A paper by Thomas Piketty and Lucas Chancel titled ‘Indian Income Inequality 1922-2014 — From British Raj to Billionaire Raj?’ studies all available data to look at income inequalities in independent India. Its findings belie the claims that globalised ‘development’ has meant “inclusive growth” and instead shows that it has vastly increased the chasm between rich and poor.
TSR Subramanian (‘Country of a chosen few’, 16 September 2017, Indian Express) summarises the paper’s findings: “Between 1980 and 2014, the share of the top 1 per cent of India’s population in income increased from 6 per cent to 22 per cent. During the same period, the share of the top 10 per cent increased from 30 per cent to 50 per cent; the share of the middle 40 per cent (the middle class) fell from 43 per cent to 30 per cent; the share of the bottom 50 per cent fell from 24 per cent to 15 per cent. More astonishingly, the top 0.1 per cent of earners captured a higher share of the total growth than the bottom 50 per cent (12 per cent vs 11 per cent)….. The period after the year 2000 saw the highest growth of the economy compared to the five preceding decades. In other words, the period 1980-2014 saw the top 0.1 per cent grow at 550 times the rate of the bottom 50 per cent. The top 1 per cent grew at 130 times of the bottom 50 per cent. The middle 40 per cent grew at a three times higher rate than the bottom-half.“
The Picketty-Chanel paper found that “the top 1% income share is at its highest level (22%) since the create of the Income Tax during the British Raj, in 1922. Top income shares and top income levels were sharply reduced in the 1950s to the 1970s at a time when strong market regulations and high fiscal progressivity are implemented. During this period, bottom 50% and middle 40% incomes grew faster than average. The trend reverted in the mid 1980s with the development of pro-business policies.” The top 1% of earners accounted for less than 21% of total income in the late 1930s; this share dropped to 6% in the early 1980s; but has now risen to 22%!
In a section titled ‘Shining India for the rich mostly?’, the paper discusses findings that belie the claims that the “middle classes” benefit from liberalisation policies: ““Shining India” corresponds to the top 10% of the population (approximately 80 million adult individuals in 2014) rather than the middle 40%. Relatively speaking, the shining decades for the middle 40% group corresponded to the 1951-1980 period, when this group captured a much higher share of total growth (49%) than it did over the past forty years.” Further, the paper finds that growth has been unevenly distributed even within that top 10%: as a consequence of the “unequal nature of liberalization and deregulation processes”, the paper finds that “India in fact comes out as a country with one of the highest increase in top 1% income share concentration over the past thirty years.”