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Thomas Piketty's India

NEWS WORLD INDIA | 0
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| September 20 , 2017 , 12:33 IST

In December this year economists Lucas Chancel and Thomas Piketty will release the first World Inequality Report, the result of the work of more than 100 researchers. In this much awaited report, the authors will measure and compare inequality across countries.

Thomas Piketty was the author of Capital, the 2013 bestselling book on capitalism and increasing inequality. And just earlier this summer, Chancel and Piketty published their research on inequality in India in a Wealth & Income Database (WID) working paper.

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News World India finds that one of the most important revelations from Chancel and Piketty's research on inequality in India was that the current income inequality in India is even higher than during pre-independence period! The researchers show that the share of national income belonging to the top 1% income earners in India is now at its highest level since the creation of the Indian Income tax in 1922. In the late 1930s the top 1% of earners captured less than 21% of total income in the late 1930s, before dropping to 6% in the early 1980s and rising more than ever before to 22% today.

Over the 1951-1980 period, there was considerable progress made by India’s bottom 50% group, as they captured 28% of total growth.The incomes of this group grew faster than that of the average population of India, while the top 0.1% incomes decreased. However, over the 1980-2014 period this trend was reversed, as the top 0.1% of earners captured a higher share of total growth of 12% than the bottom 50% that captured only 11%.The top 1% grew at 29% whereas the middle 40% grew at 23%. This goes to show that during 1980 - 2014 the richest in India have been growing richer at a faster pace than they have ever before, and much more than the income growth of India’s poorest and the middle income group.

ALSO READ: Can You Believe It? 58% Of India's Total Wealth Lies In Hands Of 1% Of Population

It is not easy to source data on inequality in India. The authors used India’s income tax data and household survey data, amongst other sources and methodologies, to arrive at their conclusions. However both these data sources can not be depended upon.

The Indian Income Tax Department released tax tabulations from 1922 to 1999, and then stopped the publication of this data in 2000, and then resumed the publication of this data for years 2011 to 2014. So the data set the authors have analysed is not complete. Moreover few Indians pay their taxes! Less than 0.5% of the population filed tax returns up to the 1950s, between 0.2% and 1% paid income tax over the period between 1960 to 1990, about 1% to close to 3% paid in the late 1990s, and more than 6% have paid income tax in the latest period.The current figure is similar to the levels observed in France and in the USA in the late 1910s! The household survey data too has many shortcomings such as under reporting and under sampling issues. Further there is a difference in Indian survey consumption growth rates and national accounts growth rates, particularly during the recent period. For example according to NAS, national income grew at 475% and household consumption grew at slightly more than 300%, while NSSO data indicates that household consumption grew at 200%.

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Besides Chancel and Piketty, the growing inequality in India has been pointed out by others too. Economist Amartya Sen has written about it for decades. Also in the Forbes' India Rich List the wealth of the richest Indians amounted to less than 2% of national income in the 1990s, was 10% in 2015, and peaked at 27% before the 2008-9 financial crisis.

However as a new finding in the WID, Chancel and Piketty reveal that India has the highest gap between the growth of the top 1% and growth of the full population, in the world!

According to News World India, such data backed research - however challenging it may be to do so - is of paramount importance so that appropriate policies for inclusive growth can be designed accordingly in a well informed manner.