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Inequality:India’s Wealth Divide



  Apr 02, 2024

Inequality:India’s Wealth Divide



1. What does the recent paper by the World Inequality Lab reveal about India’s wealth and income distribution?

The paper highlights a stark wealth divide in India, with the top 1% holding 22.6% of the country’s income and 40% of its wealth as of FY2023. This disparity places India among the countries with the highest levels of income and wealth inequality worldwide.

2. How has the wealth divide in India changed over time?

Post-Independence, inequality decreased until the early 1980s but began to rise afterward. The early 2000s saw a significant surge in inequality. The top 1% of Indians now earn 23 times more than the average citizen, emphasizing the widening gap.

3. What factors have contributed to the increase in wealth for the top percentile?

The growth in private enterprise post-liberalization and the expansion of capital markets have been significant contributors. Additionally, wage growth in both the public and private sectors up until the late ’90s and capital incomes in subsequent years have played a role.

4. What are the implications of a K-shaped growth pattern in India?

This pattern indicates that the rich are getting richer at a much faster pace, consuming more premium goods, while the poor’s economic situation improves at a much slower rate or worsens, exacerbating the wealth divide.

5. How does the distribution of employment across sectors affect inequality?

With a large portion of the workforce in agriculture and services and fewer in manufacturing, there’s a pressing challenge in moving towards more productive and better-paying employment, which contributes to the wealth and income gap.

6. What does the paper suggest to combat inequality?

It proposes a restructuring of the tax code to include income and wealth, broad-basing public investments in health, education, and nutrition, and implementing a “super tax” on the wealthiest families to create fiscal space for such investments.

7. Are there concerns about the accuracy of the report’s findings?

Yes, some experts question the report’s accuracy due to the lack of comprehensive data and official income surveys in India. The estimates are considered indicative of trends rather than precise measurements.


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