India’s Struggle with Inequality: A Comparative Analysis
India has experienced significant changes in its social and economic landscape since gaining independence from British colonial rule in 1947. The debate over whether present-day India is more unequal than it was under British rule continues to spark discussions and scrutiny. This article aims to delve into the various factors contributing to inequality in contemporary India and compare them to the disparities that existed during British colonialism. By analyzing historical trends, economic data, and social indicators, we seek to illuminate the intricate dynamics of inequality in India and evaluate the progress towards achieving greater equity and social justice post-independence.
The Rise of Economic Disparities under Modi’s Regime
In 2014, Narendra Modi ascended to power in India, with promises of economic reforms and anti-corruption measures to uplift the middle class from the grips of elites and economic challenges. However, a decade later, as Modi vies for a rare third term, economic researchers caution that the gap between the rich and poor in India has widened significantly. In fact, India’s income and wealth inequality now rank among the highest globally, surpassing countries like Brazil, South Africa, and the United States, as per a recent study by the World Inequality Lab (WIL).
The study, titled “The Rise of the Billionaire Raj,” reveals that income inequality in present-day India exceeds the levels observed during British colonial rule. The analysis, co-authored by experts from prestigious institutions, sheds light on the escalating wealth gap in India. This disparity has become a contentious political issue, with the opposition Congress Party pledging to conduct a caste census to unveil the historical injustices faced by marginalized communities under Modi’s leadership.
Examining Income and Wealth Disparities in India
Historical data indicates that during the 1930s, under British rule, the top 1% of the population controlled over 20% of the national income, a figure that gradually declined post-independence. However, with economic liberalization in the 1990s, income inequality surged, with the top 1% now holding more than 22.6% of India’s income. This rapid economic growth, with GDP expanding over 7% annually, has exacerbated income inequality, contrary to the belief that free-market mechanisms would address such disparities.
Wealth distribution in India paints an even bleaker picture, with the top 1% commanding over 40% of the national wealth today, a stark increase from less than 15% in 1961. The Modi government’s tenure has witnessed a surge in wealth accumulation among the elite, leaving a substantial portion of the population grappling with financial hardships. The mounting inequality has reignited concerns about economic stagnation, unemployment, and inadequate public services, echoing the issues that dominated pre-2014 discussions.
As the 2024 elections unfold, the discourse has shifted towards religious polarization, diverting attention from the economic promises made in 2014. Modi’s narrative now revolves around divisive rhetoric, straying from the core economic challenges faced by the populace. The concentration of income and wealth in the hands of a few has marginalized the remaining 90% of the population, particularly impacting the middle 40% whose share of national income has dwindled over the years.
India’s battle with inequality persists, with stark comparisons to its colonial past. The widening economic disparities under Modi’s leadership underscore the need for comprehensive reforms to address the deep-rooted inequities and pave the way for a more inclusive and equitable society.The Deteriorating Wealth Gap in India
A significant proportion of the adult population in India is facing a concerning trend of declining income levels, as highlighted by Bharti. The national income share of the bottom 40 percent of Indians has decreased from over 45 percent in the early 1980s to approximately 27 percent in 2022. Similarly, for the poorest half of the population, the share of national income has dropped from over 23 percent to 15 percent during this period.
The prospects for upward mobility among the Indian middle class have stagnated, indicating a lack of improvement. According to Rishabh Kumar, an economics professor at the University of Massachusetts Boston, the privatization of the Indian economy, combined with globalization, has favored individuals with higher levels of education. However, access to quality education has historically been skewed towards the affluent and higher-caste communities in India.
Kumar emphasizes that the main avenue for transformation for individuals in the middle class is to secure entry into elite institutions that can propel them into white-collar jobs. Unfortunately, this opportunity is only available to a select few. For instance, the wealthiest 10,000 Indians have an average income of 480 million rupees ($5.7 million) per year, which is over 2,000 times the average income of Indians.
