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Income and wealth inequality in India from 1922 to 2023

  • Context (IE | IE): A new working paper by the World Inequality Lab examines income and wealth inequality in India from 1922 to 2023.
  • Data from various sources, such as national income accounts, wealth aggregates, tax records, and surveys, were used for the analysis.

Key Findings

Growth in average incomes

  • 1960-1990: growth rate of 1.6% per year.
  • 1990-2022: growth rate of 3.6% per year.
  • The fastest growth periods: 2005-2010 (4.3% per year) & 2010-2015 (4.9% per year).

Emergence of very high net worth individuals

  • From 1990 to 2022, India experienced a rise in national wealth along with the emergence of very high-net-worth individuals.
  • The number of such individuals increased from 1 in 1991 to 52 in 2011 and further to 162 in 2022.
  • Very high net-worth individuals are those with a net wealth exceeding $1 billion at the market exchange rate.

Rise in the percentage of income tax payers

  • The proportion of adults filing income tax returns was less than 1% until the 1990s, but it saw significant growth after the economic reforms of 1991.
  • By 2011, this proportion had exceeded 5%, indicating a substantial increase.
  • Over the last decade, roughly 9% of adults filed tax returns between 2017 and 2020.

Extreme levels of inequality in India in 2022-23

  • The top 1% received 22.6% of the national income, the highest since 1922, surpassing even the colonial period.
  • Additionally, the wealth share of the top 1% stood at 40.1%, the highest since data collection began in 1961.
  • It raises concerns about the sustainability of such heightened inequality levels without significant social and political repercussions.

Income Inequality in India - PMF IAS

Extreme wealth concentration at the very top

  • Between 1961 and 2023, the wealth share of the top 1% tripled from 13% to 39%. Most of these gains occurred after 1991, with the top 1% shares consistently rising until 2022-23.
  • Within the top 1%, wealth concentration is exceptionally high. In 2022-23, the top 1% held 39.5% of the wealth.

International comparison of income inequality

  • The paper compares India’s income and wealth inequality with several countries, including Brazil, China, France, South Africa, the United Kingdom, and the United States as of 2022.
  • India ranks second in terms of the income share of the top 10%, trailing only South Africa.
  • However, when looking at the income share of the top 1%, India has the highest level at 22.6%.
  • According to the paper, India’s top 1% income share is among the highest globally.

International comparison of wealth inequality

  • Both with the top 10% and the top 1%, India’s wealth concentration is moderate.
  • Brazil and South Africa exhibit extreme levels of wealth concentration, with top 10% shares of 85.6% and 79.7%, respectively.

Poor data leading to likely underestimation of inequality

  • The economic data quality in India is notably poor and has worsened recently.
  • The paper suggests that the findings likely underestimate the true levels of inequality.

Policy solution

  • Implementing a super tax on Indian billionaires and multimillionaires is suggested.
  • Restructuring the tax schedule to cover both income and wealth is proposed.

World Inequality Lab

  • It is based in Paris.
  • It focuses on researching inequality and policies for social, economic, and environmental justice.
  • Report: World Inequality Report
  • World Inequality Database
    • It is an open-source database that is part of an international collaborative effort of over 100 researchers on five continents to access high-quality wealth and income inequality data.
    • Developed by an international academic consortium.
    • This project centrally addresses SDG 10 (reduce inequality within and among countries).
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