India's top 1% income and wealth shares (22.6% and 40.1%) are at their highest historical levels in 2022-'23 and the country's top 1% income share is among the very highest in the world, higher than even South Africa, Brazil and US, according to World Inequality Database by the World Inequality Lab.
Between 2014-15 and 2022-23, the rise of top-end inequality in India has been particularly pronounced in terms of wealth concentration and by 2022-23 the income and wealth share are at their highest historical levels, the report said.
The authors of the report, Income and Wealth, Inequality in India, 1922-2023: The Rise of The Billionaire Raj, are Nitin Kumar Bharti, New York University, Abu Dhabi, Lucas Chancel, Sciences Po, Harvard Kennedy School, Thomas Piketty, EHESS, Paris School of Economics, and Anmol Somanchi, Paris School of Economics.
"... After briefly rising during the 1950s, top 1% shares consistently fell over the next two decades and reached 6.1% by 1982. This was likely the consequence of the broadly socialist policy agenda pursued by the Indian government till the 1980s. This included nationalization of various important sectors (rail, air, banking, oil), strong regulation of markets, and high tax progressivity – top marginal tax rates were as high as 97.5% in 1973. This policy mix is likely to have reduced rent seeking-behaviour at the top of the distribution."
Since the early-1980s, when the Indian government began initiating a broad range of economic reforms leading up to the liberalization in 1991, the decline in top 1% shares halted. From the early-1990s onward, top 1% shares have consistently increased over the next 30 years to reach an all-time high of 22.6% in 2022, the report said.
In the wake of the liberalization reforms of 1991, top 10% shares started galloping and have reached astonishingly high levels by 2022, closing in on 60%. In other words, in the 4 decades between 1982 and 2022, the top 10% national income share has almost doubled.
There are likely numerous factors related to India’s growth and development process that are keeping bottom 50% and middle 40% shares depressed. The lack of quality broad-based education, focused on the masses and not just the elites, is likely to be an important one.
"When we zoom-in within the top 1%, we see largely similar trends for the top 0.1%, top 0.01% and top 0.001% What is interesting are the magnitudes. For instance, in 2022, just the top 0.1% earned nearly 10% of the national income. The corresponding figures were 4.3% and 2.1% for the top 0.01% and top 0.001% respectively."
"What explains the sharp rise in top 1% income shares starting the early 1990s? The public and private sector wage growth could have played a part till the late 1990s. There are good reasons to believe capital incomes likely play a role in the subsequent years. First, the capital share in the registered manufacturing sector has dramatically increased since the early 1990s Second, concentration of national wealth has also considerably grown during the last 3 decades. Third, the net wealth of the richest Indians (USD MER billionaires) as a share of India’s national income started booming since the early 2000s."
Economic inequality markedly increased during the 1990s in several forms – strong divergence across states, rising urban-rural inequality, and growing disparities within urban areas. Banerjee and Piketty (2005) were the first to mobilize annual tax tables provided by the income tax authorities in combination with national accounts to shed light on the dynamics of top incomes over the long run (1922-2000), the study revealed.