Survival of the Richest: India among most unequal countries in the world according to Oxfam

India overtook the United Kingdom last year as the world’s fifth largest economy. India is also home to the largest number of the poorest of the poor, estimated to be 228.9 million according to the ‘World Inequality Report’ (WIR), 2022. With rising poverty and an ‘affluent elite’, India is now among the most unequal countries in the world.

The first WIR in 2017—prepared by the Inequality Lab under Lucas Chancel and Thomas Picketty—had ominously found ‘the share of national income accruing to the top 1 per cent income earners at its highest level since the creation of the Indian Income Tax [Act] in 1922. The top 1 per cent of earners captured less than 21 per cent of total income in the late 1930s, before dropping to 6 per cent in the early 1980s and rising to 22 per cent today.’

Since then, India’s GDP growth has slowed down and in the post-pandemic period since 2020, the union government has been distributing free foodgrains to 800 million Indians. A report by the Centre for Monitoring Indian Economy estimated unemployment at a 45-year high. Inflation is at a 30-year high and so are corporate profits. While the pandemic caused considerable suffering and pain to people, company profits soared. Profiteering from pain is not new and the number of Indian billionaires ballooned from 120 in 2020 to 166 in 2022. The Russia-Ukraine war may have disrupted supply chains and caused shortages and price-hikes but it has also allowed some sections of industry to profit.

The day the world’s richest gathered at Davos in the middle of January to deliberate on a looming recession, Oxfam India released a report aptly titled, ‘Survival of the Richest’. The report brought out the irony that while most people were barely surviving the pandemic, pharmaceutical companies were reaping windfall gains. It also confirmed the WIR’s 2022 finding that India is now among the most unequal countries in the world; noting that ‘while the top 10 per cent and top 1 per cent hold respectively 57 per cent and 22 per cent of total national income, the share of the bottom 50 per cent has gone down to 13 per cent’.

According to the report, average household wealth in India stands at ₹983,010. It observed that the deregulation and liberalisation policies implemented since the mid-1980s have led to ‘one of the most extreme increases in income and wealth inequality observed in the world’.

The world map of inequalities reveals that national average income levels are poor predictors of inequality—among high-income countries, some are very unequal (such as the U.S.), while other are relatively equal (Sweden). ‘The same is true among low- and middle-income countries, with some exhibiting extreme inequality [Brazil and India], somewhat high levels [China] and moderate to relatively low levels [Malaysia, Uruguay],’ the WIR report held, while also pointing out that India has been denying access to sufficient data to estimate and monitor growing inequality. India, which had one of the best statistical systems among all developing countries till recently, has blocked access to more and more data.

Oxfam India’s ‘Survival of the Richest: The India Story’ makes a compelling case for taxing the rich and reducing GST slabs on commodities consumed by the masses.

Some of its conclusions have come in for criticism, primarily because the consumption data relied upon is from 2011-12. While decadeold data may not reflect current reality, it is undoubtedly illustrative; and consumption data for later years is not available in the public domain in any case.

The report states, ‘We advocate a progressive form of taxation, especially since the state earned more from indirect taxes following the pandemic years. Since 2020-21, the share of indirect taxes in the state exchequer has risen by 50 per cent. This increase in share can be attributed largely to the rise in hydrocarbon tax collection. Under the GST regime, there is a decline in the proportion of corporate taxes in the total revenues of the government. Observers argue that this is likely to increase inequality in the future.’

The report goes on to add, ‘… in 2022-23, INR 19.34 lakh crore of the country’s revenue, which is 88 per cent of the total revenue, is estimated to come from taxes. The failure to tax rich people and corporations fairly is not only a missed opportunity to reduce inequality—it actually worsens it, as governments must resort to taxing the rest of society more, or cut spending on health, education and other public services, and social protection that support the reduction of inequality. […] Since the implementation of GST, the share of direct taxes out of the total gross tax revenue receipt declined by 5 per cent by 2020-21.87. Similarly, revenue from corporate taxes as a percentage of gross tax revenue declined by 8 per cent.’ [SC1] This indicates that reliance on indirect taxes has increased. In its ‘Human Development Report’, 2015, the United Nations Development Programme (UNDP) had flagged that for just four per cent of its GDP, India could provide ‘a basic and modest set of social security guarantees for all citizens with universal pension, basic health care, child benefits and employment schemes’

The UNDP report had then called for a new social contract between governments, society and the private sector to ensure that all members of society have their needs taken into account in policy formulation, a global deal among governments to guarantee workers’ rights and benefits around the world and a decent work agenda that will help promote freedom of association, equity, security, and human dignity in work life.

The buzz [SC2] around the ‘Survival of the Richest’ report is partly because of the following claims:

• 64.3 per cent of the total GST is coming from the bottom 50 per cent of Indians while only three to four per cent of the GST come from the top 10 per cent.

• The bottom half of the population, 50 per cent of the poorest Indians, spends a higher percentage of their income on indirect taxes.

• The bottom 50 per cent of the population at an all-India level pays six times more on indirect taxation as a percentage of income compared to the top 10 per cent.

Extreme inequality, extreme distress at the bottom and extreme wealth at the top should not continue, says Oxfam India CEO, Amitabh Behar. He points out that even by the government’s own submission to the Supreme Court, 65 per cent of the deaths among children under the age of five are related to hunger/malnutrition to a greater or lesser extent.

The report also made the following suggestions/recommendations:

• Introduce one-off wealth taxes and windfall taxes to curb profiteering.

• Increase taxes on the richest one per cent and raise taxes on capital gains.

• Restore inheritance, property and land taxes, as well as net wealth taxes.

• Enhance budgetary allocation for the health sector to 2.5 per cent of GDP and for education to 6 per cent of GDP.

As anticipated, these were largely ignored by the finance minister Nirmala Sitharaman, while presenting the union budget.