Debates on income and wealth inequality in India have gained significant momentum in recent weeks, partly following the release of our study “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj”, which revealed that economic disparities in India have reached historical highs. These extreme inequalities and their close link with social injustice can no longer be ignored.
In this follow-up note, Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi propose a comprehensive tax package on the ultra-wealthy to tackle the massive concentration at the very top of the wealth distribution and create valuable fiscal space for crucial social sector investments. Such a proposal would:
- Include an annual wealth tax and an inheritance tax for those with net wealth exceeding INR 10 crores (roughly EUR 3.4 million PPP or EUR 1.2 million MER), equivalent to the top 0.04% of the adult population (~ 370,000 adults), who currently hold over a quarter of the total wealth.
- Raise phenomenally large tax revenues while leaving 99.96% of the adults unaffected by the tax. In a baseline scenario, a 2% annual tax on net wealth exceeding 10 crore and a 33% inheritance tax on estates exceeding 10 crores in valuation would generate a massive 2.73% of Gross Domestic Product (GDP) in revenues.
- Need to be accompanied by explicit redistributive policies to support the poor, lower castes, and middle classes. For example, the baseline scenario would allow nearly doubling the current public spending on education, which has stagnated at 2.9% of GDP over the past 15 years, well below – less than half – the 6% target set by the government’s own National Education Policy 2020 (NEP 2020).
- Need to be extensively debated, with a consensus on specific details of the design emerging from a broader democratic debate on tax justice and wealth redistribution in India.
Co-author Anmol Somanchi argued:
“Let’s be clear: Indian billionaires are largely an upper caste club. A progressive wealth tax package of the kind we propose is most likely to benefit lower castes and the middle classes at the detriment of only a tiny number of ultra-wealthy upper caste families. In that respect, besides addressing extreme wealth inequality, such taxes could also play a small role in weakening the rigid link between social and economic inequalities in India.”
Co-author Lucas Chancel stressed:
“Caste and wealth inequality are so tightly connected in India that tackling wealth inequality is a way to address caste inequality as well. For instance, a tax on the ultra wealthy can largely be seen as a tax on upper castes.”
He added:
“Some argue that India actually needs to be extremely unequal to develop. Let’s be clear: this isn’t backed by any kind of evidence. On the contrary, more redistribution, via multimillionaires wealth taxes financing public investments in education and health for instance, could help the country grow faster.”
Anmol Somanchi highlighted:
“The 2024 Lok Sabha election marks a critical juncture with heightened political and public focus on economic justice. Despite sustained attempts from certain sections at derailing this much needed conversation, a vibrant public debate has emerged. It would, however, be a shame if after coming this far, this momentum is not translated into policy. Progressive wealth taxation, effective redistribution, and broad-based social sector investments are urgently needed to build an equitable and prosperous India.”
AUTHORS
- Nitin Kumar Bharti, New York University, Abu Dhabi and World Inequality Lab
- Lucas Chancel, Sciences Po, Harvard Kennedy School and World Inequality Lab
- Thomas Piketty, EHESS, Paris School of Economics and World Inequality Lab
- Anmol Somanchi, Paris School of Economics and World Inequality Lab
MEDIA CONTACT
- Alice Fauvel, Communications Manager, alice.fauvel[at]psemail.eu, +33(0)763918168, press[at]wid.world
