Thank you for bringing these observations to a wider audience. Very few are aware of glaring inequalities that are part of India and empirical studies have shown that they are made worse by situations like pandemic. Here are 2 links those I would like to share
Thanks Sayali. Both of those were very insightful. Normally, I hate it when people report that top x% of the country has y% of the income share. These numbers really don't mean much until you put them in context, both, in comparison to other countries, and how the y% is changing over time. Your first link clearly shows both, and how India is doing pretty badly on both counts.
And I had always accepted the claim that only x% of Indians pay income tax along with the implication that this is too low, without thinking much about it. The vague feelling was that a very large number of people are dodging taxes. Again, your second link puts it in context properly and makes it clear that the number shouldn't really be surprising.
I am not saying there is no tax evasion. However this tax evasion is much larger in the rich corporate group which is allowed to go unabated while small fish are made to suffer. That's a different point for discussion - however, largely given our income, we are not doing too badly on taxability :)
We all think we are middle class, which actually comes from our social values. Our idea of rich (1%) is someone living in a palace, like a "staircase" house, as they still show in the movies, living on ancestral wealth. And given the size of our country and population, it is not surprising that metro people have no idea of how the rest of the country lives. When I first came across the ICE360 survey in Mint, I was really excited at this rich new source of data. Nice to see it being put to good use again.
Yes, I remember being amazed at the Mint articles and felt that I should write about them "someday". Sat on them for 4 years and finally got around to it now.
The glaring inequality between the multi millionnairs and poor is increasing drastically over the years especially during he last decade. A sweeping revolutionary measures can only bridge the gap between the rich and poor.
Amazing insights! Thanks for this.. Had a few queries..(A) In this para "The average monthly household income of the top 1% of all Indian households was ₹66k in 2016. Accounting for inflation in the last four years (and not accounting for any contraction due to COVID), that still works out to ₹85k. So, if your household earns more than ₹85k per month, then you are in the top 0.5% of India." how do you move 1% to 0.5%? Didnt follow that.. (B) Firewood statistics is a bit counter-intuitive when contrasted with the LPG connection growth in 2014-19 period. So, extrapolating 2016 data in 2020 now could be seriously misleading. (C) The para about 22% farmers, 25% construction workers is not correct. As per RBI reports, India has a workforce of approx 47-48 crores. Of this, 12 cr are land-owning farmers, and another 14 cr are agricultural labourers (including fishermen and animal husbandry). So that is 26/48 which is 55% of labour force in agri sector. Next two big sectors are 5 cr in construction labour and 4.5 cr in retail sector (mom and pop stores, owned or working there). Great insights once again! Am laughing at my responses to your survey now!
Thanks for looking at things in so much detail, and taking the time to bring up these issues.
For (A): if the average income of the top 1% is 85k, then half of them earn less than 85k and half of them earn more than 85k. Technically this would be really only true for median, not average, but in this case, I felt that the median would be pretty close to the average.
(B): Access to LPG and actually using LPG for all cooking are not the same. For example, in 2018, although LPG had reached 89.5% of the houses, 44.5% were still using firewood for cooking. It is possible that the numbers have changed in 2019, but I don't think by that much.
A) I believe the average would be lower than 85k in this case, only strengthening your case on how privileged we really are. It follows from the fact that the top 0.00001% of the 0.5% are probably bringing in crores, and the bottom 0.00001% of the top 0.5% are bringing in at least 75k.
B) I live in a village close to Dehradun and have help at home who often have to resort to firewood. And I am nowhere close to being in the 'real' rural India. I see how this can be true.
I knew we were the privileged when we had a discussion at the national level about reservation for economically disadvantaged and set the income at 8L or something. There is a website that tells you where you are w.r.t not India but the world. (Note: I was shocked at the time). Most of the world is poor (because of population, most of the poor is in India).
We should do something about it in whatever way we can. Best is to get better governments but all level who could redistribute income and resources an equitable manner so that whole world improves; but that doesn't seem likely in our current national (and to some extent global) situation.
