The State of Inequality in India

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By Philip Mudartha
Bellevision Media Network

12 May 2024:


One of the crucial issues that senior Congress leader, Rahul Gandhi, has been raising in his campaign speeches is the issue of income inequality in our country. Income and wealth Inequalities are at the highest historical levels in India. India’s incomes of top 1% is among the very highest in the world. In 2022-23, 22.6% of national income went to just the top 1%, the highest level recorded since 1922. The top 1% also own 40.1% of all wealth.


Inequalities in Incomes and wealth declined since independence due to the socialist policies adopted by successive Congress-led governments till mid-1980s. The land re-distribution laws enacted by the state governments, especially in the communist ruled states contributed most. In Karnataka and Andhra Pradesh staunch socialists like Devaraj Urs and PV Narasimha Rao enacted Land Reforms Acts. Thus, by redistribution of agricultural land to the landless tillers by state intervention of the state, farm outputs rose and they were lifted from extreme poverty.



Inequalities in incomes and wealth began rising after the economic liberalization undertaken by PV Narasimha Rao-led Congress government in 1991. However, the inequalities skyrocketed since the early 2000s. Between 2014-15 and 2022-23, during the nine years of Modi government, the rise of top-end inequality is very sharp in terms of wealth concentration.


Between 1960 and 2022, India’s average income grew at 2.6% per year in real terms. The real annual growth rate was 1.6% between 1960 and 1990. Between 1990 and 2022, the annual growth rate was 3.6%. Between 2005 and 2015, the annual growth rate was fastest at 4.6%. Growth has slowed down since 2015.


The income growth of 3.6% per year during 1990-2022 was accompanied by a rise in national wealth. India’s aggregate wealth-to-income ratio rose from 3.83 in 1995 to 5.75 in 2022. However, the rich got richer and a class of Very High Net-Worth Individuals (VHNWI) emerged. The number of Forbes Billionaires in India increased from 1 in 1991 to 52 in 2011 and to 162 in 2022.The VHNWI earned less than 1% of our net national income in 1991.  By 2022, they earned a whopping 25%.



Inequality is a political choice, not an inevitability:


Expert studies point to extreme levels of inequality in India compared to international standards. The Billionaire Raj headed by India’s modern bourgeoisie is more unequal than the colonial British Raj. How long such inequality levels can sustain without major social and political upheaval? The income and wealth inequality will not slow down by itself. It can be kept in check via government policy.


Income and wealth inequalities have been on the rise nearly everywhere since the 1980s, following a series of deregulation and liberalization programs which took different forms in different countries. The rise has not been uniform: countries like USA, Russia and India have experienced spectacular increases in inequality; others like European countries and China have experienced relatively smaller rises. These differences confirm that inequality is not inevitable, it is a political choice.



The State of Inequality in India Report:


The Economic Advisory Council to the Prime Minister, in its report, provides a broad-based review of inequality in India in recent years along various dimensions including income, health, education, and household assets. The report draws attention to the fact that “the benefits of growth have been concentrated and has marginalised the poor further”. A survey of NIFTY50 companies shows a complete lack of diversity in top management beyond upper-caste men. A “brutal power law in most Indian consumer transactions” is seen in that 1% of Indians take 45% of flights, 2.6% of Indians invest in mutual funds, 6.5% of users are responsible for 44% of digital transactions on the Unified Payment Interface (UPI), and 5% of users account for a third of the orders placed on Zomato.  As per the annual Forbes rich lists, the net wealth of dollar billionaire Indians has grown by over 280% cumulatively between 2014 and 2022 in real terms, 10 times the growth rate of national income over the same period. All of this suggests that at least the very rich seem to be doing very well in Modi’s “New India”.


The need for policy intervention is acute:


The Indian tax system is regressive when viewed from the lens of net wealth. This is perhaps good reason to consider a restructuring of the tax code to account for both income and wealth. Moreover, 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 globalization.


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 which would facilitate such investments.


