Poverty and inequality

Poverty and inequality

According to the paper entitled Wealth Inequality, Class and Caste in India 1961-2012 by Nitin Kumar Bharti, published on 20th November, 2018, World Inequality Lab, Paris School of Economics (please click here to access)

• The present paper produces long term wealth inequality series of India using survey data and correcting the top wealth distribution using the Forbes millionaires data. It complements the income inequality series produced by Banerjee (2005) and Chancel and Piketty (2017) on India.

• The income share of top 10 percent population shows an increasing trend since 1980 to reach 55 percent in 2013. Comparing this to wealth share, it was found that the top 10 percent population's share increased from 45 percent in 1981 to 58 percent (pre-correction) and 62 percent (post-correction) in 2012.

• The average annual income of an household in India is Rs. 1,13,222 (viz. Rs. 9,435 per month). The annual income of ST and SC group stands at 0.7 times and 0.8 times lower than the all-India average income. Other Backward Classes (OBC) and Muslims both have around 0.9 times household income of the overall average income. Forward castes (FC), have average household income at 1.4 times the all-India income (with a slight difference between Brahmin and Non-Brahmin). There is sequential inequality (SI) based on average income with ranking ST < SC < Muslim < OBC < OVERALL < FC(Non-Brahmin) < FC(Brahmin) < Others trend. A similar trend was observed for per-capita level of annual income. The standard deviation is highest for Others followed by FC(Non-Brahmin), FC(Brahmin), SC, Muslim, OBC and ST.

• 50 percent of the Brahmin, 31 percent of Rajputs, 44 percent of Bania and 57 percent of Kayasth fall in richest category. For other caste groups only 5 percent ST, 10 percent SC, 16 percent OBC, 17 percent Muslims fall in richest category

• Brahmins have highest adult education followed by Others and FC (Non-Brahmins). The comparison for adult education across different community gives - ST < Muslim < SC < OVERALL < OBC < FC(Non-Brahmin) < FC(Brahmin) < Others

• When education level of adult is compared among the forward castes using NFHS-3 data, it was found that Kayasth with 12.3 years of education is highest, followed by Brahmins (11.9 years), Bania (10.3 years), Rest of FC (9.16 years) and Rajput (9.05 years).

• Within ST, Christians have 1.6 times income and assets than all-India average and their educational level is better than many other groups. Muslim ST’s economic parameters are closer to all-India average but education wise they are behind. Hindus and Other/ No religion ST’s which forms 78 percent and 12 percent of all ST's are the worst performing groups.

• The average per capita wealth (APCA) is increasing since 1961 and the increase is faster in recent years. In rural areas, till 2002 there is only a modest increase from Rs.50.8k in 1961 to around Rs.180k in 2002. This figure jumped to Rs.390k in 2012 which is nearly 117 percent growth in a decade or about 7.5 percent annual growth rate from 2002-12. Similarly, in urban areas, we see a steep increase after 2002. The APCA in urban areas has increased from 272k in 2002 to 904k in 2012, implying an increase of 232 percent, or about 12.7 percent annual growth rate.

• The Urban-Rural gap in APCA is consistently increasing since 1981. The ratio of urban APCA to rural APCA has increased to 2.32 in 2012 from 1.25 in 1981.

• ST formed 8-9 percent of total population and SC formed 18-19 percent of total population. The information on OBC is present only for 2002 and 2012 survey. The proportion of OBC increased from 40.28 percent in 2002 to 43.57 percent in 2012 i.e. almost an increase of 3 percentage points. A 2 percent decline in FC share and 1 percent decline in Muslim is observed.

• SC suffers the worst in total wealth share as it owns only around 7-8 percent of total wealth, which is almost 11 percentage points (pp) less than their population share. ST owns 5 percent to 7 percent of total wealth which is around 1-2 percentage points less than their population share. OBC group owns almost 32 percent of total wealth in 2002 which increased only marginally in 2012 resulting in overall worsening of the gap relative to population share (almost 7.8 percent to nearly 10.2 percent), due to considerable increase in their population share. On the other hand, FC group share has shown an increase from 39 percent to 41 percent in their share in total wealth. Relative to their population share this group improved the gap from +14% to +18%.