True, Aparna. One of the more interesting (and controversial) proposals for solving this problem is Universal Basic Income. I'm hoping to cover some misconceptions about UBI next week.
Ugh! I posted a comment, saw two of them and then, deleted on and both got deleted! I am not sure what went wrong. Anyways, I am interested in UBI. I think the concerns are about inflation, that could be perhaps managed by rent control and price control, but don't know much. I will be looking forward to it.
One thing I have to say about data here is the right framing. I may be wrong here, and feel free to disagree, but here goes.
If we frame the conversation as 0.5 of the country against the rest of the country, then that might be counter productive because it might lead the 0.5 to resist any changes and swing right wing. Most of the 0.5 sees itself as struggling to pay kids' tuition, college fees, home loans, additional expenses etc. And would fall off the ladder if say, they get any unexpected medical expense, or reduction in salary. If we then say, we have to do more for the most marginalised, what the salaried class will hear is that, their wealth will be taken away to give to the most disadvantaged. They would feel embattled. That is not advantageous in the long term for a better world .
The real threat here is the plutocrats, few in number, across the world; may be 10000 to 1L with even fewer billionaires with outsized power. The framing should be everyone against the plutes and their lackeys, rather than the salaried against everyone else. Otherwise, Plutes and politicians will continue to provoke class war, 30-40% of the country will keep voting for the right-wing whose entire modus operandi, no matter the country, is and has been about making material wealth a zero-sum game where the 'other' needs to be crippled for 'us' to get ahead. Casteism, religious wars etc. provoke havoc just in this scenario.
Material wealth/happiness is not a zero-sum game, esp, not a competition between 0.5 and the marginalised. It is a game of power between superrich and others, and there are many fault lines that everyone who wants a just and more equitable world needs to be aware of. Right framing is key here. (I am getting concerned, because most of the leftist/liberal framing is kinda opposite).
A balanced narrative, in my opinion, would show the power of the super rich (not Bollywood, but the real estate tycoons, Adanis and Ambanis, oil guys and social media/IT giants) along with an analysis of how the most marginalised are faring. And leaven the mix with a few on how the status quo is detrimental to a majority of the 0.5 too. You cannot win in a democracy unless you bring a decent majority along, and that is difficult when the fault lines are so insidious.
Interesting points. I see what you're getting at. But this gets into areas of social and political science that I don't yet understand well, so I haven't yet formed any opinions on. Still in read and understand mode.
My controversial opinion is that we should do nothing about income inequality. Every government for the past 60 years has followed shitty socialist principles. Basically it is like we have a cake and instead of increasing the mass production of that cake, we are arguing as to how best to divide the cake in hand. Instead of getting 10% of 1 cake, I would rather have 1% of 1000 cakes .
Sometime ago I found stats of income tax payer count in different ranges. I think it was on official income tax website. Now unable to find it. Can someone post it?
Talking about salaried people, even primary teachers earn over 40k per month. If both husband and wife are teachers, the family income is about 1 lakh per month.
Similar is the case of several govt servants.
If India has 50 lakh IT professionals, may be half of them earn over 50k per month.
This is just the salaried class. We aren't even talking about self employed people, where there is massive under reporting. So I have hard time accepting that only 15 lakh families earn over 85k per month.
I have a relative who is a doctor. His monthly income may be 10 lakh. He reports about 15 lakh per year. Similar is the case of a close business family. Doctors, lawyers, CAs, shopkeepers, rich farmers - massive under reporting.
What I am stating is just anecdotal, but can't be ignored I think. Other data like house prices, farm land prices, car sales - does not seem to agree with only 15 lakh families earning > 85k/month.
While there are 50L IT professionals, more than 30L of them are in the BPO sector where the salaries are quite low. If half of the remaining make more than 50K per month, then I would guess that the ones making more than 85K per month might be one-fourth, so about 5L. Add another 10L for all the other categories, and we are still in the right ballpark.
