Context
According to a report titled as “Billionaire Raj” published by the World Inequality Lab (WIL), India’s top 1% will have the greatest income and wealth shares in history in 2022-23, at 22.6% and 40.1%, respectively.
- Four economics experts, Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi, created time series data on income and wealth inequality in India.
About World Inequality Lab
- About: The World Inequality Lab (WIL) is a research facility of the Paris School of Economics.
- Objective: To foster research in global inequality dynamics.
- Collaboration: It collaborates closely with a wide international network of scholars (more than 100 researchers from almost 70 countries) who contribute to the database.
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Key Highlights from the World Inequality Lab Report
- It claimed that the country had become more unequal than the British Raj.
- Findings of the Report: The top 1%‘ income and wealth shares in India reached their greatest historical levels in 2022-23, at 22.6% and 40.1%, respectively.
- The paper stated that India’s top 1% income share is among the highest in the world, surpassing even South Africa, Brazil, and the United States.
- India’s top 1% has a lower wealth share than South Africa and Brazil.
- Disparity among Income Groups: The paper also emphasizes the degree of difference between different economic classes.
- According to the paper, the top 1% has an average wealth of Rs 5.4 crore, which is 40 times the average Indian.
- However, the lowest 50% and middle 40% had Rs 1.7 lakh (0.1 times national average) and Rs 9.6 lakh (0.7 times national average), respectively.
Key Suggestions in the Working Paper
- Estimates from Multiple Sources: The paper’s estimates of income and wealth disparity are based on numerous sources.
- There are no official income estimates or survey-based wealth data in India.
- Policy Recommendations: The research makes several policy recommendations to alleviate India’s inequality problem.
- They include tax reform that takes into account both income and wealth, as well as broad-based public spending in health, education, and nutrition.
- Imposition of Super Tax: According to the research, a “super tax” of 2% on the net wealth of the top 167 families in 2022-23 would generate 0.5% of national income in revenue.
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- Benefit of Super Tax: It would also free up valuable fiscal space to support such expenditures, in addition to functioning as a weapon for combating inequality.
Probable Reasons for Sharp rise in top 1 Percent Income Shares
- Role of Capital Incomes: Wage growth in the public and private sectors until the late 1990s, followed by the increasing role of capital incomes.
- Lack of Quality Education: Lack of quality, broad-based education focused on the masses has contributed to the depressed income shares of the bottom 50 percent and the middle 40 percent.
- Widening Income Disparity Post-Liberalization
- Impact of Liberalization: The income gap between the top 10% and the middle 40% widened significantly post-liberalization in the 1990s, leading to a sharp increase in income inequality.
- Steady Decline of Bottom 50%: Despite marginal increases in the 1980s, the income share of the bottom 50% has steadily fallen, exacerbating socioeconomic disparities.
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March 21, 2024