A recent analysis indicates a significant surge in wealth inequality in India, with the top 1% of the population now holding a staggering 40.1% of the nation's wealth. This concentration surpasses the levels observed even under British colonial rule, prompting concerns about the fairness and sustainability of India's economic growth. In stark contrast, the bottom 50% of the population possesses a mere 6.4% of the country's wealth.
Financial analyst Hardik Joshi, citing data from the World Inequality Database and India Today, highlights that this disparity is not accidental but a consequence of policies that favor the wealthy, coupled with weak labor laws and unchecked corporate consolidation. Joshi points out that gains in real estate and the stock market disproportionately benefit those who already possess capital, further widening the gap.
The concentration of wealth in the hands of a few has steadily increased over the past few decades. According to the World Inequality Database, the share of wealth held by the bottom 50% nearly halved from 11.4% in 1961 to 6.5% in 2023. Simultaneously, the wealth of the top 10% rose from 44.9% to 64.6%, and the top 0.1% experienced an even more dramatic increase from 3.2% to 29% during the same period. The middle 40% experienced a decline in their wealth share, falling from 43.7% to 29%.
The income distribution paints a similar picture. In 2022-23, the annual income of an average Indian was Rs 2.35 lakh. However, the bottom 50% earned only Rs 71,163, while the top 1% earned Rs 53 lakh. This means the top 1% earns 75 times more income and possesses 313 times more wealth than the bottom 50%.
Economist Neelkanth Mishra from Axis Bank explains that rising inequality is often a structural challenge during a nation's development. As labor shifts from agriculture to industry and services, capital gains greater pricing power than labor, leading to a natural increase in income inequality. Mishra notes that India has been able to temper the effects of inequality in recent years due to increased access to essential infrastructure. However, he acknowledges that moving from a per capita income of $3,000 to $10,000 will require managing urbanization and fostering domestic innovation.
The implications of such stark wealth inequality are far-reaching. A report by Oxfam International reveals that the top 10% of the Indian population holds 77% of the total national wealth. In 2017, 73% of the wealth generated went to the richest 1%, while the poorest half of the population saw only a 1% increase in their wealth. This disparity affects access to healthcare, education, and other essential services for a large segment of the population.
Furthermore, a significant portion of billionaire wealth is concentrated among the upper castes, highlighting the deep-seated economic inequalities rooted in India's caste system. A World Inequality Report indicates that nearly 90% of the country's billionaire wealth is held by upper castes, while marginalized communities have little to no representation among the wealthiest Indians.
Experts suggest that the government may need to introduce tax benefits and restructure the tax code to ease the burden on the middle class. Calls for increased public investment and restructuring of the tax code are gaining traction as potential remedies. However, it's also argued that tax deductions alone have had little impact on wealth inequality in India over the past six decades. Some analysts blame skewed tax codes, weak labor laws, and corporate consolidation for the growing divide, asserting that the system is designed to preserve elite advantage rather than correct it.
