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Income gap between uber rich, poor have widened in India, says new research

Inequality in the country has risen substantially since the 1980s as India adopted globalization, and broke away from being a highly regulated economy with socialist underpinnings.

twitter-logo Goutam Das   New Delhi     Last Updated: December 20, 2017  | 21:49 IST
Income gap between uber rich, poor have widened in India, says new research

In India, the rich have gotten richer, while the poor haven't had much luck. A new report by the World Inequality Lab, promoted by economists Thomas Piketty, Facundo Alvaredo, Lucas Chancel, Emmanuel Saez and Gabriel Zucman, underlines this stark reality of income inequality in India. Inequality in the country has risen substantially since the 1980s as India adopted globalization, and broke away from being a highly regulated economy with socialist underpinnings. There is now data to show that globalization has benefited just a tiny fraction of the population and its rising ride hasn't lifted all boats.

In 2014, the share of national income captured by India's top 1 per cent of earners was 22 per cent - this share is higher than the 15 per cent share captured by the bottom 50 per cent. The share of the top 10 per cent of earners was around 54 per cent. Contrast this with 1980s and the starkness emerges: In 1983, the share of national income accruing to top earners was the lowest since tax records started in 1922. The top 1 per cent only accounted for 6 per cent of the national income, the top 10 per cent earned 30 per cent of national income while the bottom 50 per cent earned 24 per cent of national income.

In 2014, those in the top 10 per cent earned five times the national average income of Euro 6,200;  the top 1 per cent received around Euro 1,34,600 per year on average, while the top 0.1 per cent received approximately Euro 5,33,700 - 22 and 86 times the average income for Indian adults, respectively.
The World Inequality Lab promotes research on global inequality dynamics and maintains the World Wealth and Income Database, a database on the historical evolution of income and wealth. It is a collaborative effort involving 100 scholars across the world.  The authors of the new report said that the data combines all available economic data sources, including household surveys, tax receipts, and income and wealth national accounts, including offshore leaks, when available.

The growth in income inequality, however, is not just an India phenomenon. The research found that income inequality has increased in nearly all world regions in recent decades. Since 1980, income inequality has increased in North America, China, and Russia as well. More moderately in Europe. Exceptions to this pattern include the Middle East, sub-Saharan Africa, and Brazil, where income inequality has remained relatively stable.

The growing inequality clearly has political implications, Lucas Chancel told Business Today during a conversation. The rise of Donald Trump in the United States is an example. Governments have to invest more in education and health of the bottom 50 per cent to lessen this margin of inequality.
Nevertheless, here lies a challenge.

Since 1980, there have been large shifts in the ownership of capital.  "Net private capital -- the assets of individuals minus their debts -- has risen enormously in recent decades, but conversely, net public capital -- the assets of governments minus their debts -- has declined in nearly all countries since the 1980s due to large scale privatizations and rising public debts. Public capital is now approaching or below zero in rich countries. This exceptional situation by historical standards has strong implications on policy. In particular, it becomes extremely challenging for governments to invest in education, healthcare or environmental protection," the report stated.

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