The Aryavarth Express
Agency (Bengaluru): India, the world’s largest democracy and a rapidly growing economy, has long grappled with the challenges of wealth inequality and poverty. As policymakers and economists seek to understand the complex dynamics of the country’s economic landscape, the All-India Debt and Investment Survey (AIDIS) has emerged as a crucial tool for analyzing wealth distribution among various socioeconomic groups. By providing detailed data on asset accumulation patterns, liability levels, and net asset positions across different wealth brackets, AIDIS offers valuable insights into the shifting tides of India’s economic reality.
Recent AIDIS data paints a picture of progres, the survey reveals a trend towards more equitable wealth distribution, with the middle 40% and bottom 50% of households experiencing an increase in their share of net assets from 2012 to 2018. Conversely, the wealthiest top 10% saw a decline in their share during the same period. This shift suggests that economic policies aimed at reducing wealth inequality may be bearing fruit, but it is important to recognize that the top 10% still hold a significant portion of total net assets, indicating that there is still much work to be done in achieving true wealth equality.
The positive growth in net assets among all deciles, except the wealthiest, is another encouraging sign. The substantial asset growth in the lowest 10-20% decile, in particular, points to the potential for economically disadvantaged households to build financial stability and accumulate wealth. However, the contraction in net asset values for the wealthiest decile highlights the challenges faced by this group, which could be attributed to various factors such as market fluctuations, changes in economic policy, or increased taxation. While this trend may contribute to reducing overall wealth inequality, it is crucial to strike a balance and ensure that economic policies do not stifle growth and innovation among the wealthiest households, as they often serve as drivers of economic development and job creation.
To gain a comprehensive understanding of India’s wealth distribution, it is essential to consider both long-term and short-term trends. The World Inequality Database (WID), which incorporates historical data from AIDIS, reveals a pronounced rise in wealth inequality over the last 40 years, contrasting with the recent findings of decreasing wealth disparities from 2014 to 2019. This discrepancy underscores the need for ongoing analysis and data collection to capture the full picture of wealth distribution in India. Moreover, WID’s methodology of extrapolating household agricultural land holdings has limitations, particularly in urban areas where agricultural land is less relevant, highlighting the importance of utilizing multiple data sources to obtain a more accurate and current snapshot of wealth distribution.
One of the significant challenges in analyzing wealth distribution is the potential underreporting of wealth at the upper end, which can lead to an underestimation of wealth inequality. Supplementing AIDIS data with other sources, such as wealthy individual listings and financial disclosures, is crucial to address these limitations and obtain a more comprehensive understanding of wealth concentration within the top percentiles.
In addition to wealth distribution, consumption patterns provide valuable insights into the economic well-being of different income groups. The National Sample Survey (NSS) data from 2011 to 2017 reveals a contraction in consumption disparity, with the top 5% and top 10% of earners experiencing a decrease in their consumption expenditure share, while the bottom 50% saw an increase. This shift indicates a more equitable distribution of consumption and suggests that economic policies and social programs may be improving the economic well-being of lower-income groups.
The Consumer Pyramids Household Survey (CPHS) from 2014 to 2019 further corroborates this trend, showing higher consumption expenditure growth rates among lower-income households. Despite overall economic challenges, lower-income groups increased their consumption share, reflecting improved economic inclusivity. This data is encouraging, as it indicates that the benefits of economic growth are reaching a broader segment of the population.
The COVID-19 pandemic has had a profound impact on consumption inequality, with lower-income households managing to maintain or even increase their consumption share, while higher-income groups saw a decrease. Government support measures and changes in spending patterns have contributed to this trend, leading to a further narrowing of consumption inequality and highlighting the importance of social safety nets in times of economic crisis.
However, it is crucial to recognize that the observed reduction in consumption inequality does not fully reflect India’s broader economic inequality and poverty trends. Despite improvements in consumption equity, income inequality and poverty remain significant challenges that require the attention of policymakers. Addressing underlying economic disparities is essential for ensuring sustainable growth and poverty reduction.
To tackle these challenges, policymakers must implement a multipronged approach that focuses on promoting financial inclusion, improving access to education and healthcare, supporting small businesses, and implementing progressive taxation and social welfare programs. By fostering an environment that enables the accumulation of wealth and the equitable distribution of economic gains, India can work towards building a more inclusive and prosperous society.
Furthermore, it is essential to recognize the limitations of existing data and the need for ongoing research and analysis. The underreporting of wealth at the upper end and the methodological challenges associated with estimating wealth distribution underscore the importance of utilizing multiple data sources and refining survey techniques to capture a more accurate picture of India’s economic landscape.
The recent trends in wealth distribution and consumption patterns in India, as revealed by AIDIS and other surveys, offer a glimmer of hope in the quest for greater economic equality. While progress has been made in reducing wealth disparities and improving consumption equity, much work remains to be done in addressing the deep-rooted issues of income inequality and poverty. By implementing targeted policies, strengthening social safety nets, and fostering an environment that promotes inclusive growth, India can work towards building a more equitable and prosperous future for all its citizens. As the country navigates the challenges posed by the COVID-19 pandemic and the ever-evolving global economic landscape, it is crucial that policymakers, economists, and society as a whole remain committed to the goal of creating a more just and inclusive economic order.
By Prof Dr AV Srinivasan