Addressing inequality

Statistics can be trotted out to buttress all kinds of arguments, particularly of the economic kind. Then again, there are some statistics that prove a truth which is essentially limited. Take per capita income, for instance, supposedly a broad indicator of prosperity. According to provisiol data released by the Ministry of Statistics and Programme Implementation in May last, India’s per capita income (at current prices) rose by 7.4 per cent to Rs 93,293 in 2015-16. This seems pretty impressive, even if the per capita income in real terms (at 2011-12 prices) happens to be set lower at Rs 77,435. The per capita income and per capita GDP in purchasing power data are supposed to indicate how well off the average person is in an economy. But in India where at least two-third people are estimated to need basic food security, surely per capita income figures offer little comfort. Last month, the Johannesburg-based wealth research firm ‘New World Wealth’ put out data that India’s total individual wealth stood at nearly 5,600 billion dollars, putting it at seventh place among the top ten wealthy tions in the world, ahead of Cada and Australia. This too gives a misleading picture, as it represents the sum of all individual wealth; so for India with its 130 crore population, the aggregate is bound to be high, while its average citizen is quite poor. Now from this same research firm comes another picture which appears closer to the reality most Indians are familiar with. Last week, ‘New World Wealth’ data showed India to be the second most ‘unequal’ country after Russia. Millioires control 54 percent of the wealth in India; in Russia it is 62 percent. Surprisingly, in the US which is perceived to have high income inequality, millioires are found to control 32 percent of its wealth. The corresponding figure for UK is 35 percent, while Japan has been found to be the most equal country with its millioires controlling 22 percent of total wealth. In his influential work ‘Capital in the Twenty-First Century’, French economist Thomas Piketty has shown that inequality is a byproduct of capitalistic economies, and wealth goes on concentrating in fewer hands as the rate of return on capital grows greater than the rate of economic growth. Unless the state intervenes through progressive wealth taxation, its very social order may be threatened, Picketty has warned. So, rather than a country’s total wealth, how it distributes that wealth among its people and addresses gross income inequality, will remain a key factor that will grow even more important this century.