Income Inequality in India

Credit Suisse Global Wealth Report 2015 notes the below regarding wealth concentration in India –

Top 1% of the population holds 53% of country’s wealth

Top 5% of the population holds 68.6% of country’s wealth

Top 10% of the population holds 76.3% of country’s wealth

Now, attempting to convert it into real money will give this.

India’s GDP in 2016 is $2288.715 billion. Exchange rate on 01 April 2016 is 66.2365 Rupees to a Dollar. India’s population is 1.235 billion. Now, let’s try to convert the wealth holdings into per-capita incomes.

Population %	Wealth Concentration	Per Capita (per annum - lakhs)	Per Capita of Balance (per annum - lakhs)	Per Capita of Balance (per day - Rs)
100%	100%	1.23	N/A	N/A
1%	53%	122.75	0.58	159.66
5%	68.60%	24.55	0.41	111.16
10%	76.30%	12.28	0.32	88.56

Is this a joke or what? Are we saying that the average annual income of the bottom 90% of India is a paltry 32000 rupees per annum? Then, what will be the wealth of the bottom 50% or even worse, bottom 10%? Well, we are on safer ground because bottom 1% include people like those of primitive tribes of Andaman who don’t even know the concept of money. If this is the rosy picture, there is no wonder government declared urban poor as 47 rupees and rural poor as 32. And wait. Going by the definition of Graham and Pettinato, we see that Middle Class in India earns between 92000 rupees and 1.83 lakh rupees or even worse, Pew Research Definition gives the income range as 82,400-2.46 lakh rupees. Another joke on India. Are we saying that a middle class person(has his own house, has a stable job, is a graduate and has his own vehicle) can live off with maximum 2.46 lakh rupees anywhere in India, note the word anywhere? And, if we consider the global absolute definition of poverty, which is anyone living on less than $1 a day, we are staring at maybe 75-80% of Indians as poor!

On the other end of the spectrum, let’s look at the subsidies. The total amounts to 2.5 lakh crores from the central government translating to 2000 rupees per head per annum. Include the states, this may double, landing us in the range of 5000 rupees per annum per head. Now, the question is this. What are these subsidies and what is the leak? Categorize them into various threads, you will see that food, petroleum, electricity, public transport, occupational subsidies(agriculture etc), domestic, educational subsidies and freebies carve out a considerable share for them. Is all this reaching the end user? The answer, as usual is a big no. The Economic Survey 2015 places the numbers as 46% leak for wheat, 52% leak for sugar and 85% leak for rice. This is but a glimpse of how much is getting wasted. Next question is, do all the end users require subsidies. Again, the Economic Survey comes to our help. 44% of wheat, 47% of rice, 54% of kerosene, 56% of sugar, 64% of pulses, 70% of railway fares, 75% of LPG and 90% of electricity consumption is not for the poor. Look at them one by one, the trend is that more the luxury, less the usage by the needy. Assuming anyone getting above 47 rupees per day is rich and anyone getting above 88 is uber-rich, do they deserve the subsidies? After all, they are capable of buying their stuff.

1.     Are we seriously saying that 90% of India is living for less than 88 rupees per day and that, that money is sufficient to run households? If this is the real and precarious scenario India is staring at, what sense does GDP growth numbers and FDIs in billions make? Is it not time for us to concentrate on the real problem along with bringing in real money? For example, doesn’t it make sense if the declared aim of the government is to double the income of the bottom 10% of Indian population every five years?

2.     What are all the subsidies we are having today? How many of them are required and how many of them are not needed? And of those which are required, how many of them can be recast with lesser expenses?

3.     What is the leakage ratio in the subsidized distribution system of India? What is the storage ratio? What steps are we taking to reduce these leaks and wastages?

It’s high time we introspect all these things and try to chalk out a way forward for India.