The ‘Billionaire Raj’ headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces, according to a recent report by World Inequality Lab. Renowned French economist Thomas Piketty, Lucas Chancel from Harvard Kennedy School, Nitin Kumar Bharti from New York University and Anmol Somanchi from Paris School of Economics penned down the report titled -- Income and Wealth Inequality in India, 1922-2023: The rise of the Billionaire Raj.

The report by World Inequality Lab states that in FY23, 22.6% of national income went to just the top 1%, the highest level recorded in the Lab series since 1922, higher than even during the inter-war colonial period. While, the top 1% wealth share stood at 40.1% in FY23, also at its highest level since 1961 when the Lab’s wealth series began. The report says inequality grew after the globalisation wave picked up in 1991 and widened at a rapid pace in the past decade.

India features in the Top Unequal Nations

The report says that inequality in India declined post-independence till the early 1980s, after which it began rising and skyrocketing since the early 2000s. Between FY15 and FY23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration. By FY23, top 1% income and wealth shares (22.6% and 40.1%) are at their highest historical levels and India’s top 1% income share is among the very highest in the world, even higher than even South Africa, Brazil and the United States of America.

Highlighting India’s journey after Independence, the report mentions that between 1960 and 2022, India’s average income grew at 2.6% per year in real terms. But in the shorter duration of 1990-2022, the average income grew at a faster pace of 3.6% while the real growth rate stood at 1.6% per year in the same period. As per the report, the periods 2005-2010 and 2010-2015 saw the fastest growth at 4.3% and 4.9% per year respectively.

How does India fare against China?

The average income of India, China and Vietnam were similar till about 1975, adjusting for local inflation and purchasing power differentials. Subsequently, incomes in China and Vietnam grew to 35%-50% higher than India’s by 2000. At the turn of the new century, Chinese incomes began galloping ahead and are now about 2.5 times larger than Indian incomes. Vietnam, on the other hand, slowed down slightly after 2005. By 2022, average incomes were 33% higher than India’s. Nonetheless, despite the absence of democracy, incomes in both China and Vietnam have grown faster than in India over the 1960-2022 period.

Notwithstanding the comparatively slower growth vis-a-vis China, the Indian economy did experience significant growth in absolute terms during the last three decades. Income growth of nearly 3.6% per year during 1990-2022 was accompanied by a rise in national wealth -- India’s aggregate wealth-to-income ratio (𝛽) rose from 3.83 in 1995 to 5.75 in 2022. This period also saw the emergence of very high-net-worth individuals. As per data from Forbes billionaire rankings, the number of Indians with net wealth exceeding $1 billion at market exchange rate (MER) increased from 1 to 52 to 162 in 1991, 2011 and 2022 respectively.

Over this period, the total net wealth of these individuals as a share of India’s net national income boomed from under 1% in 1991 to a whopping 25% in 2022. Perhaps not surprisingly, the share of the adult population that filed an income tax return, which had remained under 1% till the 1990s, also grew significantly in the three decades after the economic reforms of 1991. By 2011, the share had crossed 5% and the last decade too saw sustained growth with around 9% of adults filing a return in the years 2017-2020.

The paper suggests the Indian tax code should be restructured to account for both income and wealth. Besides serving as a tool to fight inequality, a ‘Super Tax’ of 2% on the net wealth of the 167 wealthiest families in 2022-23 would yield 0.5% of national income in revenues. Broad-based public investments in health, education and nutrition are needed to enable the average Indian, and not just the elites, to meaningfully benefit from the ongoing wave of globalisation, the report adds.

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