The Aryavarth Express
Agency(New Delhi): A new working paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj” by Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi of the World Inequality Lab unveils a stark portrait of widening economic disparity in India over the past century. By meticulously harmonizing diverse data sources including national income accounts, wealth aggregates, tax tabulations, rich lists, and surveys on income, consumption and wealth, the researchers construct comprehensive series on the long-term evolution of inequality.
Their estimates reveal a striking U-shaped trajectory. In the decades following independence, socialist policies such as nationalization, high tax rates, and regulation led to a decline in income inequality, with the share of the top 1% falling from over 20% in the 1940s to just 6.1% by 1982. However, this trend reversed dramatically after the economic liberalization of the early 1990s. As India transitioned towards a market economy with globalized trade and capital flows, growth accelerated but the gains were captured predominantly by the elite.
By 2022-23, the researchers find that the top 1% earned a staggering 22.6% of total national income, a level of concentration surpassing even the heights of the colonial British Raj era. Meanwhile, the bottom 50% of the population earned a mere 15%. As the authors pointedly summarize, “The ‘Billionaire Raj’ headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces.”
The story of wealth inequality is even more striking, especially since the turn of the 21st century. The share of total wealth possessed by the top 1% has surged from 25.4% in 2002 to 40.1% in 2022-23. Drilling down further into the data reveals astonishing levels of concentration at the very peak of the distribution. The top 0.1% raised their wealth share from 15.1% to 29.7% over those two decades. And by 2022-23, the richest ∼10,000 Indians (out of an adult population of over 900 million) held an average net worth of INR 22.6 billion – over 16,000 times the average per adult amount of INR 1.35 million.
To put these numbers in perspective, an individual would have to be at the 90th percentile of the income distribution to merely earn the average national income of INR 234,551 in 2022-23. The threshold to break into the top 1% club was an annual income of nearly INR 2.1 million. In terms of wealth, the bottom 50% possessed a paltry average of INR 173,184 per adult, a mere 13% of the national average.
This dizzying rise of the ultra-rich has left the middle and lower segments of the population behind. A notable finding of the paper is that while the bottom 50% managed to keep pace with average income growth between 2014-2022, the middle 40% actually lagged behind. As a result, “India’s ‘missing middle class'” identified by Chancel and Piketty in earlier work has only worsened.
Importantly, the authors caution that given the sizable challenges in accurately measuring incomes and wealth in India, their estimates likely represent a lower bound on the true extent of inequality. On the income side, tax data only directly captures the top 10% of earners despite recent increases in tax filing. Survey measures of income and consumption struggle to adequately capture the top tail. And on the wealth side, the researchers show that official surveys seem to be doing an ever-worse job of representing the upper end of the distribution. The total wealth reported in the Forbes billionaire list equated to 1.26% of the national total in the 2002 All-India Debt and Investment Survey (AIDIS), but an alarming 6.01% in the 2018 edition.
To better understand these trends, the paper also places India in a comparative global context. It finds that India’s income inequality now surpasses most major economies, with only South Africa having a (marginally) higher top 10% income share in 2022. India’s top 1% share is the highest among the countries considered, exceeding even Brazil and the United States. An especially illuminating comparison is with China, another developing economy that started at similar income levels as India in the mid-20th century. The authors identify two key divergences: first in the 1990s when China’s economic take-off outpaced India’s, and then in the 2000s when China stabilized its income inequality levels even as they continued climbing in India.
The paper argues that these disconcerting trends hold crucial lessons for India’s future development path. It notes that China’s success in achieving rapid growth without the runaway inequality seen in India highlights the potential of more state-directed, egalitarian models. Conversely, India’s combination of a highly service-oriented economy, lack of broad-based education and weak social safety nets has resulted in an uneven and arguably unsustainable growth trajectory.
To conclude, the authors make a powerful case that the time has come for Indian policymakers to firmly placed inequality at the center of the development agenda. They suggest policies such as implementing an inheritance tax, raising marginal income tax rates on the super-rich, and closing tax loopholes. Notably, they calculate that a modest 2% wealth tax on just the richest 0.002% of the population (162 billionaires in 2022) would yield revenues equaling 0.5% of national income. If properly redistributed, this could make a meaningful difference to the livelihoods of the hundreds of millions of Indians at the bottom of the distribution.
At the same time, the researchers lay out an agenda for democratizing access to economic data in India, arguing this is crucial for an informed public debate on inequality and redistributive policies. They call for Indian authorities to publish income tax tabulations annually, align survey measures more closely with international best practices, and provide secure research access to anonymized administrative microdata. Such transparency, they suggest, should be a key governance priority in the world’s largest democracy.
This landmark paper marshals extensive empirical evidence to trace out the long arc of income and wealth inequality in modern India. Its sobering results, arrived at through meticulous analysis, deserve close attention from scholars, policymakers and the public alike. As India surges ahead to become the world’s most populous nation and a pivotal emerging economy, the authors argue persuasively that the road ahead must be paved with a commitment to equitable growth. Whether the “Billionaire Raj” gives way to a more inclusive economic future remains an open and pressing question.
By Prashant Goenka