Is India truly a "billionaire raj" or is the world witnessing a flawed narrative cloaked in dramatic reports? The World Inequality Lab report, a few months ago, sensationalised India's inequality, painting it as a nation spiralling into unprecedented disparity. Can any nation in history claim to have eliminated inequality entirely? And why target an economy that has emerged as a rare global success story amid uncertainty?
With the top 1% of the population controlling 22.6% of national income and 40.1% of wealth in financial year 2023, the report concluded that inequality in India had reached historic highs. However, the methodology, conclusions and proposed policy recommendations have been critiqued by economic experts. Of course, one would assume such a report would convert itself into a best-seller book for a market focussed on poverty-porn.
With the top 1% of the population controlling 22.6% of national income and 40.1% of wealth in financial year 2023, the report concluded that inequality in India had reached historic highs. However, the methodology, conclusions and proposed policy recommendations have been critiqued by economic experts. Of course, one would assume such a report would convert itself into a best-seller book for a market focussed on poverty-porn.
India's journey of economic development over the past three decades has been remarkable in many respects. Liberalisation in the 1990s opened the economy to global markets, unleashed private enterprise and lifted millions out of poverty.
The report relies heavily on fragmented datasets, including tax filings, surveys and rich lists, to estimate the distribution of income and wealth. A large portion of the economy operates in the informal sector, where incomes are often unrecorded or under-reported. Wealth, particularly in forms like real estate and gold, is notoriously difficult to value accurately, especially given significant regional variations in prices and reporting practices.
Another significant flaw lies in the comparison of India's inequality levels with those of countries like the United States and Brazil. These nations have vastly different economic structures, institutional capacities and stages of development. The informal economy constitutes a much larger share of India's gross domestic product and its vast population still relies heavily on agriculture and subsistence-level occupations. This makes direct comparisons misleading.
In many cases, India's income inequality statistics are influenced as much by the sheer scale of its population as by actual disparities in living standards. The ability to buy a cup of tea for Rs 8 at a bustling street-side chai-tapri or enjoy a vada-pav or equivalent local food for Rs 15 in an urban market demonstrates the remarkable economic viability and accessibility that underpin India's consumption-driven economy. Both value consumption as well as luxury exists.
Unlike in many western countries, where income inequality directly translates into disparities in living standards, India's extensive subsidy programmes on food, housing and healthcare help to soften the blow for lower-income groups. These safety nets, coupled with initiatives like the Mahatma Gandhi National Rural Employment Guarantee Act and direct cash transfer schemes, have played a significant role in improving the material conditions of the poorest segments of society, even if they do not directly reduce measured income inequality.
The idea of a super-wealth tax on billionaires and restructuring of wealth taxes is a populist theoretical one that may do more harm than good. While the optics of taxing the wealthy is appealing, the implementation of such measures is fraught with challenges. High tax rates on the rich can deter investment, stifle entrepreneurship and encourage capital flight, particularly in a globalised economy where businesses and individuals can easily relocate. For a economically developing country like India, it has to continue encouraging entrepreneurship capital. Any punitive taxation on wealth creation could be counterproductive.
India's economic transformation has been led by the services sector, which employs a relatively small proportion of the workforce compared to agriculture and manufacturing. The lack of widespread employment opportunities in high-productivity sectors has left large swathes of the population trapped in low-paying, precarious jobs. Addressing this imbalance requires targeted investments in skilling, infrastructure, and market development — areas that have seen significant progress but remain works in progress.
India's inequality challenge is also deeply intertwined with its regional disparities. States like Maharashtra, Tamil Nadu and Karnataka have surged ahead in terms of economic development, while others lag behind. Policies that focus on redistribution without addressing these fundamental gaps risk being palliative rather than transformative. Over the past decade, India has made broader progress in reducing absolute poverty and improving access to basic services. For instance, the World Bank estimates that India has lifted over 415 million people out of poverty in the last 15 years.
Inequality is not inherently problematic if it results from legitimate wealth creation and drives overall economic growth. The focus should instead be on ensuring equality of opportunity, where individuals have access to education, healthcare and infrastructure, allowing them to participate meaningfully in the economy. In this regard, India's digital revolution, spearheaded by the rollout of the Aadhaar system, UPI-based payments and affordable internet access, has significantly expanded opportunities for millions.
No nation in human history, no ruler, and no economic system has ever achieved the utopian ideal of complete equality. Inequality, to some degree, is an inevitable aspect of any functioning society, driven by differences in skills, effort, opportunity and outcomes. To hold India to a standard that no country has met reveals a fundamental bias in any narrative that criticises Indian economy. This is especially problematic when applied to an economy that has been one of the very few bright spots in an increasingly uncertain global landscape.
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Policymakers, across the Centre and the states, must focus on creating jobs, improving education and healthcare systems. At the same time, efforts to improve data quality and transparency will be essential for fostering informed public debates on these critical issues.
The western narrative of singling out India often appears to be a geopolitical tool, an attempt to chip away at its growing global stature. But a glance at the so-called developed nations tells a different story. Cities like London, New York and San Francisco reveal stark realities: more homeless and neglected individuals than one finds across many developing nations. Economies like India do not claim to be free of poverty or social challenges, but they are deeply rooted in a concern for humanity.
In the fiscal year 2023–24, India's GDP growth is projected at 6.9%, following a robust 7.2% expansion in 2022–23, positioning it as the fastest-growing economy. India's economic vision prioritises building an engine of growth that raises incomes and opportunities for its citizens. It doesn't aspire to enforce equal income or wealth but rather to foster a cohesive market where opportunities are equitable. This is precisely why global investors are flocking to India — because they see a nation focused on inclusive development, innovation and resilience.
Inequality is not the enemy of progress; complacency and inaction are. A thriving society does not aim to erase all disparity but strives to ensure that opportunity is abundant, access is fair, and success is within reach for all who dare to dream.
Srinath Sridharan is a corporate adviser and independent director on Corporate Boards. He tweets as @ssmumbai
Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
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