'A success story': Top Singaporean diplomat defends India's rising inequality as a byproduct of development

As India surges toward becoming the world's fourth-largest economy with a projected GDP of $4.19 trillion in FY26, former Singaporean diplomat and global affairs expert Kishore Mahbubani has made a strong case for viewing rising inequality in a new light.

"Inequality is a challenge globally. And by the way, I think the one piece of good news I have for all of you is that of course inequality is in principle a bad thing. But the laws of economics tell us that in the first phase of development when countries grow very fast, one natural consequence of that is that countries become more unequal," Mahbubani said while speaking at an event.

Citing China's transition, he added, "China for example, Gini Coefficient went from 0.3 which was very equal to 0.47 matching America's inequality. But that's a success story. It's a success story because it comes from development. And so if India's inequality rises because of development it is a good thing."

He drew from philosophy and economics to build his argument. "If you have time, read a wonderful chapter on inequality written by Steven Pinker of Harvard and he quotes from a philosopher that I studied, John Rawls. And what John Rawls said is that the most important thing you need to address when it comes to the issue of inequality is what happens to the bottom 10%. Are the bottom 10% better off in a more equal society? Are the bottom 10% of people better off in a more unequal society? And quite often because inequality is a result of development the bottom 10% are actually better off in a more unequal society."

On India's track record, Mahbubani said, "India's poverty reduction hasn't been as successful as China’s but it’s also been quite phenomenal — the number of people that have been lifted up from absolute poverty. So when I gave you the statistic that 3/4 of the world population that used to be in world poverty—from 75% it came down to 10%—it came down to 10% because of China and India having the two largest most populous societies. So that inequality is not holding back India’s development."

Neelkanth Mishra, Chief Economist at Axis Bank, recently expressed a similar economic rationale while warning of the risks if inequality goes unmanaged. "At this stage of growth, there is no economy in the world which has not seen an increase in inequality...there is a surplus of labor and there is a shortage of capital. So capital has more pricing power and therefore income starts to shift towards capital," Mishra told India Today.

However, Mishra noted that India has managed to mitigate the worst effects in recent years. "Between 2012 and 2023 we actually saw consumption inequality in India fall,” he said, attributing this to better access to basic infrastructure like roads, electricity, mobile phones, and LPG.

He cautioned, however, that India is still far from the “Lewis Turning Point” — the stage where labor supply growth halts and inequality begins to decline naturally. "In the interim we have to be very careful about the rising inequality,” he said, warning that unchecked inequality could erode political support for key reforms.