Bharat, a Burgeoning Billionaires Bagh!
According to the Hurun Global Rich List 2024 released on 26 March 2024, in adding 84 new billionaires in the year gone by, India is second only to the US (109). 
 
Mumbai, with 92 billionaires, overtaking Beijing with 91 may be seen as moral victory over our arch rival! Mumbai and New Delhi added the maximum new billionaires, a figure of 26 and 18, respectively, besting all other citadels of billionaires in the world! 
 
In the amrit kaal, spanning the years 2014-2024, India piped its two competitors, US and China, with its brisk bulging of billionaires from 70 to 271! China, in the same period, ambled from 458 to 814 and the US at even a tardier pace, 481 to 800.
 
The sole sour spot may be that Mukesh Ambani and family, who were perched at the 8th rank globally in 2019 with a wealth of US$53bn (billion), have dropped two places to the 10th rank, though their wealth increased to US$115bn in this period. The Indian czar, despite pushing the engine at 16.8% CAGR (compounded annual growth rate), is perhaps not running the race as fact as the nine others globally!
 
The media acknowledgement of these remarkable statistics about Bharat’s burgeoning billionaires has been muted. Celebrating wealth accumulation—though entirely legitimate— is a contradiction that will be very inconvenient to face in the midst of the largest electoral exercise on the globe. After all, billionaires are a minuscule minority in a nation teeming with hundreds of millions of have-nots, and the government is compelled to provide free rations to almost 800mn (million). 
 
The release of the Forbes World Billionaires report was almost synchronous with the release of the India Employment Report 2024 which revealed that the unemployment situation in the country is more distressing than what has been imagined so far.
 
Let me paraphrase a key finding that should worry the political establishment and policymakers. One, that ‘employment in India is predominantly self-employment and casual employment. Nearly 82% of the workforce engages in the informal sector and nearly 90% is informally employed. Due to the nature of employment growth since 2019, the share of total employment, which is in the informal sector and/or in informal employment, or self-employed, real earnings also declined after 2019. Overall, wages have remained low. As much as 62% of the unskilled casual agriculture workers and 70% of such workers in the construction sector at the all-India level did not receive the prescribed daily minimum wages in 2022 (sic).’
 
And, of equal, if not greater concern, should be the findings thrown up in the report titled ‘The Rise of the Billionaire Raj’ that was released a fortnight earlier by a team of economists working on income and wealth inequality in India with World Inequality Lab.
 
This study is conducted periodically and covers various countries. The India report has been compiled by ‘combining the national income accounts, wealth aggregates, tax tabulations, rich lists, and surveys on income, consumption, and wealth in a consistent framework to present long run homogeneous series of income and wealth inequality in India’ (extracted from the preface to the report).
 
In this article, I will comment on some salient data revealed by the report along with a few related statistics that were not relied upon by the report. A few business papers did publish some of the charts and tables used in the inequality report.
 
The stark reality of the income inequality, exhibited by dissecting the national income of the year 2022-23 across different income strata, pithily brings home the issue covered in detail in the 86-page report.
 
The adult population of 922.3mn is categorised under three heads—the bottom 50%, the top 10% and the middle 40%.
 
 
Even at the top 10% level, the threshold income is quite low at Rs2,90,848 per annum. This implies that only 10% of adults in this country earn more than Rs24,238 per month!
 
The table below breaks down the richest class into subdivisions demonstrating the distance each lower subdivision has from its predecessor.
 
Even among the ‘richie rich’, there is enough room for the top 1% to complain of the injustice of income inequality as the curve steepens in its travel upwards! 
 
 
Rs20.74 lakh per annum, being the threshold level for the top 1%, is actually surpassed in the recent campus placements at IIM-Rohtak and IIM-Bangalore with the median salaries of Rs19.27 lakh and Rs32.5 lakh, respectively!
 
