Indian government turns blind eye to rising inequality

The World Inequality Report 2022 named India and broadly South Asia as one of the regions with highest degree of inequality in the world (MIG photos/Aman Kanojiya)

The World Inequality Report 2022 released last month by the World Inequality Lab portrays a dismal picture of the world as inequality has continued to rise stridently across most parts of the world, with an increasing share of global wealth being captured by fewer people every year.

As much as 76 pc of global wealth is concentrated in the hands of just 1 pc and the share of the wealth in the hands of the ultra high net worth or superrich has kept on rising over the past 25 years. In 1995, for instance, the top 0.01 pc of the world’s population had 7 pc of global wealth. In 2021, they hold as much as 11 pc. And this club has become ever more exclusive. To be in the top 0.01 pc of the global rich, one had to have EUR 693,000 in 1995. Today, to be able to join this club, one has to have EUR 16.67 million.

Unfortunately, India and broadly South Asia was named as one of the regions with highest degree of inequality in the world. Indeed, the report devotes a considerable amount of space to India and with good reasons. The report’s authors, economist and co-director of the World Inequality Lab, Lucas Chancel, economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, say that India stands out as a “poor and very unequal country, with an affluent elite”, where the top 10 pc holds 57 pc of the total national income while the bottom 50 pc has just 13 pc.

The report has also flagged a drop in global income during 2020, with about half of the dip in rich countries and the rest in low-income and emerging regions. This is attributed primarily due to the impact of South and Southeast Asia, and more precisely India. “When India is removed from the analysis, it appears that the global bottom 50 per cent income share actually slightly increased in 2020,” states the report.

According to the report, India’s middle class is relatively poor with an average wealth of only INR 7,23,930 or 29.5 pc of the total national income, as compared with the top 10 pc and 1 pc who own 65 pc (INR 63,54,070) and 33 pc (INR 3,24,49,360), respectively. The average annual national income of the Indian adult population is INR 2,04,200 in 2021. The bottom 50 pc earned INR 53,610, while the top 10 pc earned over 20 times more (INR 11,66,520), the report states.

Government policies increase inequality

Ever since the current government, led by Narendra Modi, has taken charge, its economic and social policies have benefitted a handful of crony capitalists, with both Mukesh Ambani and Gautam Adani benefitting hugely from the largesse of the Modi government that has awarded or rather gifted away public assets worth billions of dollars and also awarded unprecedented volume of contracts to these and a handful of other groups that have fallen in line with Modi. One latest example is the INR 170 billion road contract awarded to Adani Enterprises for construction of most of the new Expressway announced by Modi in poll-bound Uttar Pradesh days ago.

While Modi and his team have been showering benefits and contracts on their cronies, this government has been extremely tight-fisted when it comes to an overwhelming proportion of the Indian population, leading to a heightened level of inequality.

One such example was the Union budget for year 2021-22 that was announced in March which had been touted as the most crucial budget for the country for a long while, or even since independence, as it was the first full budget after since the Covid-19 pandemic hit India.

There were genuine expectations that the government would finally focus on the hundreds of millions who have been hit the hardest by the pandemic and notably by the blundering lockdown announced by Modi on March 24. The nation is still counting the human, social and economic cost of the lockdown that sent Indian GDP fall off the cliff by 23.9 pc and put well over 250 million people into poverty, undoing the work done by the previous governments for over a decade when India had managed to pull over 230 million people out of poverty.

Pointedly, the report also squarely blames the government not only for the rising inequality, but also accuses it of hiding the problem by not being transparent about the data or by presenting very poor quality data about this huge problem. “For India, the quality of inequality data released by the Government has seriously deteriorated, making it particularly difficult to assess recent inequality changes,’’ the report states.

As per the recent Multi-dimensional Poverty Index (MPI) prepared by the government’s own think tank, Niti Aayog, one in every four people in India was multidimensionally poor. Bihar has the highest proportion of people (51.91 pc of the state’s population) who are multidimensionally poor, followed by Jharkhand at 42.16 pc and Uttar Pradesh at 37.79 pc.

According to the inequality report, global inequalities seem to be about as great today as they were at the peak of Western imperialism in the early 20th century. The poorest half of the global population “barely owns any wealth” possessing just 2 pc of the total, whereas the richest 10 pc of the global population own 76 pc of all wealth, it states.

While inequality has perhaps existed ever since humanity came into being, but the inequality of today and the last few decades is more worrying on several counts. First is that while earlier, till about 1970s, there was greater inequality between nations, that means richest in the rich world was far richer than the richest in poor world, today, there is much more inequality is within countries than between countries as the super rich in poor nations like India rub shoulders as equals with the richest in say the United States.

Certainly, there continues to an overhang of the negative impacts of western imperialism and colonialism across the world as the countries that were colonised still struggle to emerge from the damages done by centuries of colonial rule and pillaging of natural and national resources by the western nations.

But while the governments may not be able to do much about addressing these issues, they ought to be worried about the impact of rising inequality at home. In some regions, notably the Middle East and South Asia, it has reached worryingly high proportions. The World Inequality Report says that the most inequal region in the world is Middle East and North Africa where the top 10 pc of population holds 58 pc of national income, compared to Europe where the top 10 pc account for relatively modest 36 pc of national income.

As this show, growing inequality is not an inevitability, but more a function of the political choices made by governments that create the conditions for inequality. Indeed, Europe has managed to curb its inequality over the decades by consistently focusing its social efforts and budgets on the poorest parts of the populations, while in the United States, Russia, India and in MENA, the governments seem to have left the poor to their own fate, leading to the sharp spike in extreme poverty as was seen in India where almost 250 million were pushed into extreme poverty just in 2020 due to government’s failure in reaching out to them as the coronavirus pandemic hit the world. This was the biggest reverse in the global battle to counter poverty and has effectively undone 10 years of concerted efforts by previous governments to alleviate poverty.

Governments ought to be worried about rising inequality for a simple reason. The aspirations of the global youth have risen manifold in the past decade or two, thanks in a major way to the rise of social media that has millions of posts everyday of people showing off their new clothes, expensive meals or fabulous travels. Thus, today’s poorer populations are hardly likely to blame their state on fate and try to make ends meet. They could either rise against the superrich and the governments or simply pack up and migrate to another country in search of better opportunities.

Both the effects are already being seen in many parts of the world. An increasing number of countries, across most regions of the world, have been witnessing widespread civil unrest for a variety of reasons, but most are linked to poor economic and social condition. Protestors, seeking justice for the underprivileged, are also now a common sight at most venues of large multilateral meetings like the G20 or IMF. And in over three dozen countries, mainly in the Middle East and Africa, the situation has deteriorated into civil war.

The second global impact of rising inequality can be seen in the form of millions of migrants trying every day to cross border into a more prosperous and peaceful country in order to escape the life of misery and poverty that they face back home.

Governments as well as multilateral financial institutions need to address the issue of inequality, by promoting much higher social expenditure and creating equal opportunities for the underprivileged to succeed. Over the past few decades governments have cut their social expenditure under various guises or excuses and focused on privatisation as an alternate route to spread prosperity. Unfortunately, privatisation or rather excessive reliance on private sector has led to the current crisis as is evident from the huge gaps in salaries of the top management and the workers in most private firms and more so in the countries where inequality has increased.

If governments and nations want to avoid total social chaos across the globe, it is high time they reviewed their economic policies and priorities.