‘57 billionaires control 70% of India’s wealth … India is second most unequal economy after Russia’
India is the second most unequal economy in the world, according to an Oxfam report released recently at the World Economic Forum. Oxfam India CEO Nisha Agrawal tells Himanshi Dhawan that demonetisation has only aggravated this inequality with no significant long-term benefits.
Oxfam’s new report ‘Economy for 99%’ claims that since 2015, eight men own the same amount of wealth as the poorest half of the world. In India, the richest 1% control 60% of the total wealth. Your comments?
In 2016, India is the second most unequal economy after Russia. Inequality is fracturing our economy and the reality is that today 57 billionaires control 70% of India’s wealth. Even International Monetary Fund recently warned that India faces the social risk of growing inequality. As per IMF, India’s Gini coefficient rose to 51 by 2013, from 45 in 1990, mainly on account of rising inequality between urban and rural areas as well as within urban areas.
India is currently too dependent on a regressive tax structure of indirect taxes and should move towards a more progressive taxation system that raises more tax revenues from the wealthy to fund more public expenditures on health and education to create a more equal opportunity country.
What have been the reasons behind this growing inequality? Would you say successive governments have failed to address the concerns of the 99%?
Over the last 25 years, the top 1% has gained more income than the bottom 50% put together. Far from trickling down, income and wealth are being sucked upwards at an alarming rate. Like many other countries, in India too policies have not focussed on raising the incomes of the poorest. India’s liberalisation in the early 1990s has seen an explosion in inequality since it created opportunities in a few high end sectors such as banking, IT, telecom and airlines that only created a handful of jobs for the highly skilled and educated. Not many policy reforms have happened either in agriculture or labour intensive manufacturing that could have created millions of jobs and raised incomes of the poor. Furthermore, not much effort has been made to raise more revenues and spend on basic education and health so that the poor could benefit from the opportunities being created.
In the current context of demonetisation, has the problem of inequality aggravated?
India could face significant short-term economic costs from the ban on large-denomination currency notes, with no significant long-term benefits. IMF has just lowered its projections for GDP growth in 2016-17 by a whole percentage point from 7.6% to 6.6% due to the disruption caused by demonetisation. Since the demonetisation has been affecting the incomes of the poor more than those of the rich, it is indeed likely to further aggravate the problem of high and sharply rising inequality in India.
What are some of the false myths around economic growth that the report talks of?
The current economy of the 1% is built on a set of flawed assumptions. Contrary to popular belief, many of the super-rich are not ‘self-made’. Over half the world’s billionaires either inherited their wealth or accumulated it through industries prone to corruption and cronyism.
What policy actions do you think are required to address this growing inequality?
Governments need to stop obsessing about GDP and build an economy for the 99% of humanity instead of the 1%. Inequality can be addressed through initiatives of proper taxation and expenditure policies domestically; complemented by a concerted effort of countries to check some transnational problems, namely tax havens, tax dodging and tax avoidance. The tax havens should be closed and public expenditure on health and education increased. It is time that education for all – with good learning outcomes – is made a reality.
This article originally appeared in the Times of India.