India’s income inequality in 2017 may be worse than what it was during the British Raj. According to a paper titled ‘Indian income inequality, 1922-2014: From British Raj to Billionaire Raj?’ penned by renowned economist Thomas Piketty and Lucas Chancel, India witnessed a sharp rise in the incomes of top 1 per cent post 1980s.
The study, which took inputs from household surveys, national accounts, NSSO data and recently released tax tabulations tracks the dynamics of Indian income inequality from 1922 to 2014.
The share of national income accruing to the top 1% income earners is now at its highest level since the creation of the Indian Income tax in 1922 during the British colonial rule. The top 1% of earners captured less than 21% of total income in the late 1930s, before dropping to 6% in the early 1980s and rising to 22% today, the paper said.
The study says the share of fiscal income accruing to the top 1 per cent of population shrank substantially from the mid-1950s to the mid-1980s, from about 13 per cent of fiscal income, to less than 5 per cent in the early 1980s. However, after India’s economic liberalization when pro-business, market deregulation policies were implemented the situation was reversed, the share of fiscal held of the top 1% doubled from approximately 5 per cent to 10 per cent in 2000.
The revised paper which was released on Tuesday found that the bottom 50% group grew at a substantially lower rate than average growth (Figure 1a) since the 1980s. Middle 40% grew at a slower rate than the average (Figure 1b). On the contrary, top 10% and top 1% grew substantially faster than the average since 1980 (Figure 1c).
The paper stressed on the need for more democratic transparency on income and wealth statistics to avoid what it called another ‘black decade’ similar to the 2000s, during which India entered the digital age but stopped publishing tax statistics.
Such data sources are key to track the long run evolution of inequality and to allow an informed democratic debate on income patterns, it said.
Calling for a more inclusive growth in India, the paper said its findings reveals the unequal nature of liberalization and deregulation processes in the country.
In 2016, the Income Tax Department released tax tabulations for recent years (2011-12, 2012-13 and 2013-14), making it possible to revise and update previously published top income estimates and better inform public debates on growth and income inequality in India, it added.