Santosh Kumar Mohapatra
Economic inequality (income and wealth inequality) in the world, including in India, has reached a tipping point. The Indian government may be tom-tomming high growth, but its inequalities are widening. India is probably the second most unequal country in the world. Though India’s growth has accelerated and wealth has been created faster since the country adopted neoliberal policies, major chunk of wealth has been cornered by the rich, leading to rampant inequality and impoverishment of masses. The chasm between rich and poor is getting widened with passing of each day. This is corroborated by international reports and indices.
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The ninth edition of the Global Wealth Report, published in 2018 by the Credit Suisse Research Institute, reveals that the richest 10 per cent of Indians own 77.4 per cent of the country’s wealth. The bottom 60 per cent, the majority of the population, own 4.7 per cent only. The richest 1 per cent own 51.5 per cent. In the last few years, the share of the top 1 per cent has increased at a cracking pace, from 49 per cent in 2014 to 53 per cent in 2015 and further to 58.4 per cent in 2016.
By using tax data, Thomas Piketty and Lucas Chancel also had found that income inequality in India today is higher than any time since 1922 when income tax was first introduced
The report also refers to the Gini coefficient or Gini Index — a measure of income equality on a scale of 0-100 per cent. India’s inequality level on the index has gone up from 81.3 per cent in 2013 to 85.4 per cent in 2018. The effects of inequality are pervasive in that India loses a quarter of its human development value to it, far worse than the global average decrease of 20 per cent.
In 2002, there were five Indians on the annual Forbes list of the world’s billionaires. In 2018, the number has risen to 119. When it comes to billionaire wealth as a proportion of national output, India perhaps ranks only behind Russia.
An Oxfam report earlier this year had said 73 per cent of the wealth generated in 2017 went to the richest 1 per cent, while 670 million Indians who comprise the poorest half of the population saw 1 per cent increase in their wealth. By using tax data, Thomas Piketty and Lucas Chancel also had found that income inequality in India today is higher than any time since 1922 when income tax was first introduced. The top 1 per cent of earners captured 22 per cent while the top 10 per cent of the population accounted for 56 per cent of national income in 2014.
Similarly, according to government data, the number of taxpayers showing income above Rs 1 crore has registered sharp increase of 68 per cent from 2014-15 to 2017-18. What is disconcerting is that income tax collections have not gone up proportionately. According Barclays Harun India’s Rich List 2018, released in October, the number of Indians with net worth Rs1,000 crore has increased by 34 per cent in just one year, making India “the fastest growing rich list in the world”.
Economic inequality is driven largely by unequal ownership of capital, which can be either private- or public-owned. The report of Thomas Piketty and Lucas Chance gives credence to the theory that opening of the economy has disproportionately benefited those at the top of the income pyramid. Oxfam has calculated that about two-third of that wealth is the product of inheritance, monopoly and cronyism. In an interview with ‘Mint’, journalist and author James Crabtree talks about the rapid rise of India’s ultra-rich and the crony capitalism and inequality that have accompanied such concentration of wealth.
Inequality is more insidious than poverty and creates more discontentment. Whereas poverty involves absolute deprivation in terms of economic resources such as income, wealth and access to public services, economic inequality involves relative deprivation, that is, where one stands in relation to others in one’s society. Economic inequality is morally bad, economically catastrophic, socially cacophonous, which is risking a new explosion in instability, social upheaval, rising frustration, corruption and poverty.
Despite rising inequality, the government of India has made no attempt to reduce inequality. In the “Reducing Inequality Index” of Oxfam and Development Finance International, India fared poorly, ranking 147 out of 157 countries, in terms of its commitment to reducing inequality. It means India ranks among the last 15 of 157 countries on efforts to reduce disparity. In terms of its ranking across specific pillars this year, India was placed 151st on the index for public spending on healthcare, education and social protection, 141st on labour rights and wages, and 50th on taxation policies.
Hence, in view of above, bridging inequality gaps has become highly imperative. It is true that inequality has always existed, no matter what the design of the society is. But it needs to be reduced to the extent possible. It does not mean pampering the rich or making all equal, but preventing those becoming rich by unfair means and impelling them to pay more for the development of society and the nation where they have grown and whose resources they have used.
Tax progressivity, which is a powerful policy tool to contain the rise in inequality, was reduced progressively in most of countries. In India, top tax rates, which were very high in the 1970s (up to 97.75 per cent), decreased to 30 per cent in the 1980s and after in line with trends seen in America. Wage inequality dispersal also increased in many sectors, as privatisation removed government-set pay scales, which were less unequal.
A redistribution of resources from the privileged to the deprived should be given top priority. Privatisation of essential services should be reversed. Government should impose higher capital gain tax, reintroduce wealth and inheritance tax and adopt progressive income and corporate tax. Efforts should be made to create a more equal opportunity by increasing public expenditure on health, education and housing. Stringent measures should be taken against tax evaders.
The writer is an Odisha-based economist. e-Mail: skmohapatra67@gmail.com.
