- The Global Inequality Report 2025, led by Nobel laureate Joseph Stiglitz under South Africa’s G20 Presidency, exposes the rapid rise of global and national disparities. It shows how concentrated wealth & unequal access to opportunities are widening social & economic divides worldwide, including in India.
Key Findings of the Report
The Scale of Inequality
- Wealth Gap: The wealthiest 1% gained 41% of all new global wealth since 2000, while the bottom half received only 1%.
- Income Divide: Around 83% of countries, covering 90% of the world’s population, face high income inequality with Gini scores above 0.4.
- Food Crisis: One in four people (2.3 billion) experience moderate or severe food insecurity, an increase of 335 million since 2019.
- Inherited Wealth: About $70 trillion will be transferred via inheritance in the next decade, continuing intergenerational inequality.
India-Specific Findings
- Wealth Concentration: India’s richest 1% increased their wealth share by 62% between 2000 & 2023.
- Capital Divide: Nearly 97% of Indians earn negligible income from capital, highlighting a sharp labour–capital divide
- Rising Ultra-Wealthy: India’s millionaire population grew by 6% in 2024, with 191 billionaires recorded nationwide.
- Global Role: Rising per capita incomes in India and China have slightly narrowed income inequality between countries.
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Key Drivers of the Inequality
- Capital Concentration: Since 1990, 56% of countries saw a rise in capital income share, while global labour share declined, reflecting widening wealth gaps.
- Wage Inequality: Between 2019–2024, CEO pay jumped 50%, but worker wages grew by less than 1%, deepening income disparity.
- Wealth Imbalance: The top 1% owns nearly 41% of global wealth, leaving 85% of people without any capital income. (Oxfam, 2025)
- Fiscal Inequity: High indirect taxes on goods and services disproportionately burden low-income groups, reducing disposable income.
- Rural Divide: In India, rural incomes are 40% lower than urban ones due to limited diversification, land inequality, and low agricultural returns.
Government Initiatives to Address Inequality in India
- MGNREGA: Provides 100 days guaranteed wage employment to rural poor, stabilising incomes and reducing poverty.
- PM-KISAN: Offers ₹6,000 annual income support to 11 crore small farmers, strengthening rural income security.
- Ayushman Bharat–PM-JAY: Gives ₹5 lakh health cover to 50 crore Indians, reducing catastrophic health expenditure for vulnerable groups.
- PMGKAY: Ensures free food grains to 81 crore beneficiaries, preventing hunger & inequality.
- Jan Dhan Yojana: Brings 51 crore citizens into formal banking, boosting financial inclusion and reducing systemic exclusion.
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Consequences of High Inequality in India
- Growth Slowdown: High inequality depresses consumption, bottom 50% hold only 13% of income reducing domestic demand and slowing GDP growth. (WID 2024)
- Democratic Strain: Inequality widens political distrust. India’s top 1% owns 40% of wealth, fuelling elite capture, social resentment, and weakened democratic participation. (Oxfam)
- Health Inequities: Health gaps widen as poorer states underperform. IMR ranges from Kerala (6) to UP (38) per 1,000 births), showing inequality-driven health disparity. (SRS 2023)
- Educational Divide: Learning inequality persists, only 25% of rural grade-3 children can read grade-2 texts, locking low-income households into intergenerational poverty. (ASER 2023)
- Social Instability: Regional and caste inequalities fuel unrest, SC/ST poverty rates remain two times higher than national average leading to social tension and conflict risks. (NITI 2023)
Key Measures to Reduce Inequality
- Wealth Taxation: A 2% wealth tax and 33% inheritance tax on the top 1% can generate ~₹11 lakh crore annually, enabling large-scale redistribution.
- Tax Credits: Earned-income tax credits for poor households can offset GST burden and improve disposable income, following global models like the 22% poverty reduction seen in the US.
- Human Capital: Raising India’s low public spending on health (2.1% GDP) and education (2.9% GDP) can reduce inequality of opportunity and boost long-term productivity.
- Worker Power: Strengthening collective bargaining can reverse India’s falling labour-income share, which declined from 32% in the 1990s to ~22% in 2024 (ILO).
- Social Security: Expanding MGNREGA, raising minimum wages, and piloting UBI-style support can protect vulnerable households and reduce inequality.
“Inequality is not just an economic gap; it is a governance fault line.” India must pair high growth with fair redistribution, stronger public services, and labour empowerment to ensure that prosperity is shared and democracy remains resilient.
Reference: The Hindu | PMFIAS: Inequality in India
PMF IAS Pathfinder for Mains – Question 418
Approach
- Introduction: Write a contextual introduction by mentioning the Global Inequality Report 2025.
- Body: Discuss the major causes of inequality in India and suggest policy measures for equitable and inclusive development.
- Conclusion: Emphasis on structural reform to promote equitable and inclusive development.