These newly-minted graduates, with little experience in managing anything, will be part of the 1% of the earning population of the country, underscoring how a tiny sliver of society stands privileged due to a certain social background and access to a particular type of education.
 
The data available with the World Inequality Lab captures the movement in inequality over not just a few years, but two centuries to be precise!
 
 
The table below is extracted from the above graph to zoom in on the data for the decades post-independence.
 
 
The difference between the top 1% and the bottom 50%, which was almost 10 percentile points in favour of the latter in 1950, exactly reverses in less than seven decades’ time such that the top 1% has income which is nine percentile points more than the bottom 50%!
 
While the top 1% owns 21.7% of the total national income, the top 0.1% owns almost 10% of the national income, demonstrating the skewness in the income distribution even at the highest possible level.
 
However, the tax collections nowhere reflect this concentration in the income. My article would turn too heavy if all the numbers in the report were thrown at the reader. 
 
How far the sharp rise in inequality post-1990 is correlated to the change in the tax rates, which were periodically slashed from the 1980s onwards, from the stratospheric heights of the 1970s, is for the economists to deliberate. 
 
High tax rates were criticised for promoting black money and tax evasion. Lower taxes became a fashion in the days of Ronald Reagan and Margaret Thatcher, in the US and UK, respectively. India also followed the theory eponymously named after its proponent, the economist, Arthur Laffer.
 
The most recent data available on the effective tax rate and the income declared across taxpayers offer little comfort on the Laffer curve working in the Indian context.
 
 
India stands on the horns of a paradox. The lion’s share of its national income is cornered by a tiny fraction of the population. Its effective taxpayer base is very low as shown in comparison to a few other countries in the picture below.
 
It also has the problem of a low per capita gross domestic product (GDP) that will continue into the coming years as shown in comparison to peer countries that constitute the bottom 10 of the G20.
 
 
While the graph above shows the figure in purchasing power parity (PPP) terms, the actual per capita GDP growth in India in the ten-year period 1994 -2004 went from US$346 to US$624 at 6.1% CAGR, in the decade of 2004-14 (termed by the current Union finance minister—FM—as a wasted decade) (US$624 to US$1560) it grew by 9.6% CAGR, and in the eight years between 2014 and 2022 (US$1560-US$2411) at 5.6% CAGR.
 
While in absolute growth terms, we are often credited as the fastest-growing major economy, it may be important to check the per capita GDP growth in US dollar terms if we qualify as that.
 
In the eight-year period (2014-22) a country in the neighbourhood, though much smaller in size - Bangladesh, grew at 11.71% with the per capita GDP moving from US$1,108 to US$2,688!  
 
And China, said to have slipped grievously in economic growth, grew its per capita GDP from US$7,636 in 2014 to US$12,720 in 2022, a CAGR of 6.6%. 
 
The triad of low real per capita income, the excessive concentration of income with a tiny fraction of the  total population, and a tax system that is failing to deliver a just transfer of resources from the haves to the have nots, is a tinder box the country is resting on! The level of inequality in comparison to a few other countries is also shown on the graph here to demonstrate that we may enjoy the dubious distinction of being the most unequal country at the top 1% level of income. 
 
The divergence in the income inequality has been the highest in the last two decades or so. There is scarcely any official recognition of the issue. None of the economic surveys or the Union budget speeches delivered in this period make even a nodding acknowledgement of the issue. There were four different Union FMs in office during the 20-year period.
 
Whenever any international agency puts out such studies, it is officially debunked as lacking in thoroughness in methodology or faulted for basing the findings on inaccurate data. If such is the conviction, the official machinery should come up with a credible local exercise that forms the avenue for further debate among the right experts. 
 
It may be befitting to end with the words of Oliver Goldsmith’s poem The Deserted Village: 
 
‘Ill fares the land, to hastening ills a prey, where wealth accumulates and men decay!’
 
(Ranganathan V is a CA and CS. He has over 43 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
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