In order to preserve our democratic way of life and social cohesion, income and wealth inequality in India must be closely tracked and challenged. The wealthy already wield excessive power and influence in India. Look at the unabashed display in Jamnagar in Gujarat leading up to the “pre-wedding” celebrations of Anant Ambani, son of Mukesh Ambani. The Jamnagar airport, which is a major Air Force station, was given a temporary 10-day international airport status to accommodate foreign flights. The Indian Air Force also permitted access to its sensitive areas and provided additional military personnel to staff the air traffic control tower.



Also look at the phenomenal rise of the Adani business house: In September and October 2018, the Modi government awarded 126 contracts to set up and operate piped natural gas networks and fuel stations across India. The number of contracts given out in these two months was significantly higher than those given in the previous nine years: 35 contracts under the five-plus years of UPA government, and 63 contracts in four plus years of Modi government.


The largest winner of the bids was Gujarat-based Adani Group. In a bidding process that saw 23 participants for 126 tenders, the group won 25 bids, 15 on its own and 10 in a joint venture with Indian Oil Corporation. Other companies bagged fewer contracts.


Apart from winning the gas bids, Adani group acquired Reliance Power’s electricity transmission business in Mumbai, GMR’s thermal power project in Chhattisgarh, L&T’s Katupalli port near Chennai, and a power transmission line owned by KEC International in Rajasthan. The group also bid for 51% in a power project owned by Tamil Nadu-based Coastal Energen.


Towards the end of 2018, the group bagged a project to treat wastewater in Allahabad. In February 2019, when the Modi government invited bids from private players to manage six airports, the Adani Group, a newcomer to airport management, trumped established players like GMR and bagged all six contracts. In January 2018, it had announced a plan to set up solar-powered data centres in and around Visakhapatnam in Andhra Pradesh.


Between 2014 and 2017, the Adani Group acquired projects like Lanco’s Udupi thermal power project and L&T and Tata’s Dhamra port in Odisha. It also entered new sectors – wind energy, solar manufacturing, lending, power distribution, and aerospace and defence. In September 2017, it tied up with Swedish Defense giant Saab to make drones and helicopters.


The group boasts: “From its modest beginning, the group is now present in more than 260 cities across India.”


The Crony Capitalism of Modi Government:


PM Modi has turned India into a plutocracy. Look at the phenomenal wealth amassed by India’s and Asia’s richest families.



(To be continued)



Comments on this Article
JANARDHANAN, Qatar Mon, May-20-2024, 9:46
Dear sir, I have gone through your new article regarding the income disparity in India. I do carry a different viewpoint on this subject even though we both are much aligned on our socialistic inclinations. In the first place, I do not feel that voters are taking Rahul seriously. False narratives related to election result are roaming in the air. It is usual that stock market goes jittery to such events/news. I do believe that the present turmoil in the stock market is an opportunity for us to invest and derive profit later. In my opinion, Adani/Ambani like are nation builders. It is also because of their vision and hard work, nation is progressing. They deserve appreciation, not curse. Wealth creation is not a matter of joke. And their wealth is the nation’s wealth. When they grow, India is growing. Rich as well as poor, all are progressing. What matter most is the upliftment of the poor. As long as it is happening, we are on the right track. Even though there are Forbes billionaires in our country, our per capita income is still very low. So we need to grow, grow further to reach at least in a comparable level with others. You have rightly said that a policy intervention is very much needed as far as the income wealth inequality matter is concerned. Grabbing rich and redistributing to poors is a raw idea that needs to define well before entering in to such tricky business. Any hasty steps of that nature can derail or jeopardize our economic progress. So far so good as far as the present GDP growth is concerned. In order to maintain this momentum, the nation needs a stable government, whoever it may be. I think that is going to happen. Be positive, be happy.
Dr Austin Prabhu, Nantur/Chicago Tue, May-14-2024, 8:00
The number one issue in India is CORRUPTION! India should get rid of corruption and the corrupt leaders. Once the corruption cancer heals, India will improve significantly!
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