Half of India is so poor it owns almost nothing

How the other half lives.
How the other half lives.
Image: REUTERS/Shailesh Andrade
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India’s economy is a paradox of inequality—and a new global study confirms this.

It is among the world’s most unequal countries, says the World Inequality Report 2022, brought out by global data tracker World Inequality Database. This, Nobel laureates Esther Duflo and Abhijit Banerjee note in a foreword to the report, is due to a loosening of state control and letting private wealth accumulate unabashedly.

“Policy kept inequality in check, and policy changes let it run amok,” they wrote in the report released yesterday (Dec. 7).

In India’s case, the consequences of liberalising the economy in 1991 have been particularly harsh on the bottom 50% of the population. While India inherited a grossly unequal population because of the policies of the British empire, a socialist-focused regime helped the country reduce disparity with five-year plans, according to the authors.

But “since the mid-1980s, deregulation and liberalisation policies have led to one of the most extreme increases in income and wealth inequality observed in the world,” the authors said.

To begin with, there is a vast gap between the incomes of the bottom 50% of the population and the top 10%. The top 1% alone earns 27% of the total national income, according to the report.

The inequality in wealth is even greater, given that while the bottom half’s share in the total income is 14%, its share in total wealth is only about 6%.

The researchers wrote that these changes have been mapped despite poor data transparency in India. “Over the past three years, the quality of inequality data released by the government has seriously deteriorated, making it particularly difficult to assess recent inequality changes.”

Gender inequality in India

While India has made strides in improving its sex ratio, economic inequality is still heavily tilted against women. Women share only 18% of the total national income, even though their population share is close to 50%.

This, the authors noted, is among the worst in the world, even below the 21% average for Asia. Such vast inequality persists despite an improvement of 8 percentage points in female income share since 1990.