shares of the bottom 50% in 1991 - 9%. Because of this, the gains made by the top 10% came from the middle class’s wealth share. The middle 40% 's wealth share were between 40% to 45% between 1961 and 1981. After that, it fell to 31% in 2012, rose marginally to 32% in 2018 and lowered considerably to 29% in 2023.
Owing to “sluggish economic growth” during Prime Minister Narendra Modi’s tenure, annual growth rates of income fell from over 6% in 2015 to 4.7% in 2016, 4.2% in 2017 and 2018, and 1.6% in 2019. When COVID-19 hit, incomes fell further by 95, the study said. Meanwhile, unemployment has risen considerably between 201-2018. The study also mentioned that the demonetisation scheme implemented in 2016 to have “disproportionately hurt the informal sector, small-medium businesses, and the poor, with one set of estimates suggesting that short-term GDP fell by 2 percentage points.”
The study concluded with a grim estimate and mentioned that such high levels of inequality in income and wealth can lead to social and political unrest in the country. “As per our benchmark estimates, the Billionaire Raj headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces. One reason to be concerned with such high levels of inequality is that extreme concentration of incomes and wealth is likely to facilitate disproportionate influence on society and government. This is even more so in contexts with weak democratic institutions,” it said.