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.

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).