The national average income of about 200,000 rupees ($2,400) per year is deceptive, as Kumar points out that only a small fraction of the population is close to reaching the top 10 percent income bracket. This disparity underscores the stark wealth inequality in India, with the rich benefiting more than others.
The divide between the extremely wealthy and the desperately poor in India is glaringly evident. The extravagant pre-wedding celebrations of Anant Ambani, son of India’s richest man Mukesh Ambani, costing $120 million, showcased the lavish lifestyle of the top 1 percent. While billionaires in India have seen their online wealth grow significantly, millions of Indians continue to suffer from hunger and malnutrition.
The concentration of wealth at the top echelons of society is mirrored in various aspects of Indian life, from air travel to digital payments. While a small percentage of Indians dominate these sectors, a large portion of the population struggles to meet basic needs. The widening income gap has raised concerns about the government’s failure to address inequality and support the most vulnerable segments of society.
The root causes of worsening inequality in India can be attributed to structural factors stemming from the country’s economic liberalization in 1991. The shift towards a market-driven economy has left behind a significant portion of the workforce engaged in agriculture, contributing to the widening wealth gap. Experts emphasize the need for policy interventions to address these systemic issues and ensure a more equitable distribution of resources.India’s Rising Economic Inequality: Causes and Solutions
Over the past 25 years, India has experienced economic growth that has disproportionately benefited the top 10 percent of the population, leading to increased inequality. This trend has been exacerbated by the country’s focus on tertiary education for elites, neglecting the needs of the majority of the workforce. According to Bharti, this has hindered the transition to more productive and higher-paying jobs for many.
Several factors have contributed to the widening wealth gap in India. Policies such as demonetisation, the introduction of GST, and the COVID-19 lockdown have disproportionately affected the informal sector, leading to loss of livelihoods and employment opportunities for millions of workers. The sudden discontinuation of high-value currency notes in 2016 caused a crisis that impacted the savings of many Indians and the liquidity of small-scale industries.
Furthermore, the implementation of GST in 2017 and the nationwide lockdown in response to the pandemic further strained the informal sector, resulting in job losses and economic hardships for migrant workers and small businesses. The disproportionate impact of these policy decisions on the most vulnerable segments of the population has deepened economic inequality in the country.
The World Inequality Lab has highlighted the regressive nature of India’s income tax system, where the wealthiest individuals pay a lower proportion of their wealth in taxes compared to others. This contributes to the concentration of wealth among a few individuals, further widening the wealth gap in the country.
To address these challenges, the authors of the World Inequality Lab report have proposed the implementation of a fair tax system that includes a 2 percent tax on billionaires and multimillionaires. They also recommend restructuring the tax schedule to include both income and wealth taxes as tools to combat inequality effectively.
Education has been identified as a key factor in reducing inequality in India. Bharti emphasizes the need for aligning the country’s education system with the demands of the job market to produce graduates who are better equipped for employment opportunities. Without such reforms, India risks continuing to produce unemployable graduates, further exacerbating the issue of inequality.
In the political arena, different parties have proposed various solutions to address economic inequality. The Communist Party of India advocates for a wealth tax and inheritance tax to promote a more equal and just economic system. The Congress Party, the main opposition party, pledges to tackle job losses and monopolies, aiming to reorient economic policies to benefit the marginalized sections of society.
Despite these proposals, the ruling Bharatiya Janata Party (BJP) has faced criticism for its concentration of wealth among the elite while neglecting the needs of the poor. However, the BJP has managed to deflect attention from economic issues by focusing on Hindu majoritarian politics, deflecting criticism and maintaining its popularity among certain segments of the population.
the growing economic inequality in India poses a significant threat to the country’s economy and social fabric. Sustainable solutions that address the root causes of inequality, such as fair taxation, education reform, and equitable economic policies, are necessary to ensure a more inclusive and prosperous future for all Indians. The time to act is now to prevent further widening of the wealth gap and promote a more equitable society for generations to come.
