The World Inequality Report has exposed the stark nature of income and wealth concentration in India. An update.
SHARE:
India - A hugely unequal country of rich elite and mass poverty
- The story: The World Inequality Report 2022 released by Paris-based World Inequality Lab, a global research initiative, found India to be among the most unequal countries in the world. For policymakers, that is a very worrisome indicator.
- Bare facts: The bottom half of the Indain population earns Rs.53,610, and the top 10% earns twenty times more at Rs.11,66,520. While the top 10% and top 1% hold respectively 57% and 22% of total national income, the share of the bottom 50% has gone down to just 13%. India stands out as a poor and very unequal country, with an affluent elite. The situation today is what is was when the British ruled India.
- Who prepared the report: The report, authored by Lucas Chancel and coordinated by Thomas Piketty among others, has captured certain interesting insights about global income & wealth inequality.
- Contemporary income and wealth inequalities are very large - The richest 10% of the global population currently takes 52% of global income, whereas the poorest half of the population earns 8% of it. These averages mask wide disparities both between and within countries. MENA is the most unequal region in the world, Europe has the lowest inequality levels.
- Global wealth inequalities are even more pronounced than income inequalities - The poorest half of the global population barely owns any wealth at all, possessing just 2% of the total. In contrast, the richest 10% of the global population own 76% of all wealth. On average, the poorest half of the population owns $4,100 per adult and the top 10% own $771,300 on average.
- While inequality has increased within most countries, over the past two decades, global inequalities between countries have declined.
- The gap between the average incomes of the richest 10% of countries and the average incomes of the poorest 50% of countries dropped from around 50x to a little less than 40x.
- At the same time, inequalities increased significantly within countries. The gap between the average incomes of the top 10% and the bottom 50% of individuals within countries has almost doubled, from 8.5x to 15x. Despite economic catch-up and strong growth in the emerging countries, the world remains particularly unequal today.
- Rise of private wealth - There has been a rise of private wealth in emerging countries such as China and India. Large emerging economies such as China and India experienced faster increases in private wealth than wealthy countries after they transitioned away from communism (in China and Russia) or from a highly regulated economic system (in India). While to some extent these increases are to be expected (as a large proportion of public wealth is transferred to the private sector), the scale of the change is striking. China has had the largest increase in private wealth in recent decades. The private wealth increase seen in India over this time is also remarkable (up from 290% in 1980 to 560% in 2020).
- Nations richer, governments poorer: Over the past 40 years, countries have become significantly richer, but their governments have become significantly poorer. The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands. This trend has been magnified by the Covid crisis, during which governments borrowed the equivalent of 10-20% of GDP, essentially from the private sector. The currently low wealth of governments has important implications for state capacities to tackle inequality in the future, as well as the key challenges of the 21st century such as climate change.
- Covid crisis and inequality: The Covid-19 pandemic and the economic crisis that followed hit all world regions, but it hit them with varying intensity.
- Europe, Latin America, and South and Southeast Asia recorded the largest drops in national income in 2020 (between -6% and -7.6%) while East Asia (where the pandemic began) succeeded in stabilizing its 2020 income at the level of 2019.
- It is still too early for a systematic understanding of the intra-country impact of the crisis on income and wealth inequality due to the lack of real-time data on the distribution of growth across all countries. However, between 2021 and 2019, the wealth of the top 0.001% grew by 14%, while average global wealth is estimated to have risen by just 1%. The global billionaire wealth increased by more than 50% between 2019 and 2021.
- Summary: While concerns were raised about growing inequality in India for years now, the government has been cold on the topic. The GDP growth figures are what most agencies focus on, assuming that fruits of national income will be equitably distributed, automatically. The latest inequality report has laid bare the truth - a tiny elite in India is taking away most of India's income. With that in mind, the government now needs to focus on getting money into people's hands, especially when joblessness is at a historic high in India. Merely minting new billionaires and Unicorns cannot be the way forward for India becoming a Vishwaguru, but taking everyone alone can be.
- EXAM QUESTIONS: (1) Explain why economic and financial inequality in India is rising so rapidly, and consistently. Why is the system not able to do much about it? (2) Define the nature of inequalities in India. How much of it is structural and irreversible? Why? Explain.
* Content sourced from free internet sources (publications, PIB site, international sites, etc.). Take your own subscriptions. Copyrights acknowledged.
COMMENTS