The Top 1% and Rising: India’s Billionaire Boom
The top 1% share rose during the 1950s for a short while but consistently fell over the 60s and 70s. They contributed only 6.1% to the Net National Income in 1982. Since the early 1980s, Indian governments began to undertake economic reforms leading to liberalization in 1991. So, the decline in the Top 1% stopped. Since the early 1990s, the share of the richest 1% has been steadily increasing. It increased over the next 30 years, reaching a record high of 22.6% in 2022.
When we zoom in within the top 1%, we can see similar trends in growth for the top 0.1%, the top 0.01%, and the top 0.001%. The magnitude of growth in India is interesting. Unlike India, its neighbours, like China, have witnessed steady and stable growth in the Top 1% population. The decline of the public sector and the growth of the private sector could be a reason for this trend. First, there has been a significant decline in the capital share of registered manufacturing. Second, India underwent a service sector boom in the 1990s and 2000s, meaning more wealth to the Top 1%.
The Bottom 50%
Starting with 15 % in 1990, the bottom 50% was at 22.5 % by 2022, This share fell by the mid-1950s, and hovered around 22% to 23% from 1960 to 1980.
This share declined by two percentage points in 1983, stabilized at that level for the next few years, and then declined steadily after 1993. In recent years, there was a temporary small increase in the share of the poorest quintile, between 2018 and 2020, but since then it has started to decline again, back to 50%. Similarly, the share of the richest 10% declined slightly between 2018 and 2020, before increasing. This is likely due to India’s economic slowdown (which began in 2017 and culminated in the COVID-19 crisis in 2020) and the cyclical nature of inequality.
Average Income in India
As the chart illustrates, the average income in India was around Rs 60,000 in 2012. The figure grew steadily until 2017 before becoming linear in 2017-2018. The average income of India has since then dwindling from Rs 85,000 in 2020 to Rs 80,000 in 2021 and again rising to Rs 90,000 in the year 2022.
Long Run Income Inequality In India
The Long run Income Inequality chart shows the gaps between the Top 1%, Top 10% and the Bottom 50%. Top 1% is steadily growing while the Top 10% is on the rise. Meanwhile the Bottom 50% have declined.
The Top 1%'s Share In National Income: India And Its Neighbours
The chart illustrates the top 1% income share in several South Asian countries from 2000 to 2020. India shows the most significant increase, with the top 1% holding over 20% of the national income. This stark rise underscores the growing inequality in India. In contrast, Bhutan and Sri Lanka exhibit a relatively stable share, hovering around 18%, although Sri Lanka experienced a sharp decline after 2020. Pakistan, China, and Nepal maintain a smaller, stable income share for the top 1%, fluctuating around 12-15%. Nepal's trend, in particular, shows a notable decline after 2020, indicating reduced inequality.
The Top 10%'s Share In National Income: India And Its Neighbours
The chart depicts the top 10% income share in several South Asian countries from 2000 to 2020. India shows a steep rise in income inequality, with the top 10% controlling nearly 60% of the national income, the highest in the region. In contrast, neighboring countries like Pakistan, China, Bhutan, and Sri Lanka maintain a relatively stable share of around 40-45%. Nepal, which exhibited rising inequality until 2010, saw a sharp decline after 2020. This data highlights a significant divergence, with India having more unequal wealth distribution compared to its neighbors, which have relatively balanced income shares.
The Bottom 50%'s Share In National Income: India And Its Neighbours
The chart displays the share of national income held by the bottom 50% of earners in various South Asian countries from 2000 to 2020. Nepal stands out with a sharp rise after 2020, where the bottom 50% of earners control over 20% of the income, indicating reduced inequality. In contrast, India, Bhutan, China, Sri Lanka, and Pakistan show relatively stagnant trends, with the bottom 50% holding around 15% or less of the national income. This stagnant trend, particularly in India, reflects deep-seated inequality, with minimal gains for the lower-income population over the years.
Conclusion
After independence, the income inequality declined until the early 1980s. However, after this period, both top income and wealth shares began to climb and have been steadily increasing since the early 2000s. The trends in top income and wealth shares have closely matched each other in recent decades. As of 2022-23, the top 1%'s income and wealth shares had reached historic highs of 22.6% and 40.1%, respectively. India's top 1% income share is the highest among its neighbours, outpacing China, Nepal, Sri Lanka and Pakistan.
