Patralekha Chatterjee | Why isn’t rising inequality turning into a poll issue?

In 2022, India had 12,495 ultra-high-net-worth individuals (UHNWI), defined as someone with a net worth of $30 million or more, according to The Wealth Report 2024 by consultancy firm Knight Frank. In 2023, that figure shot up to 13,263, and by 2028, it is expected to become 19,908 -- a 50 per cent jump from 2023, far higher than the global average of a 28.1 per cent rise.

Clearly, India’s penthouse dwellers have a lot to celebrate. Significantly, a new working paper from researchers linked to the Paris-based World Inequality Lab points to skyrocketing inequality in the country between 2014-15 and 2022-23, when the rise of top-end inequality has been particularly pronounced in terms of wealth concentration. By 2022-23, the top one per cent income and wealth shares (22.6% and 40.1%) are at their highest historical levels; India’s top one per cent income share is among the very highest in the world, higher than even South Africa, Brazil, and the United States, notes the paper, titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj”.

Authored by Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty and Anmol Somanchi, economists affiliated with the World Inequality Lab (WIL), it flags income inequality in 2022-2023. The top one per cent earn on average Rs 5.3 million, 23 times the average Indian (Rs 0.23 million), while the average incomes for the bottom 50 per cent and the middle 40 per cent stood at Rs 71,000 (0.3 times the national average) and Rs 165,000 (0.7 times the national average) respectively.

“At the very top of the distribution, the richest (approximately) 10,000 individuals (of 920 million Indian adults) earn on average Rs 480 million (2,069 times the average Indian),” it says.

Inequality is not news in India. What is remarkable, however, is its escalation in recent years. It would take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment company earns in a year, says Oxfam, a leading NGO.

Why do so many Indians embrace the India Soaring story when it is not soaring for everyone? In fact, in a country where the median age is 28, the share of manufacturing, which could generate lots of jobs, has come down to 13 per cent of the overall GDP, compared with 28 per cent in China, according to The World Bank. Even as good times roll for billionaires, India’s Human Development Index (HDI) rank is 134 out of 193 countries, according to the UN Development Programme. This, despite numerous government welfare schemes in the past decade and earlier. Many of India’s South Asian neighbours fare better -- Bangladesh ranks 129, Bhutan 125 and Sri Lanka 78 on HDI.

All the jaw-dropping data about inequality points to distress on the ground. The glaring cleavage between the distressed and the dazzling, a wafer-thin minority among the super-rich, however, has not translated into a potent political issue as India heads for a general election next month.

Arguably, absolute poverty is coming down if you go by official figures. Recent welfare measures have led to progress on several fronts. The recent report by the NITI Aayog, based on data of the National Family Health Survey (NFHS) 4 and 5, says 13.5 crore people have escaped poverty between 2015-16 and 2019-21.

Numbers apart, how do Indians really feel about inequality? On that, there is much less research.

“Our results point to obscene inequality levels in India today. This has been the case for the last 10-15 years at least, with inequality levels skyrocketing since the 2000s. The biggest benefactors from the growth story of the last two decades have been the very rich and wealthy, the top one per cent, top 0.1 per cent and beyond. It remains a puzzle why this has not led to large-scale political mobilisation around this issue,” says Anmol Somanchi, a scholar with the Paris School of Economics and WIL.

“One likely factor,” he says, is “India's caste system which creates an entirely misplaced sense of entitlement among the upper-caste elites and perpetuates a brutally hierarchical society. It is then perhaps not surprising to see very exploitative labour contracts (domestic helpers, brick kiln workers, sewage cleaners, etc.) abound… However, with economic inequality showing no signs of slowing down, it is unclear how long social and political unrest can be kept at bay.”

While many at the bottom of the socio-economic heap accept rising inequality as pre-ordained, their “fate”, some have pinned their hopes on the high-decibel mood music of “Achche Din” offered by the ruling BJP. There is another factor at play -- those higher up the socio-economic ladder are often ignorant, or choose to overlook the extent of inequality in a country, fractured along the lines of gender, geography, caste, and religion. That is partly why there is muted public discussion on the subject.

In a 2021 public lecture, Reetika Khera, who teaches economics at Delhi IIT, pointed out that many among the top 10 per cent in India often consider themselves middle class. “In 2020 and 2021, I conducted a simple class self-perception test: in my IIM Ahmedabad and IIT Delhi classes, I asked around 500 students what class they think they belong to, whether their family owns a car, an air-conditioner, has an Internet connection and a sewage connection. These seemingly middle-class comforts are enjoyed by a small minority in India. The self-perception test results show more than three-fourths of the IIT and IIM students I surveyed had access to these facilities, yet almost 90 per cent self-identified as middle-class. Only 10 per cent self-identified correctly, as members of the upper class.”

Only 7.5 per cent of Indian households have cars, according to NFHS-5 (2019-2021).

Many Indians will tolerate massive inequality in the hope of eventually becoming well off themselves. As India heads towards the general election, a legitimate question is about the future of those who look up at the penthouse from the pavement, unable to break out of low-paid, informal work in a deeply unequal country. We must not erase them from the poll discourse.

Is such staggering inequality sustainable without major social and political upheaval? What about costs in terms of India’s human capital? “How many Ambedkars have we missed out because they somehow weren’t able to escape the clutches of social hierarchies,” ask Raghuram Rajan and Rohit Lamba in their book, Breaking the Mould: Reimagining India's Economic Future.