Income of Fellow Indians: Wither Equity, Equality, or Equanimity?

The Stark Reality of India's Income Divide

In a nation of over 140 crore (1.4 billion) people, India's economic growth is often celebrated. Yet, beneath this narrative lies a tale of two Indias, separated by a chasm of income inequality that is both staggering and sobering. If left unaddressed, this divide has the potential to create a rift that extends beyond mere economic statistics, leading to more severe stresses within the socio-economic fabric of the country.

The Haves and the Have-Nots

At the top of India's economic pyramid sits a privileged few, while the vast majority struggle not just to make ends meet, but to survive on daily wages or meagre earnings. The top 1% of earners in India command a staggering 22.6% of the country's total income, with an average annual income exceeding ₹53 lakh. This elite group earns more than 22 times the national average, underscoring the extreme concentration of wealth at the top.

The Struggling Majority

In stark contrast, the bottom 50% of India's population—over 460 million adults—collectively earn just 15% of the nation's income. With an average annual income of merely ₹71,163, these individuals struggle daily to meet basic needs, leaving little room for aspirations of upward mobility. In a country where the official social security system is virtually non-existent or, at best, symbolic, millions of families are just one major illness away from abject poverty and starvation. This vulnerable group includes daily wage earners, agricultural and non-agricultural labourers, as well as small and marginal farmers, many of whom are burdened with formal and informal debts—often at exorbitant interest rates. When compounded with social obligations like the marriage of daughters, this class is under the crushing weight of debt and responsibilities, making their economic situation even more precarious.

The Squeezed Middle Class

The middle 40% of India's population, often considered the backbone of any economy, finds itself in an increasingly precarious position. Despite representing a significant portion of the population, their share of the national income stands at just 27.3%. This squeeze on the middle class raises serious concerns about social stability and economic growth. This group is often celebrated for being educated, aspirational, and the backbone of the salaried workforce—many of whom diligently pay income taxes. However, unlike the wealthy who can leverage depreciation on luxury assets or claim business travel expenses to reduce their tax liabilities, the middle class lacks such tax avoidance devices.

While the country's GDP may be growing, and India may be on the path to becoming the third-largest economy in the world, the reality for the middle class is far from rosy. High inflation and interest rates have left them trapped in a "middle-income trap," where their real income might actually be decreasing.

The Ultra-Rich: A World Apart

Perhaps the most provocative aspect of India's income inequality is the existence of a super-elite class. The top 0.001% of earners—just 9,223 individuals—have an average annual income exceeding ₹48 crore, more than 2,000 times the national average. This microscopic segment of society wields more wealth than millions of their fellow citizens combined. Their fortunes are not merely inherited; they are often bolstered by investments from obscure overseas tax havens, allegations of crony capitalism, and the capture of regulatory regimes. Moreover, the political executive often competes for their favours, further entrenching their influence. Many of these individuals maintain personal wealth management offices abroad, complete with PR visas or green cards for flexibility of travel and residency.

The private jets they use—ostensibly for business purposes—have operating expenses, staff salaries, and depreciation written off against their companies' income. India, unfortunately, holds the dubious distinction of being one of the few countries where the corporate tax rate is lower than the maximum tax bracket for individuals, and capital gains tax remains relatively low. Consequently, on a gross basis, the effective tax rate for these super-elites is likely lower than that of a middle-class salaried employee.

Beyond Income: The Wealth Gap

The disparity becomes even more pronounced when examining wealth distribution. The top 10% of India's population controls a staggering 65% of the country's total wealth, while the bottom 50%—half of all Indian adults—own a mere 6.4%, many of whom are trapped in a cycle of debt and poverty. This is not just a skewed distribution; it is profoundly inequitable, bordering on unjust. One must question what has become of the Directive Principles of State Policy, which advocate for the equitable distribution of the nation's resources.

A Call for Reflection

These figures paint a picture of an India deeply divided, where economic opportunity and security are luxuries afforded to a select few. As the nation continues on its path of development, it must grapple with fundamental questions:

• Can a society with such extreme inequality sustain itself in the long term?

• What are the social and political implications of a system where the ultra-rich accumulate wealth at rates far outpacing the rest of the population?

• How can India harness its economic potential to create more inclusive growth that benefits all segments of society?

The answers to these questions will shape the future of India, determining whether it can transform its economic miracle into shared prosperity for all its citizens. If you have any answers or comments or suggestions, please don’t hesitate to respond.