Wealth gap rising
Many column inches have been devoted to the question of income inequality in India. It’s no secret that since the dawn of liberalisation in this country, the rate of income inequality has risen at a faster clip. According to the latest data on wealth from Credit Suisse, a Zurich-based financial services company, the richest 1 percent of Indians now own 58.4 percent of the nation's wealth—a jump of one percent since its last report from the year before.
What should concern policymakers in this country is the rate at which this has grown. In the last two years, the share of the top 1 percent increased at a phenomenal rate from 49 percent in 2013 to 58.14 percent in 2016. Delving further, the richest 10 percent have raised their share from 68.8 percent in 2010 to 80.7 percent in 2016.
Meanwhile, the bottom half own a mere 2.1 percent. Irrespective of the government in power, India’s richest seem to have no problem increasing their rising share of the wealth pie. The share owned by the rich has steadily increased since the turn of the century. Data shows that India’s richest 1 percent held just 36.8 percent of the country’s wealth in 2000, while the share of the top 10 percent was 65.9 percent. “In the last 16 years, they have increased their share from a bit more than a third to almost three-fifths of total wealth,” says a recent report in Mint.
By any standards, such numbers are unacceptable in a country where millions live hand to mouth. Are the rich getting richer because of the Narendra Modi government? The answer is no. From 2010 to 2014, the share of the top 1 percent rose from 40.3 percent to 49 percent. Irrespective of the government in office, the rich are growing richer, while the poor scramble for the leftovers. The unfortunate rise in income inequality increased during both the first National Democratic Alliance government from 2000-04 and consecutive United Progressive Alliance-led governments.
The trend has not bucked under the current ruling dispensation. In its report last year, the authors at Credit Suisse stated that India’s wealth increased by $2.284 trillion between 2000 and 2015, of which, the richest 1 percent has monopolised 61 percent of the wealth, while the top 10 percent bagged 81 percent. Meanwhile, the other 90 percent has been left to scramble for the leftovers. India’s perceived place as the world’s fastest growing economy means nothing if the country continues to witness such stark income inequality.
The International Monetary Fund, probably the repository of neo-liberal economic thought, has itself admitted that a widening income gap between the wealthy and poor is bad for growth. In its report, economists in the IMF have said that if governments want to increase the pace of growth, they should concentrate on aiding the poorest of 20 percent of citizens. Evidently, most of the gains from years of high economic growth have not trickled down to them. This sentiment isn't restricted to India and the developing world. The rise of Donald Trump and Brexit are expressions of the discontentment felt by many that they have not received the fruits of economic growth.
In an astonishing report last year, Oxfam (a global advocacy group) had found that just 62 individuals had the same wealth as 3.5 billion people—the bottom half of humanity—in 2015. In its report titled, 'An Economy For The 1 percent', Oxfam has found that the wealth of the richest 62 people has risen 44 percent in five years, which amounts to an increase of $542 billion to $1.76 trillion. To put these figures into perspective, $1.76 trillion amounts to 86 percent of India’s Gross Domestic Product ($2.05 trillion) in 2014. Meanwhile, the wealth of the bottom half fell by a little over 1 trillion dollars in the same period.
In its report, Oxfam notes, “Had inequality within countries not grown during 1990 and 2010, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.” How does India compare with other countries? The top 1 percent in China own 43.8 percent, and in Brazil, it is 47.9 percent. Russia, however, tops the list—the top 1 percent own 74.5 percent of the nation’s wealth.
Inequality in this country exists in many forms, besides income. Vast sections of the populace also suffer from inequality of opportunity. Class, caste, religion, literacy, and health are all factors in denying people the opportunity to raise their share of the wealth pie. The reservation system in its current form has done little to correct these imbalances. In fact, its failure has inspired reactions from some to scrap reservations.
Of course, the solution is not to get rid of it, but to work out why the system has failed so many. It is not as if our political class is ignorant of these realities. In 2013, a Parliamentary standing committee on finance published its report titled 'Current Economic Situation and Policy Options'. In the report, the committee criticised India’s growth model, claiming that far more people were being excluded and that the gains were accruing only to a select few.
The Credit Suisse report only confirms this fear. “In the context of the economic growth and per capita income, the Committee is concerned to note the emerging ever-widening gap between the wealthy and poor and the increasingly disproportionate distribution of assets in our country. It is being observed that the purchasing power is getting concentrated in the hands of a few, whereas the majority is stuck below the expenditure curve,” the Parliamentary committee said. Is anybody listening?