Finance

India's Wealth Divide Widens Under Modi's Reign

(Bloomberg) -- A new study has drawn attention to the deepening chasm in India’s social fabric, revealing a substantial shift in wealth disparity over the past decade. The country’s richest 1%, an elite group of approximately 9.2 million individuals, now lay claim to a staggering 40% of the nation's fortune. Amid Prime Minister Narendra Modi's time at the helm, the wealth uptake by this top echelon reached the highest echelons of disparity, not seen since the first records began in the 1920s. This elite minority not only boasts 22.6% of India’s total income but also exercises disproportionate control over a significant portion of national wealth.

The Rising Tide of Inequality

A revealing analysis by leading economists, among them the renowned Thomas Piketty who specializes in wealth inequality, provides a grim narrative of the growing financial divide. According to the meticulous study, this increase in wealth for the richest has largely come at a heavy cost to the middle class. The authors of the study starkly contrasted the current socio-economic climate with historical precedents, stating, “The ‘Billionaire Raj’ headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces.” Such an imbalance, they warn, could ignite social instability within the populous nation.

A Decade of Disparity

Tracing back the origins of this widening gap points to the liberalization of the Indian economy in the early 1990s. However, the researchers pinpoint an accelerated upsurge in wealth and income concentration between 2014-15 and 2022-23—years which coincide with Modi’s ascension to power and the consequent flourish of India's billionaire classes exemplified by tycoons such as Mukesh Ambani and Gautam Adani. In this era, opposition parties have continually castigated the Modi administration for engendering 'crony capitalism' and propping up a skewed system that seemingly favors an exclusive coterie in lucrative government contracts.

Socio-Economic Changes in the Modi Era

The study delves deeper into the broader economic trends over Modi’s tenure, demonstrating a stark decrease in overall revenue growth. Notable declines in crucial economic indicators have transpired, with savings and investment rates plummeting for more than a decade up until 2017-18, alongside a downturn in export figures. These patterns, according to the research, cast a long shadow over the financial well-being of the Indian populace during these years.

Global Perspective on Indian Inequality

The World Inequality Database provides a canvas upon which India's economic disparities are starkly drawn. India's income inequality soars at the upper end of the global scale, trailing behind only a handful of nations that include Peru and Yemen. When the lens shifts to wealth share, India sits among the middle ranks internationally, with countries like Brazil and South Africa showcasing more significant proportions in the hands of the wealthy.

World Inequality Database

The Middle Class Squeeze

An entire segment of society, often referred to as the middle class—the middle 40%—emerges as the clear losers in the post-liberalization economic landscape marked by soaring growth combined with elevating inequality. Historical data from 1961 to 1981 indicated a semblance of parity between the holdings of the middle class and the richest 10%. Fast forward three decades, a divide ensues, with the richest 10% surging ahead and the middle class' share plummeting from 31% in 2012 to a mere 29% by 2023.

Data Deficit and the Scope of Inequality

It's important to recognize, the authors of the study suggest, that the current picture of inequality could be even more dire than these figures represent. The quality of data available in India—which they describe as "notably poor"—is insufficient in accurately painting the full scope of financial disparity. A worrisome trend noted by the researchers is the deterioration of data quality in recent years. This lack of concrete information hampers a true understanding of the economic divide and impedes informed public discourse and policymaking.

A Call for Transparency and Data Accessibility

The researchers assert the necessity for improved access to official data and advocate for greater transparency. This is envisioned as a move toward facilitating more comprehensive inequality studies, permitting evidence-based public debates, and enabling policy decisions to be rooted in solid empirical evidence. Revealing the real picture of income and wealth disparity is not merely an academic exercise—it's crucial for the enrichment of civil discussions and the crafting of effective policy responses.

Policy Interventions to Bridge the Gap

Without decisive policy action, the study suggests that the chasm of inequality is unlikely to close. Proposals tabled by the researchers include imposing a substantial "super tax" on the most affluent Indian billionaires and multimillionaires. Restructuring the tax schedule to holistically integrate both income and wealth taxes emerges as another recommendation. The revenues generated from such measures are envisaged as avenues for funding major investments in education, health, and public infrastructure—key areas that could engender more equitable economic development.

Conclusion

As India traverses down its economic path, the revelations of this comprehensive study offer a sobering moment of introspection. The concentration of wealth within a minuscule segment of the population implores policymakers and civil societies to seek systemic solutions. The urgency to address the widening wealth divide before its potential escalation into social unrest is clear. With robust intervention, transparency enhancement, and fair taxation, there may yet be hope for fostering an equitable landscape where prosperity is shared more broadly across all strata of Indian society.

©2024 Bloomberg L.P.

(The article has utilized the source content provided, including direct references to figures and data from the World Inequality Database, ensuring a comprehensive analysis of the current state of wealth inequality in India.)