• Rural area seems more favourable for OBC group and less favourable to FC. In urban areas the sign of gap changes for ST group, i.e. they own more wealth than their population share. In 1991, 2002 and 2012, the relative gap is +1.12 pp, +2.24 percentage points and +1.72 percentage points respectively presenting urban area to be favourable to ST.

• According to New World Wealth Report, in India, the cumulated wealth of all High Net Worth Individuals (HNWI) increased from US$ 310 billion to US$ 588 billion and their numbers increased from 84k in 2008 to 153.4k in 2012. HNWI’s are individuals owning net assets of more than $1million (=Rs 60,000,00) value. Correspondingly, in the same time period, as per Reserve Bank of India report, the decrease in the population of BPL (Below Poverty Line; Monthly consumption below Rs.1000) was from 407k to 269k. The rate of increase in HNWI’s was 82 percent compared to reduction rate of BPL population by 24 percent.

• At all-India level, top 10 percent of population had 45 percent of total wealth in 1981 which increased to almost 58 percent, an increase of 15 percentage points (pp) in 30 years. There is a major jump in 2012 from 2002 almost 10 percentage points. On the other hand, looking at bottom 10 percent we see, total wealth share is less than 0.6 percent for all the years and for both sectors. Wealth inequality is lower in rural areas than in urban areas and we see an improving trend (i.e. increase in wealth share of bottom 10 percent) in both rural and urban areas.

• In rural areas, the top decile share saw a slight decrease/ stagnation in the period of 1961-1981 at almost 43 percent, which withered away in later decades when the top decile share jumped to 51.2 percent. In 60 years, the change in top decile share is of +8 percentage points.

• In urban areas, the top decile shares in total wealth stood at 55 percent in 1991 which first declined to 52.5 percent in 2002 and then gained 7 percentage points to reach to 60 percent level. In 1991-2002 the top 10 percent wealth share decreases only in urban areas while it remains constant in rural areas. Nevertheless after 2002 the 10 percent wealth share increases faster in urban areas than in rural areas.

• Middle wealth population in rural India used to own 45 percent total value of rural wealth in 1961 which has decreased to roughly 39 percent in 2012. The wealth share almost equals the population share of the middle 40 percent. In urban sector, middle 40 percent share has declined to below 35 percent in 2012 from almost 42 percent in 1981. A jump in 2002 in middle wealth population is observed which is in contrast to the decline of top 10 percent share. At all-India level, the share of middle wealth population is now closer to urban sector level at nearly 35 percent.

• The share of bottom 50 percent in rural India has decreased from 12.6 percent in 1961 to 10.5 percent in 2012 which implies a drop of 15.9 percent.

• Inequality in urban regions is more extreme. In those regions the bottom 50 percent owns only 5.9 percent of total wealth. At all-India level the share of this section stands at 8 percent. The condition of half of the population of country is dismal in the share of total wealth.

• Out of the total asset share with top decile in rural area, top 5 percent population owned 70.4 percent in 1961 and 74.3 percent in 2012. Looking at the evolution of portion of top 1 percent population in total wealth share of top 10 percent population, one could see first a decrease from 1961 to 1981 and then an increase post 1981 to reach at 33.5 percent. The period of 1961-71 and 1971-81 saw a small decline which happen to be the years when land reforms were implemented in India.

• The concentration at top is higher in urban areas than in rural areas. The portion of wealth share of top 5 percent population in the wealth share of top decile, increased from 71 percent in 1981 to 78 percent in 2012. Similarly, top 1 percent population captured 29.4 percent in 1981 to 44.5 percent in 2012 of the total wealth shares of top decile. The year of 2002 is an aberration, when wealth share of top 5 percent and top 1 percent (and also of top 10 percent share) saw a major decline in urban area. This is the time period just after the implementation of liberalization in India. The decrease in the wealth share at top 10 percent is distributed across all the lower deciles.

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