The Aryavarth Express
Agency (New Delhi): On the eve of Lok Sabha general election 2024, we have two important news this week – first, Indians are one of the most unhappy people of the world; and secondly, the promised “good days” came only for the top 10 per cent people of the country who were enabled to earn 57.7 per cent of the national income in 2022-23 with average income of about Rs 3,758 per day, but not for the bottom 50 per cent of the people who could earn only 15 per cent with average income of less than Rs 198 per day.
According to the World Happiness Index, India ranked 126th out of 143 nations in the Global Happiness Index, while the World Inequality Lab report said that inequality in India has reached the highest historical levels under Modi regime, though our Honourable Prime Minister Narendra Modi says it is Rising India, and is giving guarantee of a developed India by 2047.
The report titled “Income and Wealth Inequality in India, 1922-23” subtitled “The Rise of the Billionaire Raj” authored by Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi, published by the World Inequality Lab has pointed out that between 2014-15 and 2022-23, the rise of top-end inequality has-been particularly pronounced in terms of wealth concentration.
The report found that in 2022-23, the Middle 40 per cent people had an average income of only Rs 165,273 per year (27.3 per cent), while it was Rs 13,52,985 for top 10 per cent (57.7 per cent), and Rs 53,00,549 for top 1 per cent (22.6 per cent). Average wealth of bottom 50 per cent was Rs 1,73,184 (6.4 per cent), Middle 40%- Rs 9,63,560 (28.6 per cent), top 10 per cent Rs 87,70,132 (65 per cent) and top 1 per cent Rs 5,41,41,525 (40.1 per cent).
How such an inequality was bred? The report finds suggestive evidence that the Indian income tax system might be regressive when viewed from the lens of net wealth. It emphasized that the quality of economic data in India is notably poor and has seen a decline recently. “It is therefore likely that our results represent a lower bound to actual inequality levels. We call for improved access to official data and greater transparency to enhance the study of inequality and enable evidence-based public debates,” the report said.
“Many observers believe that over its two terms, it has led an authoritarian government with centralization of decision-making power coupled with a growing nexus between big-business and government,” the report pointed out.
It also gives a grim macroeconomic picture. The report says, “Official statistics suggest rather sluggish economic growth during the Modi years – real year-on-year growth rates of incomes fell from over 6% in 2015 and 2016 to 4.7% and 4.2% in 2017 and 2018 and then dramatically to 1.6% in 2019. All this was before the COVID-19 pandemic hit and incomes fell by 9% in 2020. There was a base-year effect in 2021 and incomes grew by 4.7% in 2022.What was driving the declining growth even before COVID? Estimates based on official statistics suggests that savings and investment rates steadily fell for over a decade till 2017-18, exports began falling 2014-15, and the share of manufacturing and industry in the GDP stagnated between 2013and 2018.”
“Unemployment rates, especially among the youth (15-29 years), increased considerably between 2011-12 and 2017-18. Real wages across various sectors have more-or-less stagnated over the last decade or so. Another possible factor contributing to the economic slowdown was the harsh “demonetization” shock dealt to the economy in November 2016 when nearly 86% of the currency in circulation ceased to be legal tender overnight. While the move was supposedly aimed at fighting “black money”(unaccounted incomes) stored as currency notes, it is believed to have disproportionately hurt the informal sector, small-medium businesses, and the poor, with one set of estimates suggesting that short-term GDP fell by 2 percentage points.
The Modi government has certainly invested in expanding the coverage of various infrastructural benefits like housing, toilets, electricity, and banking, what some have called the “new welfarism of India’s right”. But it is unclear if these investments have led to an improvement in purchasing power on the market. Further, in the absence of any NSSO consumption surveys in recent years, it is unclear how much progress India has made in reducing extreme poverty.
In terms of inequality dynamics, the Modi years of 2014-2023 can be divided into 3 phases: 2014-2017, 2018-2020, and 2021 onwards. In the first phase, the economy was growing moderately fast and both income and wealth inequality continued to rise. In the second phase, from 2017-18 to 2020, growth slows down considerably and then plummets in 2020. In this second phase, we see top 10% income and wealth shares decline by 1-2 percentage points. The most likely explanation for which is the pro-cyclical nature of inequality, i.e. the rich tend to benefit disproportionately from boom periods and are disproportionately hurt during slumps. This seems the most likely explanation especially given that we observe similar trends for both income and wealth during this phase. Moreover, the wealth of the richest Indians as a share of national income also declined between 2018 and 2020. It is hard to think of other factors that concomitantly explain these trends for both incomes and wealth.
Finally in the last phase, after the lock-downs were lifted and the economic effects of COVID-19 dissipated, we find top shares revert to their upward trend in 2021 and 2022, while bottom shares decline back to their 2014 level. By examining the growth incidence curve for incomes and wealth between 2014-2022, we find that the real beneficiaries in the recent years appear to be the super-rich, the top 1%. This is particularly so for wealth concentration at the very top. This lends some support to political economy assessments that have characterized the economic system in India in recent years as “conglomerate capitalism” and a “conclave economy”.
By 2022-23, top 1% income and wealth shares are at their highest historical levels at 22.6% and 40.1% respectively and India’s top1% income share is among the very highest in the world, higher than even South Africa, Brazil and US. The report also finds tentative evidence that wealth-to-income ratios in the recent years could be as low as 30%-40% at the lower end of the wealth distribution compared to over 4600% at the very top of the distribution.
The report concluded, “As per our benchmark estimates, the Billionaire Raj headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces. One reason to be concerned with such high levels of inequality is that extreme concentration of incomes and wealth is likely to facilitate disproportionate influence on society and government. This is even more so in contexts with weak democratic institutions. After largely being a role model among post-colonial nations in this regard, the integrity of various key institutions in India appears to have been compromised in recent years. This makes the possibility of India’s slide towards plutocracy even more real.” (IPA Service)
By Dr. Gyan Pathak
