The Legacy Of The Billionaire Raj – OpEd
Since the early 2000s, inequality in India has soared, with the top 1% of the population holding 22.6% of the income and 40.1% of the wealth in 2022-23, according to a working paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj.” This paper, authored by Thomas Piketty, Lucas Chancel, and Nitin Kumar Bharti, highlights the pronounced increase in wealth concentration, particularly between 2014-15 and 2022-23.
In 2014, Narendra Modi was elected as Prime Minister on a platform of development and economic reforms. However, critics argue that his tenure has seen a widening gap between the wealthy and the rural poor, even as India’s economy grew at an impressive 8.4% in the last quarter of 2023. The Congress party, India’s main opposition, has been vocal about the Modi government’s close ties with billionaires, especially during rallies in the lead-up to the general elections starting April 19.
The authors of the working paper point out that by 2022-23, the income and wealth shares of the top 1% in India were at their highest historical levels. India’s top 1% income share is among the highest globally, surpassing even that of South Africa, Brazil, and the US. They suggest that the Indian income tax system might be regressive, contributing to the wealth disparity. Factors such as inadequate education have trapped many in low-paid jobs, stalling the economic progress of the bottom 50% and middle 40% of Indians.
The World Inequality Lab proposes a restructuring of the tax code to consider both income and wealth, along with substantial public investments in health, education, and nutrition. Such measures would help the broader population benefit from globalization, not just the elite. The paper also recommends a “super tax” of 2% on the net wealth of the 167 richest families in 2022-23, which could generate 0.5% of national income in revenue, providing critical fiscal space for these investments.
Despite the government’s efforts, such as subsidized grain distribution, spending on education and health, and direct cash transfers through a rural jobs scheme, inequality persists. The Indian government’s Chief Economic Adviser highlighted these measures in December 2023, noting their role in promoting more equitable income distribution. However, the paper argues that the quality of economic data in India is poor and has declined recently, complicating the assessment of inequality trends.
Historically, the income share of the top 1% in India has fluctuated significantly. From 13% in 1922, it rose to over 20% during the inter-war period before dramatically falling to 13% in the 1940s, around the time of India’s independence. After a brief increase in the 1950s, the share steadily declined, reaching 6.1% by 1982, likely due to the socialist policies of the Indian government during that era. However, economic reforms beginning in the 1980s, culminating in the liberalization of 1991, halted this decline. Since the early 1990s, the top 1% income share has consistently risen, hitting an all-time high of 22.6% in 2022.
India’s economic liberalization in 1992 opened its markets to foreign investment, leading to a surge in the number of billionaires. Forbes data shows that the number of Indians with net wealth exceeding $1 billion grew from one in 1991 to 162 in 2022. The country’s wealth is increasingly concentrated, with Asia’s two richest men, Mukesh Ambani of Reliance Industries and Gautam Adani of Adani Group, both being Indian. The top 10,000 wealthiest individuals hold an average of Rs. 22.6 billion each—16,763 times the national average—while the top 1% have an average wealth of Rs. 54 million.
The paper’s analysis of wealth inequality spans from 1961 to 2023, leveraging tax data dating back to the enactment of the Income Tax Act by the British administration in 1922. This extensive dataset allowed the authors to examine the evolution of the top 1% income share over a century, concluding that the modern “Billionaire Raj” is even more unequal than the British Raj.
As India grapples with this growing inequality, it is crucial to address the systemic issues that perpetuate wealth concentration. Implementing progressive tax reforms, investing in public services, and creating opportunities for all citizens are essential steps towards a more equitable society. While economic growth is vital, it must be inclusive to ensure that the benefits are shared broadly, not just among the elite. The legacy of the Billionaire Raj serves as a stark reminder of the urgent need for policies that promote social justice and economic fairness.