This study has not taken into account the black money and cash transactions which dominate rural India where 55%+ of the population lives. Moreover, it takes into account disposable income and not wealth, which shows a 'high' cash flow but doesn't represent actual wealth. Agriculture is mainly a cash based business, which is tax free and hence isn't recognized in the study. I would love to get feedback on my opinion.
Nonetheless, it was a great read and different perspective.
I don't have numbers. It's true that the daily expenses in rural India are dominated by cash transaction, labor, food, medicines and education. Banking sector penetrates poorly there, and services are awful, my own experience is very bad.
Finally, given the spate of co-ops and other banks going solvent, people prefer to hoard land cash and gold more. Also, life expectancy is lower, and people don't see how they would need money when they are 60+.
Being tax free in farming is not such loss for govt, most people get less than 3L per year of income anyway. If you start taxing remaining that population, most will be in debt within a couple of years, you will break farming sector completely.
Thank you for sharing this extensive analysis. You might also want to look at the visual depicton of the income inequality and how it manifests in the way people live their lives in India - at https://onehundredhomes.in/
Wonderful article Navin. I think most of the people do not realize one major thing. If you have a roof over your head, food on the table and a family that is safe and healthy, you probably belong to the top 1% of Indians. Secondly, I dont know if the survey (2016) that you talked about can give any guidance on disposable monthly income and not in general income tat people have. I think the tendency among younger generation to be YOLO may have probably made a dent there in terms of ability to save.
Thank you for bringing these observations to a wider audience. Very few are aware of glaring inequalities that are part of India and empirical studies have shown that they are made worse by situations like pandemic. Here are 2 links those I would like to share
1. https://www.bloombergquint.com/business/income-inequality-in-india-rise-in-inequality-in-india-second-only-to-russia-shows-un-report
2. It's my pet peeve when people keep talking about how tax base in India is low in an accusing tone.
https://www.hindustantimes.com/analysis/the-myth-of-india-s-low-income-tax-base/story-UlN3FLG6NNzQilt09BSXnN.html
Thanks Sayali. Both of those were very insightful. Normally, I hate it when people report that top x% of the country has y% of the income share. These numbers really don't mean much until you put them in context, both, in comparison to other countries, and how the y% is changing over time. Your first link clearly shows both, and how India is doing pretty badly on both counts.
And I had always accepted the claim that only x% of Indians pay income tax along with the implication that this is too low, without thinking much about it. The vague feelling was that a very large number of people are dodging taxes. Again, your second link puts it in context properly and makes it clear that the number shouldn't really be surprising.
I am not saying there is no tax evasion. However this tax evasion is much larger in the rich corporate group which is allowed to go unabated while small fish are made to suffer. That's a different point for discussion - however, largely given our income, we are not doing too badly on taxability :)
Powerful piece. My friends and I belong to the category that calls itself middle class. I can see now that that idea needs a drastic revision
We all think we are middle class, which actually comes from our social values. Our idea of rich (1%) is someone living in a palace, like a "staircase" house, as they still show in the movies, living on ancestral wealth. And given the size of our country and population, it is not surprising that metro people have no idea of how the rest of the country lives. When I first came across the ICE360 survey in Mint, I was really excited at this rich new source of data. Nice to see it being put to good use again.
Yes, I remember being amazed at the Mint articles and felt that I should write about them "someday". Sat on them for 4 years and finally got around to it now.
I read somewhere only about 2% - 3% Indians have ever sat on a domestic flight. So yes this reinforces that.
The glaring inequality between the multi millionnairs and poor is increasing drastically over the years especially during he last decade. A sweeping revolutionary measures can only bridge the gap between the rich and poor.
Amazing insights! Thanks for this.. Had a few queries..(A) In this para "The average monthly household income of the top 1% of all Indian households was ₹66k in 2016. Accounting for inflation in the last four years (and not accounting for any contraction due to COVID), that still works out to ₹85k. So, if your household earns more than ₹85k per month, then you are in the top 0.5% of India." how do you move 1% to 0.5%? Didnt follow that.. (B) Firewood statistics is a bit counter-intuitive when contrasted with the LPG connection growth in 2014-19 period. So, extrapolating 2016 data in 2020 now could be seriously misleading. (C) The para about 22% farmers, 25% construction workers is not correct. As per RBI reports, India has a workforce of approx 47-48 crores. Of this, 12 cr are land-owning farmers, and another 14 cr are agricultural labourers (including fishermen and animal husbandry). So that is 26/48 which is 55% of labour force in agri sector. Next two big sectors are 5 cr in construction labour and 4.5 cr in retail sector (mom and pop stores, owned or working there). Great insights once again! Am laughing at my responses to your survey now!
