The Billionaire Boom in India Is Leaving the Rest Behind

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admin December 13, 2021
Updated 2021/12/13 at 3:08 PM
Conceptual illustration, the rich and the poor. AI and EPS editable files included.

According to the World Inequality Report 2022, India is a “poor and very unequal country with a wealthy elite,” with the top 10% holding 57% of total national income, including 22 percent owned by the top 1%, and the bottom 50% holding just 13% in 2021. The analysis, which was released this week, also predicts a reduction in global income in 2020, with approximately half of the loss occurring in affluent nations and the other half occurring in low-income and developing countries. This is mostly due to the influence of “South and Southeast Asia, and more specifically” India, according to the report.

Lucas Chancel, an economist and co-director of the World Inequality Lab, co-authored the report with Thomas Piketty, Emmanuel Saez, and Gabriel Zucman.

Key findings

According to the report, “India stands out as a poor and unequal nation with an affluent elite.” According to the report, India’s middle class is comparatively poor, with an average worth of Rs 7,23,930, or 29.5% of total national income, compared to the top 10% and 1%, who possess 65% (Rs 63,54,070) and 33 percent (Rs 3,24,49,360) of the entire national income, respectively.

In 2021, the Indian adult population’s average yearly national income would be Rs 2,04,200. According to the report, the poorest 50% earned Rs 53,610, while the top 10% earned nearly 20 times more (Rs 11,66,520). The average household wealth is Rs 9,83,010, with the bottom 50% of the population owning just Rs 66,280, or 6%.

Since 2014, the pre-tax national income share of the top 10% and bottom 50% has stayed relatively steady. According to the report, the government’s data on inequality has worsened significantly, making it impossible to analyse current inequality changes.

According to the Niti Aayog’s new Multi-dimensional Poverty Index, one out of every four Indians is multi-dimensionally poor. Bihar has the highest percentage (51.91%), followed by Jharkhand (42.16%) and Uttar Pradesh (37.79%).

The Impact of a Pandemic

The pandemic’s effects were reflected in a decline in world income, which was strongly impacted by India. “When India is taken out of the analysis, it seems that the global bottom 50% income share grew somewhat in 2020,” the report said.

In addition, although nations have become wealthier over the past 40 years, their governments have been much poorer, a trend exacerbated by the pandemic. In wealthy nations, the proportion of money owned by public actors is close to zero or negative, implying that the whole wealth is in private hands. The COVID crisis, during which governments borrowed the equivalent of 10–20% of GDP, mostly from the private sector, has exacerbated this tendency, according to the report.

Within nations and globally, the growth in private wealth has been uneven. Since the mid-1990s, the wealthiest 1% of the global population has received 38% of all the increased wealth, while the bottom 50% has received just 2%. “Since 1995, the wealth of the world’s wealthiest people has expanded at a rate of 6 to 9% each year, while average wealth has grown at 3.2% per year.” “During the COVID pandemic, this rise was exacerbated,” it says.

Trends at a global and regional level

According to the report, the poorest half of the world population “barely owns any wealth,” owning just 2% of the total, while the wealthiest 10% control 76%. The wealthiest 10% of the population today own 52% of global wealth, while the poorest earn just 8%.

According to the report, the Middle East and North Africa (MENA) are the world’s most unequal regions, while Europe has the lowest levels of inequality. The income share of the top 10% in Europe is roughly 36%, and it is 58% in MENA, 43% in East Asia, and 55% in Latin America.

In 2020, global wealth was estimated to be about 510 trillion euros or almost 600% of national income. Total wealth to total income ratios has risen from roughly 450% in the early 1990s to over 600% presently. In 1970, private wealth–national income ratios in high-income nations varied between 200 and 400%. By 2008, when the global financial crisis started, these ratios had risen to 550%.

 After transitioning away from communism (in China and Russia) or a highly regulated economic structure (India), large developing economies like China and India saw quicker growth than wealthier nations. Private wealth in India has grown from 290% in 1980 to 560% in 2020.

According to the report, global inequities are nearly as high now as they were during the pinnacle of Western imperialism in the early twentieth century.

Other significant inequities

According to the research, women’s share of total labour income was about 30% in 1990 and is currently less than 35%.

Within-country inequalities are currently higher than between-country inequalities. Within nations, the wealth disparity between the top 10% and the poorest 50% almost increased from 18 times in 1820 to 41 times in 1910, peaked at 53 times in 1980 and 50 times in 2000, and then fell to 38 times in 2020.

Global income and wealth disparities are “closely linked to ecological inequalities and inequalities in contributions to climate change,” according to the report. The top 10% of emitters are responsible for over half of total emissions, while the bottom 50% are responsible for just 12%.

If the wealthy were to be taxed

A small progressive wealth tax on multimillionaires is recommended in the paper.

More than $1 million was owned by 62.2 million people in 2021 (measured at market exchange rates). Their total fortune was $174 trillion, or $2.8 million per person. More than 1.8 million people (the top 0.04%) have a net worth of more than $10 million, 76,500 (0.001%) have a net worth of more than $100 million, and 2,750 (0.00005%) have a net worth of more than a billion dollars. Billionaires own more than $13 trillion in assets, accounting for 3.5% of global wealth.

According to the analysis, a worldwide effective wealth tax rate of 1.2% on wealth above $1 million could raise 2.1% of global income in revenue. A 0.6% tax rate on wealth between $1 million and $10 million can generate 0.6% of global income. A 1.1% rate on wealth between $10 million and $100 million can generate 0.4% of global income. A 5% rate on wealth between $1 billion and $10 billion can generate 0.3% of global income.

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