Inequality worsening in India with share of top 1% in total income at new high, says new paper co-authored by Piketty

The share of the top 1% of Indians in total income and wealth is expected to have reached its highest ever level in 2022-23, according to a working paper published by the World Inequality Lab at the Paris School of Economics.

The paper's co-authors include Thomas Piketty – considered among the most authoritative voices on economic inequality. It suggests that the super-rich seem to be usurping most of India’s growth dividend. It calls for proactive government intervention both on the tax front and in greater social sector spending to address this problem while also underlining the fact that India needs better data to understand economic inequality.

The findings of the paper were used by the Congress to criticise the Narendra Modi government which has been in power since 2014. The BJP, on the other hand, said its government at the Centre has worked tirelessly towards eradicating poverty and increasing the income and ease of living for the marginalised section of the society.

The working paper by four economics researchers – Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi – has created time series data on income and wealth inequality in India. This data on inequality goes back to 1922 for income and up to 1961 for wealth. This shows that in 2022-23, the latest year for which estimates have been made, top 1% income and wealth shares were at their highest ever historical levels in India: 22.6% and 40.1%. India’s top 1% income share is among the very highest in the world, higher than even South Africa, Brazil, and the US, the paper said.

The wealth share of the top 1% was lesser in India than in two of these countries: South Africa and Brazil.

To be sure, the paper has used multiple sources to build its income and wealth inequality estimates. India does not have official income estimates and survey based official statistics on wealth, such as the All-India Debt and Investment Survey (AIDIS) published by the National Sample Survey Organisation tend to exclude the really rich. To be sure, some of the trends reported by the paper have been known from data presented earlier by the World Inequality Lab on income and wealth inequality. One of these trends is that inequality is expected to have declined in the years after independence. This trend reversed in the 1980s and inequality skyrocketed in the 2000s, with current income inequality closer to levels last seen pre-independence.

The paper recommends multiple policy measures to address the problem of inequality in India. They include “restructuring of the tax code to account for both income and wealth, and broad-based public investments in health, education and nutrition”.

In his response to the report, Congress’s communications head Jairam Ramesh said the Modi government’s economic policies have focused on creating billionaire wealth and argued that the “rise of top-end inequality has been particularly pronounced between 2014 and 2023”.

Taking a cue from the report that said the quality of economic data in India is notably poor and has declined recently, Ramesh said the government failed to conduct the 2021 Census and refused to publish the 2011 Socio Economic Caste Census while “manipulating” GDP figures.

BJP national spokesperson Zafar Islam said poverty is a deep-rooted problem in India but in the last 10 years, the government, under the leadership of Modi, has worked tirelessly towards eradicating poverty and increasing the income and ease of living for the marginalised section. “As a result, around 250 million people of India have come out of the below the poverty line and slowly becoming part of the lower middle class. Also, the wealth of rich individuals is calculated on the basis of their investment, including exposure in equity, which has done exceedingly well in the last 10 years... Once you ignore the wealth created through investments in equity and stocks, the statistics will look very different,” he said.