Insights from World Inequality Lab’s Research Paper        

Introduction:

• The World Inequality Lab’s recent working paper, titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj”, authored by Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi, sheds light on significant trends in income and wealth distribution in India over the past century. This paper utilizes a comprehensive dataset, combining various sources such as national income accounts, wealth aggregates, tax records, and surveys, to provide valuable insights into the dynamics of inequality in the country.

1. Growth in Average Incomes:

• The paper reveals that India’s average income experienced notable growth between 1960 and 2022, with a real annual growth rate of 2.6%. Particularly striking is the acceleration in income growth from 1990 onwards, reaching 3.6% per year. The periods from 2005-2010 and 2010-2015 witnessed even faster growth rates of 4.3% and 4.9%, respectively.

2. Emergence of Very High Net Worth Individuals:

• During the period spanning from 1990 to 2022, there was a significant rise in national wealth accompanied by the emergence of a substantial number of very high net worth individuals, defined as those with assets exceeding $1 billion. This demographic increased from just 1 to 162 individuals over the same period.

3. Rise in the Percentage of Income Tax Payers:

• Following economic reforms in 1991, there was a notable increase in the proportion of the adult population filing income tax returns. This share, which remained below 1% until the 1990s, surged to over 5% by 2011, with sustained growth observed in the subsequent decade.

4. Extreme Levels of Inequality in India:

• The paper highlights alarming levels of inequality, with 22.6% of India’s national income accruing to the top 1% in 2022-23, the highest recorded since 1922. Moreover, the top 1% wealth share stood at 40.1% during the same period, surpassing levels seen during the colonial era.

5. Extreme Wealth Concentration at the Very Top:

• A notable feature of wealth accumulation in India is the extreme concentration at the upper echelons. The top 1% wealth share tripled from 1961 to 2023, with significant gains post-1991. Moreover, within the top 1%, wealth concentration is exceedingly high, with a substantial portion accruing to the top 0.1%, 0.01%, and even 0.001%.

6. International Comparison of Income and Wealth Inequality:

• Comparing India’s income and wealth inequality with other countries, the paper underscores India’s high levels of inequality, particularly in terms of the income share of the top 1%. Despite middling wealth inequality levels globally, India stands out with its extreme income disparities.

7. Poor Data Quality and Underestimation of Inequality:

• The authors caution that India’s economic data quality is notably poor, potentially leading to underestimation of actual inequality levels. Despite stark findings, the data likely represents a conservative estimate of the true extent of inequality.

8. Policy Solutions:

• The paper suggests policy measures such as implementing a super tax on billionaires and multimillionaires, alongside tax restructuring to fund investments in education, health, and public infrastructure, as potential remedies to address rising inequality.

Conclusion:

• In conclusion, the World Inequality Lab’s working paper provides critical insights into the evolving landscape of income and wealth distribution in India. The findings underscore the urgent need for policy interventions to mitigate the widening gap between the affluent and the marginalized segments of society, ensuring a more equitable and inclusive economic trajectory.