Income of India's top 0.001% rose 3083%, of bottom 50% just 107%; inequality gap widened after 1983: Report

By Jag Jivan
In a major revelation, a top report by an international non-profit organization, World Inequity Lab, the total per adult income among the top 0.001% of India’s population rose by a whopping 3,083% between 1980 and 2016, compared to just about 235% in the world. In Europe it rose just by 120% and in US-Canada by 629%.
Titled “The World Inequality Report 2018”, the report says, as against this, the average income of India’s “full population” rose by 223%, of “bottom” 50% by a mere 107%, and of “middle” 40% by 112%. In a further breakup, the report says, the income of top 10% since 1980 rose by 469%, of top 1% rose by 857%, of top 0.1% by 1,295%, and of top 0.01% by 2,078%.
The report comments, whether it is North America, China, India or Russia, ever since 1980, “From a broad historical perspective, this increase in inequality marks the end of a postwar egalitarian regime which took different forms in these regions”. In India, it adds, because of the implementation of what it calls “socialist policies after gaining its independence”, inequalities were reduced to some extent.

Giving absolute figures, the report says, despite such a sharp rise in income at the very top, the average pre-tax national income per adult within the top 1% is “similar in India and China” (Euros 131000 versus Euros 157000, respectively), which is much lower, say, than in “Brazil (Euros 436000) and in the United States (Euros 990000).”
The report says, “Inequality has risen substantially from the 1980s onwards, following profound transformations in the economy that centred on the implementation of deregulation and opening-up reforms. Since the beginning of deregulation policies in the 1980s, the top 0.1% earners have captured more growth than all of those in the bottom 50% combined.”

Noting that “the middle 40% have also seen relatively little growth in their incomes”, the report says,“This rising inequality trend is in contrast to the thirty years that followed the country’s independence in 1947, when income inequality was widely reduced and the incomes of the bottom 50% grew at a faster rate than the national average.”
“Over the past four decades”, the report says, “The Indian economy has undergone profound evolutions. In the late seventies, India was recognized as a highly regulated, centralized economy with socialist planning. But from the 1980s onwards, a large set of liberalization and deregulation reforms were implemented.”

Thus, it says, “Liberalization and trade openness became recurrent themes among Indian policymakers, epitomized by the Seventh Plan (1985-90) led by Prime Minister Rajiv Gandhi (1984-89). That plan promoted the relaxation of market regulation, with increased external borrowing and increased imports.”
It adds, “These free-market policy themes were then further embedded in the conditions attached to the International Monetary Fund’s assistance to India in its balance of payment crisis in the early 1990s, which pushed further structural reforms for deregulation and liberalization.”
“This period also saw the tax system undergo gradual transformation, with top marginal income tax rates falling from as high as 97.5% in the 1970s to 50% in the mid-1980s”, the report says, adding, “The structural changes to the economy along with changes in tax regulation, appear to have had significant impact on income inequality in India since the 1980s.”
“In 1983, the share of national income accruing to top earners was the lowest since tax records started in 1922”, the report says, adding, “The top 1% captured approximately 6% of national income, the top 10% earned 30% of national income, the bottom 50% earned approximately 24% of national income and the middle 40% just over 46%.”
“But”, the report says, “By 1990, these shares had changed notably with the share of the top 10% growing approximately 4 percentage points to 34% from 1983, while the shares of the middle 40% and bottom 50% both fell by 2 percentage points to around 44% and 22%, respectively.”

Recalling that “reforms were implemented both by the Congress government and its Conservative successors”, the report says, most reforms were “concomitant with a dramatic rise in Indian income inequality by 2000. The top 10% had increased its share of national income to 40%, roughly the same as that attributable to the middle 40%, while the share of the bottom 50% had fallen to around 20%.”
“These pro-market reforms were prolonged after 2000”, the report says, adding, “Inequality trends continued on an upward trajectory throughout the 2000s and by 2014 the richest 10% of the adult population shared around 56% of the national income. This left the middle 40% with 32% of total income and the bottom 50%, with around half of that, at just over 16%.”

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