The observations made by French economist Thomas Piketty in his study, Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj, has re-stirred a fairly old debate on ‘development’ vs ‘equality’. It is unfortunate that in a binary, both the terms have to be pitted against each other when in ideal terms, they should complement each other. Piketty's findings show that the top 1 per cent of Indians own over 40 per cent of the nation’s wealth, which is worse than what was witnessed in the British India (as suggested by Piketty). Rising inequality has also captured the imagination of the opposition—mainly Congress—nudging it to float the idea of wealth distribution in the wake of elections. Alleged to be a ‘friend’ of influential capitalist forces, the BJP is framed as a party forming policies with capitalistic bias, hence, increasing inequality.
Irrespective of political narratives, it cannot be denounced that glaring wealth and income inequality persists in India as a lived reality. The disparity is particularly stark when comparing the economic conditions of the top 1 per cent with the bottom 50 per cent of the population, who own a meagre 6.4 per cent of total wealth and earn only 15 per cent of total income. Such figures paint a grim picture of a deeply divided society where the majority struggles under the weight of economic disparity. The exacerbation of these disparities is mostly traced back to economic reforms initiated in the late 1980s and the liberalisation policies of the early 1990s. While these reforms spurred remarkable GDP growth, lifting millions out of poverty, they concurrently catalysed a steep increase in income and wealth inequality. This indicates that while the economic pie has indeed grown, its distribution remains lopsided, benefiting a small elite at the expense of the broader populace.
Piketty and other experts suggest that India's taxation system, which leans heavily on income taxes rather than wealth taxes, plays a role in perpetuating this inequality. They argue for the introduction of a wealth tax aimed at redressing this imbalance. However, the proposal of wealth redistribution via taxation is met with scepticism from various quarters, who argue that such measures could stifle economic growth and investment. Critics of the wealth tax proposal emphasise, and rightly so, that the economic liberalisation has not only increased wealth for the top echelons but has also, albeit unevenly, raised the living standards across different strata of society. They suggest that the focus should not be on penalising wealth but on creating more avenues for upward mobility through enhanced access to education, healthcare, and economic opportunities for the underprivileged.
Indeed, while the data from the World Inequality Lab suggests an increase in real income for the bottom 50 per cent, the fact remains that their share of the national income pie has shrunk. This necessitates policies that not only focus on economic growth but also on ensuring that this growth is inclusive and equitable. The narrative that markets alone will correct these disparities is overly optimistic. Markets do not operate in vacuums and are often skewed by legacies of access and capital that are disproportionately available to the wealthy. Therefore, interventions that remove barriers to education and healthcare, and that foster job creation and fair wages, are imperative. Moreover, the argument for economic freedom for the poor needs to be strengthened by robust policy frameworks that protect the rights of the most vulnerable, ensuring that they have both the means and the opportunity to improve their socioeconomic standings.
While India’s economic growth story is one of remarkable success, it also tells a parallel tale of deepening inequality. Addressing this issue requires a balanced approach that involves thoughtful redistribution mechanisms, coupled with aggressive policy interventions aimed at enhancing human capital and economic opportunities for all. This dual approach will ensure that the fruits of India’s economic growth are not just bountiful but are also shared equitably among its billion-plus populace.