Why is it in the News?

India’s top 1 percent income and wealth shares have reached historical highs and are among the very highest in the world, according to a paper released by World Inequality Lab.

What is the World Inequality Lab?

• The World Inequality Lab is a global research center that focuses on studying inequality and public policies that promote social, economic, and environmental justice.

The lab's main missions include:

• Expanding the World Inequality Database: The lab gathers and analyzes data on income, wealth, and capital asset distribution across various countries.
• Publishing research: The lab releases working papers, reports, and methodological handbooks to contribute to the understanding of global inequality dynamics.
• Collaborating with international researchers: The lab works with a network of researchers from around the world to compile and analyze data for the World Inequality Database.
• Promoting public debate: The lab aims to raise awareness about inequality by disseminating their findings and engaging in public discourse.
• The World Inequality Lab is known for producing the World Inequality Report, which offers up-to-date and comprehensive data on different aspects of inequality globally, including wealth, income, gender, and ecological inequality.

Key Insights from the Research Paper Released by the WIL:

• A team of four economists, including Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi, has compiled comprehensive time series data on income and wealth inequality in India.
• Titled "The Billionaire Raj," the paper asserts that India's current level of inequality surpasses that of the British Raj era.
• In the fiscal year 2022-23, India witnessed its highest recorded levels of income and wealth concentration among the top 1%: 22.6% and 40.1%, respectively.
• India's top 1% income share is noted to be among the highest globally, even surpassing countries like South Africa, Brazil, and the US.
• While India's top 1% holds a significant share of income, the wealth share of this segment is comparatively lower than in South Africa and Brazil.
• The paper accentuates the stark disparities among various income groups in India.
• For instance, the wealthiest 1% possess an average wealth of Rs 5.4 crore, 40 times the national average, whereas the bottom 50% and the middle 40% hold significantly lower amounts: Rs 1.7 lakh (0.1 times the national average) and Rs 9.6 lakh (0.7 times the national average), respectively.
• At the pinnacle of the wealth distribution, approximately 10,000 individuals out of 92 million Indian adults possess an average wealth of Rs 2,260 crore, a staggering 16,763 times the average Indian wealth.

Key Recommendations from the Research Paper:

• The research paper has meticulously compiled data from various sources to construct its estimates on income and wealth inequality.
• Given the absence of official income estimates and wealth statistics based on surveys in India, the paper underscores the necessity for reliable data sources in these domains.
• To tackle the issue of inequality in India, the paper proposes a range of policy interventions.
• These measures encompass a comprehensive overhaul of the tax structure to encompass both income and wealth considerations, alongside substantial public investments in critical areas such as healthcare, education, and nutrition.
• A notable suggestion outlined in the report is the implementation of a "super tax" of 2% on the net wealth of the 167 wealthiest families recorded in 2022-23. This levy is projected to generate revenues equivalent to 0.5% of the national income.
• Furthermore, the imposition of such a tax is envisaged not only to create fiscal leeway for essential investments but also to serve as an effective tool in combatting entrenched inequality within the society.