India remains a low-middle-income country, and the bulk of the population ranks low compared to most countries in most indicators of conditions of life. Yet the country ranks third in the number of dollar billionaires, just behind the United States and China, which have significantly higher per capita incomes.
The K-shaped recovery the economy experienced after the pandemic has many manifestations: the growing share of profits in national income, and within that, the concentration of corporate profits in the largest companies; and the change in patterns of aggregate demand away from mass consumption goods to goods and services consumed by the affluent. But one critical piece of evidence is surely the gaping wealth inequality in the country, which has already made it one of the most unequal countries in the world.
According to the Hurun Global Billionaires list, the number of US dollar billionaires in India increased to 187 in 2023, adding 16 more billionaires since the previous year. Their total estimated wealth increased as well. This was quite unlike the global pattern: across the world in 2023, the number of dollar billionaires is estimated to have fallen by 8 per cent while their total wealth declined by 10 per cent. As a result, the share of Indians on the global billionaire list has nearly doubled over the past five years, from 4.8 per cent to 8 per cent.
This is not the result of increased aggregate income growth; rather, it reflects extreme increases in inequality. Oxfam estimated that the fortunes of billionaires increased tenfold over the decade preceding the Covid-19 pandemic, such that by 2019, the top 10 per cent of the population held 77 per cent of national wealth, and the top 1 per cent grabbed nearly three-quarters of the increased wealth generated in 2017.
The pandemic and its aftermath made matters significantly worse in terms of wealth inequality. In the decade from 2012 to 2021, the top 10 per cent of the population appropriated 40 per cent of the wealth created in India, with the bottom half of the population getting only 3 per cent. In early 2023, the richest 21 individuals in India held more wealth than 700 million Indians.
Yet, while the richest have never had it so good in India, the mass of people are experiencing dramatically worsening conditions. The bulk of the people in the country, whose livelihoods depend on self-employment or low-paid work in small and micro enterprises, have experienced a series of major blows since late 2016: the disastrous demonetisation in November 2016; the problematic, abrupt, and poorly managed imposition of the Goods and Services Tax in July 2017; the decline in per capita public spending on essential public services like nutrition, health, and education, as well as on the rural employment programme; and then, of course, the Covid-19 pandemic that was characterised by a brutally imposed lockdown and completely inadequate social protection for the most vulnerable populations.
All the evidence points to many disastrous outcomes for ordinary people. There has been a significant increase in absolute hunger, to the point that the central government even admitted to the Supreme Court that nearly 70 per cent of the deaths of children under five years were due to malnutrition. Public health services remain woefully inadequate in most states, and the much-vaunted public insurance-based programme has largely failed in even the most basic objectives. Major programmes like the rural employment guarantee are starved of funds. The years of learning losses resulting from pandemic-related closures are affecting hundreds of millions of children and youth, but education spending stagnates.
None of these terrible outcomes were inevitable or even necessary. They are the outcome of policy choices that have enabled massive enrichment and aggrandization of a tiny minority of rich individuals and corporations, whose wealth increases are mistakenly sought to be celebrated as a sign of India’s aggregate advancement.
It’s time to stop and reverse this horrifying process of extreme wealth inequality. One obvious instrument for this is the imposition of wealth taxes on the extremely rich. This is not a novel concept, and it is one that is being much more widely applied in many countries, especially since the pandemic. Some governments in Europe are imposing “solidarity taxes” on high-net-worth individuals and large corporations, while others (most recently Colombia) are raising taxes on the wealthy wherever they choose to hold their wealth.
In the Indian case, in 2020, the economist S Subramanian estimated that a tax of just 4 per cent on the estimated wealth of the top 953 richest families (based on the Hurun India wealth list for 2019) would yield the equivalent of 1 per cent of GDP in additional taxes—more than three times the central government’s health expenditure, for example. Yet the very rich will barely notice this amount of taxation since this is equivalent to around the amount of fluctuations in their total wealth that come about annually through changing asset prices, etc. Since wealth inequality has increased massively since then, it is likely that such a tax would in fact yield much more in tax revenues if properly applied.
Earlier attempts at wealth taxes in India were criticised because they were seen as too complicated to administer and led to low tax collection relative to the costs of collection. It is interesting to note that a much more complicated tax—the property tax applied to real estate—is still seen as perfectly feasible. But also, one problem with the previous attempts in India could be that the threshold for wealth tax collection was placed too low, affecting many who were not so extremely wealthy and generating very high implementation costs. If the wealth threshold is placed very high, say confined to the 177-dollar billionaires, and covers the relatively easy known sources of wealth such as financial and property assets that must be registered, it would be relatively easy to collect and not impinge on 99.99 per cent of the population, even while it could yield significant tax revenues.
The main constraint to this is not a broader political acceptance but the lobbying power and deep linkages of the extremely wealthy with the government. In the face of this, taxing the extremely rich can only come about through widespread social mobilisation, raising a demand so loud and strong that it will be impossible for the government to deny.
(The writer is a professor of economics at the University of Massachusetts Amherst, US, and part of the UN Secretary General’s High-Level Advisory Board on Effective Multilateralism)
(This is the seventh of a series of articles on inequality in India in Deccan Herald, curated in collaboration with the Centre for Financial Accountability, New Delhi)
This article was originally published in Deccan Herald and can be read here.
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