India’s Soaring Economy Masks Stark Inequality

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India, once the world’s fifth-largest economy, has undergone a significant economic shift, surpassing the United Kingdom. Despite this achievement, it remains a nation marked by stark economic disparities, hosting the largest population of impoverished individuals globally—estimated at 228.9 million, according to the 2022 ‘World Inequality Report’ (WIR). As economic growth slowed and the post-pandemic era unfolded, the nation witnessed rising poverty juxtaposed with an affluent elite, solidifying its position as one of the most unequal countries globally. In this article, we will try to understand how India, in its soaring economy, has given rise to stark inequality within the country. Let’s delve into these disparities below:

Historical Perspective on Income Inequality

The inaugural WIR in 2017 revealed a troubling trend, citing the top 1% income earners’ share at its highest since the inception of the Indian Income Tax Act in 1922. From less than 21% in the late 1930s, it plummeted to 6% in the early 1980s, only to surge to 22% in contemporary times. This trajectory highlights India’s grappling struggle with income inequality over the decades.

Economic Shifts Amid Pandemic

The economic landscape witnessed fluctuations, with GDP growth decelerating, high unemployment rates, and escalating inflation. Paradoxically, corporate profits soared, and the number of Indian billionaires surged from 120 in 2020 to 166 in 2022. While the pandemic inflicted suffering on the populace, it became a windfall for some industries, exemplifying the age-old practice of profiteering from pain.

The Oxfam India’s Report: ‘Survival of the Richest’

Released amidst discussions of a looming recession at the Davos summit, Oxfam India’s report, ‘Survival of the Richest,’ laid bare the irony of pharmaceutical companies reaping windfall gains amid a global struggle for survival. The report concurred with the WIR’s findings, categorising India among the world’s most unequal nations. Notably, the top 10% and top 1% held 57% and 22% of total national income, while the bottom 50% dwindled to a mere 13%.

Analysis of Wealth Dynamics

Average household wealth in India was gauged at ₹983,010, reflecting the profound impact of deregulation and liberalisation policies since the mid-1980s. The world map of inequalities portrayed national average income levels as insufficient predictors of inequality, emphasising India’s reluctance to provide adequate data for monitoring growing inequality.

Call for Tax Reforms

Oxfam India’s report advocated progressive taxation, citing a 50% increase in indirect taxes in the post-pandemic years, primarily attributed to the rise in hydrocarbon tax collection. The emphasis on indirect taxes raised concerns about potential future inequality. The report urged for a new social contract and a global deal to address workers’ rights and benefits.

Critique and Finance Minister’s Response

While the report faced criticism for relying on 2011-12 consumption data, the scarcity of more recent data in the public domain makes the provided insights illustrative. The report’s call for progressive taxation, including one-off wealth taxes, was largely overlooked in the union budget, reinforcing concerns about the exacerbation of inequality.

Global Significance of Inequality

The global economic order, as illustrated by the WIR, indicates that national average income levels don’t uniformly reflect inequality. While India exhibits extreme inequality, the report highlights the nation’s reluctance to share sufficient data for accurate monitoring. This denial of access to comprehensive data, coupled with the decline in India’s statistical transparency, raises concerns about the true extent of the inequality crisis.

Oxfam India’s Bold Recommendations

Oxfam India’s call for progressive taxation and specific wealth and windfall taxes underscores a plea for equitable fiscal policies. However, these proposals faced neglect during the budget presentation, emphasising the challenges in aligning policy decisions with the imperative of reducing inequality.

Persistent Challenges in India’s Social Landscape

The ‘Survival of the Richest’ report unveils distressing statistics, emphasising that 65% of deaths among children under five are linked to hunger or malnutrition. The report’s emphasis on increased budgetary allocations for health and education resonates with the UNDP’s 2015 Human Development Report, which proposed a modest investment for comprehensive social security guarantees.

Future Imperatives: Addressing Inequality Head-On

India’s journey to economic prominence is juxtaposed with widening inequality, necessitating a critical examination of its fiscal policies. The urgency to revisit tax structures, emphasise progressive taxation, and prioritise social spending gains prominence in mitigating the perilous effects of extreme economic imbalances. As India grapples with the consequences of its economic ascent, the call for a more inclusive and equitable economic model becomes increasingly imperative.

Conclusion: A Plea for Equitable Fiscal Policies

The buzz around the ‘Survival of the Richest’ report revolves around claims of disproportionate GST contributions, revealing the burden on the bottom 50% and emphasising the urgent need for comprehensive tax reforms. The recommendations, although largely ignored, underscore the imperative of implementing fiscal measures that promote economic equity and alleviate the extreme distress experienced by the vulnerable segments of society.

Mohd Ziyauallah Khan is a freelance content writer based in Nagpur. He is also an activist and social entrepreneur, co-founder of the group TruthScape, a team of digital activists fighting disinformation on social media.”

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