India’s income and wealth inequality has touched historic peaks, making it one of the world’s most unequal countries, according to the World Inequality Lab’s new working paper. Authored by renowned economists including Nobel laureate Thomas Piketty, the report estimates the richest citizens, or the top 1 percent, own 40.1 percent of the country’s wealth and 22.6 percent of the total income. Such wealth concentration is at its highest in six decades, while the income share exceeds those in Brazil and the US.
The latest paper is an extension of Piketty’s 2014 study, which too pointed out India’s income-wealth gap was worse than during the British Raj and how India’s 1991 liberalisation helped increase the number of billionaires, which Forbes says grew from just one in 1991 to 162 in 2022. The paper also cites numerous other studies, all of which confirm the widening gap between the rich and the rural poor, depressing growth at the middle and the bottom 40-50 percent.
The stark findings could become a political issue in the election season. But is India really one of the world’s most unequal countries? Not everyone agrees. Over the past decade, several authors have objected to Piketty’s inequality numbers—not just for India, but also for countries such as the US. They dismiss his findings, blaming opaque methodological choices and cherry-picking of sources like the Forbes and Hurun rich lists to overstate inequality.
Instead, they favour other reliable indicators of inequality like the Gini coefficient—a standard measure that ranges from 0, indicating perfect equality, to 1, indicating perfect inequality. According to SBI Research, India’s Gini coefficient fell from 0.472 in 2014-15 to 0.402 in 2022-23, indicating a significant reduction in inequality.
One fundamental question remains: whether India should continue to focus on growth to reduce poverty, even if it increases income and wealth inequality. If the bottom 90 percent saw significantly higher growth than the top 10 percent during the 1960s-1980s period, growth for the top decile shot up over the rest of the population’s post liberalisation.
During 2014-2022, the middle 40 percent seem to have grown slower than the bottom 50 percent, while the top 10 percent’s growth appears unstoppable, explaining widening disparities. While the relationship between growth, poverty and inequality is complex, the government must ensure India does not end up as a plutocracy.