MUMBAI – India’s inequality gap has widened sharply during Prime Minister Narendra Modi’s decade in power, with the richest 1 per cent of the population now owning 40 per cent of the country’s wealth, a new study has found.
The top 1 per cent, or about 9.2 million people, earn 22.6 per cent of total income – the highest share since data going back to the 1920s – and hold more than 40 per cent of the wealth in the world’s fifth-largest economy, according to a study by economists, including renowned inequality expert Thomas Piketty.
The growth comes mainly at the expense of the middle class, they said. “The ‘Billionaire Raj’ headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces,” the authors wrote.
They warned that further divergence in inequality may fuel social unrest in the country.
The inequality gap widened after the economy’s opening up in the early 1990s, but “between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration”, the researchers said.
The period coincides with Mr Modi’s accession to power and the growth of India’s billionaire class, led by Mr Mukesh Ambani and Mr Gautam Adani. India’s opposition parties have long accused the Modi government of “crony capitalism” and favouring certain businesses in government contracts.
The researchers said the Modi years have also seen a steady decrease in overall income growth as savings and investment rates fell for over a decade until 2017 to 2018, and exports declined.
Based on figures from the World Inequality Database, India’s income inequality is among the very highest in the world, behind only Peru, Yemen and a few other small countries, the authors said.
India ranked in the middle of the pack in terms of wealth share, with Brazil and South Africa topping the list.
“In the post-liberalisation years of high growth and rising inequality, the middle class (middle 40 per cent) appears to have lost out significantly,” the study said.
Between 1961 and 1981, the middle class and richest 10 per cent had nearly identical share in wealth. But over the next three decades, the share of the top 10 per cent pulled ahead, while the middle 40 per cent consistently fell to reach 31 per cent by 2012 and 29 per cent by 2023.
The inequality gap could be starker than captured in the study as the quality of available data remains “notably poor” in India, and has seen a further deterioration in recent years, the researchers said. “We call for improved access to official data and greater transparency to enhance the study of inequality and enable evidence-based public debates.”
The inequality gap will likely not close on its own without policy intervention, said the researchers, who suggested imposing a “super tax on Indian billionaires and multimillionaires, along with restructuring the tax schedule to include both income and wealth”. This could then be used to invest in education, health and other public infrastructure. BLOOMBERG
