India's wealthy barely pay taxes -CP Chandrasekhar and Jayati Ghosh

-NetworkIdeas.org

India is often mistakenly seen as a country with relatively low economic inequality. In fact, there were always very significant economic inequalities in India, which intersected with social and locational inequalities in complex ways. More significantly, the country’s inequalities widened after the internal and external economic liberalization measures from the early 1990s, which attracted global financial investors and boosted economic growth considerably.

The estimates of low inequality are usually based on the fact that the Gini coefficients of consumption expenditure have not been so high in India (although they have increased over time). The National Sample Survey data on which such estimates are based tend to understate the extent of inequality because they underestimate the tails of the distribution, excluding the very rich and the very poor. Further, the poor are more likely to consume their income or even more, while the rich can save out of their incomes. Official survey data indicate that the Gini coefficient increased from 31 per cent in 1993-1994 to around 34 per cent in 2011-2012, but this is clearly an underestimate of even the extent of consumption inequality. The further limitation is that data are only available up to the last large sample survey that was undertaken in 2011-12.

Predictably, income inequality estimates reveal greater inequality. The India Human Development Surveys of 2004-05 and 2011-12, which provide longitudinal information on a reasonably large sample of households, suggest a Gini coefficient of 55 per cent, which is not only much higher than that for consumption, but also similar to countries generally seen as very unequal, like Brazil.

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NetworkIdeas.org, 6 November, 2018, http://www.networkideas.org/featured-articles/2018/11/indias-wealthy-barely-pay-taxes/

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