Unequal Wealth Distribution in India
Incredible India—this was exactly my first impression of India when I landed the country a dozen years ago as a young tourist. The country overwhelmed me with the rich heritage and culture, the lively bustle of the busy streets, the colourful dresses of women, and rituals rooted in people’s lives. While I truly appreciated my entire experience, I couldn’t just ignore the absolute poverty on the street near the newly opened fancy shopping mall. Unequal wealth distribution in India seemed to be a big issue then.
Years have passed and India today positions itself at 6th in GDP (nominal) and 3rd GDP PPP (purchasing power parity), according to the latest data from the World Bank. It is the largest economy in the South Asia. (Although there are many definitions of the region of “South Asia,” I define the following five countries as the South Asian countries for the availability of data: India, Bangladesh, Pakistan, Sri Lanka, and Nepal.)
However, only a small portion of the Indian population benefits from this rapid economic development. With such an honourable achievement, India has one of the highest Gini coefficient indices i.e., highest levels of inequality for both income and wealth distribution.
Gini Coefficient: An Index to Measure Inequality
The World Bank defines Gini index as follows:
Gini index measures the extent to which the distribution of income (or, in some cases, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution.
Gini index is the percentage expression of Gini coefficient. The Gini index of 0 means the country distributes income/wealth perfectly equally; the Gini index of 100 means the complete opposite. In other words, the smaller the Gini coefficient or index, the more equal the country is in terms of income/wealth, and vice versa.
The following table displays the Gini indices for income distribution in the eight countries in South Asia, along with GDP:
|Country||Most Recent Year||Gini Index for Income Distribution||GDP (2020, Current US$ Millions)|
Source: World Bank
India is by far the largest economy in the region. But the index proves it is the second most unequal country for income distribution. However, as years of available data varied depending on each country, it is difficult to compare the numbers. These countries have been developing at a galloping speed in the recent decade, which could entirely change the whole picture.
Next, let’s have a look at Gini indices for wealth distribution in the five countries for 2019 and 2020.
|Country||Gini Index for Wealth Distribution (2019)||Gini Index for Wealth Distribution (2020)|
Source: Global Wealth Databook 2019, 2021
Here, although India is the only country that decreased inequality, it still clings to the worst position for equality.
Inequality in Numbers
We now know that Gini indices exhibit income and wealth are distributed unequally in India. But how much inequality are Indian people facing? The World Inequality Report (WIR) shared some interesting figures for Indian national income and wealth distribution.
Top 10% Earn 20+ Times More Than Bottom 50% in India
According to the report, the average income in India was 204,200 Indian Rupees (₹) in 2021. (€1 PPP = $PPP 1.4 = ₹ 27.5, ₹204,200 ≈ $PPP10,360) Annually, the top 1% earn ₹4,444,000 or $PPP226,240 and the top 10% earn ₹1,168,750 or $PPP59,500. Then the middle 40% earn ₹151,250 or $PPP7,700 and the bottom 50% earn only ₹55,000 or $PPP 2,800. This means the top 1% earn over 80 times and the top 10% earn over 20 times more than the bottom 50%.
The income gap between top 10% and bottom 50% in India is higher than gap observed in many Asian countries (for example, China 14 times, Indonesia 13, Japan 13) and in North America (US 17, Canada 13). It is much higher than 9 for the European Union. However, it is smaller than that of some South American countries such as 30 for Brazil and Chile.
Furthermore, the top 10% hold 57% of total national income, while the bottom 50% hold only 13%. This is higher than the inequality that people of India experienced under British colonial rule, when the top 10% held 50%. Moreover, WIR pointed out that the quality of inequality reports released by the Indian government has seriously worsened over the past three years. The deterioration of the data has made it difficult to assess the inequality.
Top 10% Own 55 Times More Than Bottom 50% in India
When it comes to household wealth or the value of assets owned by a household, the gap is extreme in India. The household wealth consists of all financial assets such as stock and bonds, non-financial assets such as housing, and net of debts.
On average, Indian households own assets worth ₹983,010 or $PPP50,120. The bottom 50% own ₹66,280 or $PPP3,374, and the middle 40% hold ₹723,930 or $PPP36,960. Then the top 10% own ₹6,354,070 or $PPP323,820 and the top 1% assets jump to ₹32,449,360 or $PPP1,653,960. Surprisingly, the top 1 own approximately 490 times more than the bottom 50%.
The top 10% richest Indians own 64.6% of India’s wealth. The middle 40% take 29.5% of the country’s wealth, while the bottom 50% own only 5.9%.
India: Super Rich and Super Poor Live Together
According to the Hurun India Wealth Report 2020, the combined wealth of 827 richest Indians listed in IIFL Wealth Hurun India Rich List 2020 was equal to one third of India’s GDP. And there were 179 dollar-billionaires, which was 3 times more than in 2013. There were also 4,12,000 dollar-millionaires.
On the other hand, 21% of the Indian population live on less than $1.9 a day. One fourth of the world’s undernourished people live in this country. About 35% of the urban population live in slums in 2018.
India is a country where a handful of super rich elites coexist a mass of poor hungry people—the income and wealth distribution in India is extremely unequal. This inequality could be a big hurdle for the country’s future development. If the rich get richer while the poor remain poor, the disparity between people will be wider and deeper. Then people’s discontent will be grow louder, which can destabilize the nation, thereby hinder its development.