Hi Muthuraman,
Thanks for looking at things in so much detail, and taking the time to bring up these issues.
For (A): if the average income of the top 1% is 85k, then half of them earn less than 85k and half of them earn more than 85k. Technically this would be really only true for median, not average, but in this case, I felt that the median would be pretty close to the average.
(B): Access to LPG and actually using LPG for all cooking are not the same. For example, in 2018, although LPG had reached 89.5% of the houses, 44.5% were still using firewood for cooking. It is possible that the numbers have changed in 2019, but I don't think by that much.
(C): 22% farmers only counts farm owners (I've updated the article to make this clear). Labourers working in the agricultural sector are counted separately. See this article for more more details http://www.ice360.in/en/projects/homepageservey/how-indians-earn-2
A) I believe the average would be lower than 85k in this case, only strengthening your case on how privileged we really are. It follows from the fact that the top 0.00001% of the 0.5% are probably bringing in crores, and the bottom 0.00001% of the top 0.5% are bringing in at least 75k.
B) I live in a village close to Dehradun and have help at home who often have to resort to firewood. And I am nowhere close to being in the 'real' rural India. I see how this can be true.
I knew we were the privileged when we had a discussion at the national level about reservation for economically disadvantaged and set the income at 8L or something. There is a website that tells you where you are w.r.t not India but the world. (Note: I was shocked at the time). Most of the world is poor (because of population, most of the poor is in India).
We should do something about it in whatever way we can. Best is to get better governments but all level who could redistribute income and resources an equitable manner so that whole world improves; but that doesn't seem likely in our current national (and to some extent global) situation.
True, Aparna. One of the more interesting (and controversial) proposals for solving this problem is Universal Basic Income. I'm hoping to cover some misconceptions about UBI next week.
Ugh! I posted a comment, saw two of them and then, deleted on and both got deleted! I am not sure what went wrong. Anyways, I am interested in UBI. I think the concerns are about inflation, that could be perhaps managed by rent control and price control, but don't know much. I will be looking forward to it.
One thing I have to say about data here is the right framing. I may be wrong here, and feel free to disagree, but here goes.
If we frame the conversation as 0.5 of the country against the rest of the country, then that might be counter productive because it might lead the 0.5 to resist any changes and swing right wing. Most of the 0.5 sees itself as struggling to pay kids' tuition, college fees, home loans, additional expenses etc. And would fall off the ladder if say, they get any unexpected medical expense, or reduction in salary. If we then say, we have to do more for the most marginalised, what the salaried class will hear is that, their wealth will be taken away to give to the most disadvantaged. They would feel embattled. That is not advantageous in the long term for a better world .
The real threat here is the plutocrats, few in number, across the world; may be 10000 to 1L with even fewer billionaires with outsized power. The framing should be everyone against the plutes and their lackeys, rather than the salaried against everyone else. Otherwise, Plutes and politicians will continue to provoke class war, 30-40% of the country will keep voting for the right-wing whose entire modus operandi, no matter the country, is and has been about making material wealth a zero-sum game where the 'other' needs to be crippled for 'us' to get ahead. Casteism, religious wars etc. provoke havoc just in this scenario.
Material wealth/happiness is not a zero-sum game, esp, not a competition between 0.5 and the marginalised. It is a game of power between superrich and others, and there are many fault lines that everyone who wants a just and more equitable world needs to be aware of. Right framing is key here. (I am getting concerned, because most of the leftist/liberal framing is kinda opposite).
