India’s rich richer, poor poorer; No data, and we won’t get one soon either

Income inequality | Representative image | Photo courtesy: Special arrangement

When the union government was questioned in the Parliament recently about the rising inequality between the top 1 per cent and the bottom half of the population, it said that the data on income distribution was not compiled at a central level. Even when India does not have official data on income distribution, many studies have repeatedly confirmed that India is faced with the problem of massive income inequality.

Surjit Bhalla, economist and Former Executive Director for India at the International Monetary Fund speaks to The Probe’s Vikas Mavi on income inequality

“We do not have national data on income inequality in India. When I was at the National Sample Survey Office (NSSO) over a decade ago, I made a plea that the NSSO should have an income distribution survey. That plea fell on deaf ears within the government. So many years have passed, and I continue to make the same demand. This data is so important to the government that it is through it that the government can make the right decisions and bring about accurate policies. In the absence of this data, the very purpose of development schemes gets defeated as it does not reflect the ground realities,” asserts Surjit Bhalla, economist and former Executive Director for India at the International Monetary Fund (IMF).

Bhalla says that though India has considerable data on inequality in consumption, successive governments always shied away from collecting income distribution data. “Many Latin American countries, Europe, the US and some other western nations have a lot of income inequality data, but East Asian countries have predominantly collected data related to consumption inequality only,” rues Bhalla.

A report released by Oxfam stated that India’s top 1 per cent owned more than 40.5 per cent of the country’s total wealth in 2021. The report also notes that the number of billionaires in India increased from 102 in 2020 to 166 in 2022. But economists like Bhalla note that while private organisations occasionally come up with reports, these reports do not reflect the state of inequality in a country.

“Oxfam data is private sector data. The point is that we need national data on such important issues. I have seen the Oxfam data and am convinced that it is not a byproduct of rigorous research. This is a common problem everyone faces globally. Governments worldwide are keeping their national data a secret and allowing all private data to flourish. The question is, why do governments not want their national data to be published? The 2017-18 NSSO data on consumption was not released on the grounds of bad quality. Some of the data was leaked in some newspapers. Looking at the data, I found that it was terrible news for the country,” says Bhalla.

Amitabh Kundu, Distinguished Fellow at the Research and Information System for Developing Countries in conversation with The Probe’s Vikas Mavi

Amitabh Kundu, Distinguished Fellow at the Research and Information System for Developing Countries, states that the problem lies in the fact that the Indian government has not been able to find a solution to collect the distributional data related to income at the household level and only maintains data related to national, state and sectoral level.

“The global Credit Suisse data shows that India is one of the very highly unequal countries in the world in terms of income and wealth data. The top ten per cent of the wealthiest in India have more than 70 per cent of the total wealth, which is alarming. The data varies from private institution to institution. However, all the data on inequality is a matter of serious concern because this affects the poverty level in the country. We must certainly address the problem of unequal income distribution across the country’s households before it is too late,” says Kundu.

Kundu says that the way out in the absence of any meaningful data is to focus on inclusive growth targeting Sustainable Development Goals. “It is good that the government has the strategy of inclusive development, made in India and promotion of small and medium scale industries, but we certainly do need a deep strategy related to inclusive growth especially targeting the Sustainable Development Goals. Rural and urban linkages are also required to correct the structural wrongs in the system. There is inequality in access to education and skill development across gender, SC/ST population and the minority communities which needs to be addressed.”

India’s Household Consumption Expenditure Survey (HCES) is a primary source of statistical indicator on the social consumption of people. The survey is conducted every five years, and the last report was published in 2011-12. However, the government conducted the survey in 2017-18 and decided not to release it, citing “quality issues”. Human development economist Santosh Mehrotra believes that the ongoing HCES survey results will not be released before the 2024 elections due to political reasons.

“You cannot measure income in a highly informalised economy. You can measure income in a highly formalised economy like Germany, the USA or the UK because citizens are all registered, but in India, it is very difficult to measure this. Every five years, we used to conduct the Consumption Expenditure Survey, but this government did not release the data of the 2017-18 survey. Since then, a new survey has been done, which is the Consumption Expenditure Survey 2022-23, but I don’t think this data, too, will be released before the 2024 elections because of political reasons,” affirms Mehrotra.

Mehrotra notes that while income inequality data may be one issue that dominates the thought space on inequality, the problem related to inequality in India is far more complex than that. “There are many dimensions and types of inequality. Income inequality is, of course, there, but wealth inequality matters the most in any society. While wealth and income are economic categories, what is more important than these two is the third type of inequality, which is social inequality like for instance, caste inequality. Another dimension to this is the unaccounted wealth in terms of assets which could be gold, buildings and land. These transactions are made in cash. How do you measure this?” asks Mehrotra.

While the income distribution data is unavailable and the government is currently surveying the consumption data, the current data is an underestimate of the true inequality scenario in the country, says Amit Basole, Head of the Centre for Sustainable Employment at Azim Premji University.

“After 2011, we do not have consumption data. The 2017-18 data was junked by the government, and the government is working on the latest survey. However, I don’t think this data will be in tune with the ground realities because consumption data is actually measuring spending. Generally, spending has some natural limitations. The thing is that when people are poor, they may still be spending something. It can be negative also. For instance, I may be in debt. So, my net worth is negative, but consumption can never be negative. The other way of looking at it is while I may be very rich, I may not be spending that kind of money. So, how can spending data alone be indicative of anything?” questions Basole.

Basole notes that while the government releases the Periodic Labour Force Survey (PLFS) reports every year, indicating the inequality between the salary earners, the data is unreliable. “According to this data, the inequality has not increased that much but having said that, these surveys do not capture the really rich people. The fact is that inequality has definitely increased since the pandemic, but in the absence of any data, we can’t factually say anything concretely or question the government,” notes Basole.

PC Mohanan, the former Acting Chairperson of the National Statistical Commission, states that the government should focus on inclusive growth while simultaneously considering releasing data related to individual taxpayers. “We do not have clear data to assess inequality. Most countries use tax returns data to analyse income inequality. In India, we don’t have individual tax records that the Income Tax department releases. Our official surveys don’t collect income data. Some income data are collected by the National Council of Applied Economic Research (NCAER) and Centre for Monitoring Indian Economy (CMIE) in their surveys, but these are not holistic data based on which we can make any assessment or analysis. The government should consider releasing the tax returns so that at least one could understand how much inequality exists amongst the tax-paying population.”

According to a recent CMIE report, India’s unemployment rate rose to 7.45 per cent in February from 7.14 per cent in January. Mohanan maintains that the absence of data is one of the key reasons why many government programs are failing, resulting in a rise in unemployment among India’s population. “The only solution to this is we must improve our employment situation. We have a huge population, and the government should be able to generate a decent income for the people so that they can maintain a good standard of living. On this front, it is a big failure as almost half of our population is not productively employed. The CMIE data shows a very bleak picture of the employment scenario in India, and unemployment has been increasing steadily. It’s time the government took data collection seriously.”