Why is it in the news?

• A working paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj” by the World Inequality Lab (WIL) reveals a concerning trend.
• According to it, the inequality in India declined post-independence until the early 1980s, but has since been on a rising trajectory, particularly soaring since the early 2000s.

 Key Takeaways

 Growth in Average Incomes:

• India’s average income grew at a rate of 2.6% per year between 1960 and 2022, with a notable acceleration to 3.6% per year between 1990 and 2022.
• The periods 2005-2010 and 2010-2015 witnessed the fastest growth at 4.3% and 4.9% per year respectively.

Emergence of Very High Net Worth Individuals:

• Between 1990 and 2022, there was a rise in national wealth and the emergence of very high net worth individuals, with the number increasing from 1 to 52 to 162 in 1991, 2011, and 2022 respectively.

 Rise in Percentage of Income Tax Payers:

• The share of the adult population filing income tax returns grew significantly, from under 1% until the 1990s to around 9% in the years 2017-2020.

Extreme Levels of Inequality in India:

• In 2022-23, 22.6% of India’s national income was captured by the top 1%, the highest level recorded since 1922, with the top 1% wealth share at 40.1%.
• India’s current wealth inequality surpasses even the levels during the inter-war colonial period.

Extreme Wealth Concentration at the Very Top:

• The wealth accumulation process in India demonstrates extreme concentration at the very top, with the top 1% wealth share increasing threefold from 1961 to 2023.

International Comparison of Income and Wealth Inequality:

• India’s income share of the top 1% is among the highest globally, with the top 1% income share standing at 22.6%.
• However, India’s wealth inequality ranks in the middle compared to countries like Brazil and South Africa.

Poor Data Quality Leading to Underestimation of Inequality:

• The quality of economic data in India is noted to be poor, likely leading to an underestimation of actual inequality levels.

Policy Solutions:

• The paper suggests implementing a super tax on Indian billionaires and multimillionaires, along with restructuring the tax schedule to include both income and wealth, to finance investments in education, health, and public infrastructure as effective measures to address rising inequalities.