A balanced narrative, in my opinion, would show the power of the super rich (not Bollywood, but the real estate tycoons, Adanis and Ambanis, oil guys and social media/IT giants) along with an analysis of how the most marginalised are faring. And leaven the mix with a few on how the status quo is detrimental to a majority of the 0.5 too. You cannot win in a democracy unless you bring a decent majority along, and that is difficult when the fault lines are so insidious.
Interesting points. I see what you're getting at. But this gets into areas of social and political science that I don't yet understand well, so I haven't yet formed any opinions on. Still in read and understand mode.
Sure. apologies if I jumped the gun.
My controversial opinion is that we should do nothing about income inequality. Every government for the past 60 years has followed shitty socialist principles. Basically it is like we have a cake and instead of increasing the mass production of that cake, we are arguing as to how best to divide the cake in hand. Instead of getting 10% of 1 cake, I would rather have 1% of 1000 cakes .
Sometime ago I found stats of income tax payer count in different ranges. I think it was on official income tax website. Now unable to find it. Can someone post it?
Talking about salaried people, even primary teachers earn over 40k per month. If both husband and wife are teachers, the family income is about 1 lakh per month.
Similar is the case of several govt servants.
If India has 50 lakh IT professionals, may be half of them earn over 50k per month.
This is just the salaried class. We aren't even talking about self employed people, where there is massive under reporting. So I have hard time accepting that only 15 lakh families earn over 85k per month.
I have a relative who is a doctor. His monthly income may be 10 lakh. He reports about 15 lakh per year. Similar is the case of a close business family. Doctors, lawyers, CAs, shopkeepers, rich farmers - massive under reporting.
What I am stating is just anecdotal, but can't be ignored I think. Other data like house prices, farm land prices, car sales - does not seem to agree with only 15 lakh families earning > 85k/month.
Pravin,
While there are 50L IT professionals, more than 30L of them are in the BPO sector where the salaries are quite low. If half of the remaining make more than 50K per month, then I would guess that the ones making more than 85K per month might be one-fourth, so about 5L. Add another 10L for all the other categories, and we are still in the right ballpark.
Very insightful. Thank you for putting numbers in the right context!
This study has not taken into account the black money and cash transactions which dominate rural India where 55%+ of the population lives. Moreover, it takes into account disposable income and not wealth, which shows a 'high' cash flow but doesn't represent actual wealth. Agriculture is mainly a cash based business, which is tax free and hence isn't recognized in the study. I would love to get feedback on my opinion.
Nonetheless, it was a great read and different perspective.
I don't have numbers. It's true that the daily expenses in rural India are dominated by cash transaction, labor, food, medicines and education. Banking sector penetrates poorly there, and services are awful, my own experience is very bad.
Finally, given the spate of co-ops and other banks going solvent, people prefer to hoard land cash and gold more. Also, life expectancy is lower, and people don't see how they would need money when they are 60+.
Being tax free in farming is not such loss for govt, most people get less than 3L per year of income anyway. If you start taxing remaining that population, most will be in debt within a couple of years, you will break farming sector completely.
It's mind boggling. It's an eye opener. Thanks for the article. It made me realize how lucky & privileged i am.
Thank you for sharing this extensive analysis. You might also want to look at the visual depicton of the income inequality and how it manifests in the way people live their lives in India - at https://onehundredhomes.in/
Wonderful article Navin. I think most of the people do not realize one major thing. If you have a roof over your head, food on the table and a family that is safe and healthy, you probably belong to the top 1% of Indians. Secondly, I dont know if the survey (2016) that you talked about can give any guidance on disposable monthly income and not in general income tat people have. I think the tendency among younger generation to be YOLO may have probably made a dent there in terms of ability to save.
Pradeep, all the household income numbers in the article refer to disposable income. But that is just defined as income after taxes (what we informally call money in hand). The survey, of course, has lots of details on how they spend and how much they save. See, for example, http://www.ice360.in/en/projects/homepageservey/how-indians-spends and http://www.ice360.in/en/projects/homepageservey/99-indian-households-are-covered-by-a-bank-account