India’s Income Inequality Is Now Worse Than Under British Rule, New Report Says

[signalmankenneth]

We have a serious problem with inequality in this country too!

A new study from the World Inequality Lab finds that the present-day golden era of Indian billionaires has produced soaring income inequality in India—now among the highest in the world and starker than in the U.S., Brazil, and South Africa. The gap between India’s rich and poor is now so wide that by some measures, the distribution of income in India was more equitable under British colonial rule than it is now, according to the group of economists who co-authored the study, including the renowned French economist Thomas Piketty.

The current total number of billionaires in India is peaking at 271, with 94 new billionaires added in 2023 alone, according to Hurun Research Institute’s 2024 global rich list published Tuesday. That’s more new billionaires than in any country other than the U.S., with a collective wealth that amounts to nearly $1 trillion—or 7% of the world’s total wealth. A handful of Indian tycoons, such as Mukesh Ambani, Gautam Adani, and Sajjan Jindal, are now mingling in the same circles as Jeff Bezos and Elon Musk, some of the world’s richest people.

“The Billionaire Raj headed by India’s modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces,” the authors write.
The observation is particularly stark when considering India is now hailed as an 8% GDP growth economy, according to Barclays Research, with some projecting that India is poised to surpass Japan and Germany to become the world’s third-largest economy by 2027.

But the authors of the World Inequality Lab study reached this conclusion by tracking how much of India’s total income, as well as wealth, is held by the country’s top 1%. While income refers to the sum of earnings, interest on savings, investments and other sources, wealth (or net worth) is the total value of assets owned by an individual or group. The authors combined national income accounts, wealth aggregates, tax tabulations, rich lists, and surveys on income, consumption, and wealth to present the study's findings.

For income, the economists looked at annual tax tabulations released by both the British and Indian governments since 1922. They found that even during the highest recorded period of inequality in India, which occurred during the inter-war colonial period from the 1930s until India’s independence in 1947, the top 1% held around 20 to 21% of the country’s national income. Today, the 1% holds 22.6% of the country’s income.

Similarly, the economists also tracked the dynamics of wealth inequality, beginning in 1961, when the Indian government first began conducting large-scale household surveys on wealth, debt and assets. By combining this research with information from the Forbes Billionaire Index, the authors found that India’s top 1% had access to a staggering 40.1% of national wealth.

https://www.yahoo.com/news/india-income-inequality-now-worse-181723828.html

 

[cawacko]

Ed D'Agnostino writes a good column on macroeconomics and geopolitics and this is from earlier this month on the economic growth of India. Good read on demographic and economic forces in play driving the country's growth. (Indian's are also the highest earning ethnic/racial group in the U.S. - now I suppose one might argue that's due in part to our immigration policies which allow their highly educated people to come here, but that's not the only reason)




India: On Track to Become the World's #3 Economy

India’s growth story is unprecedented.

It has the fastest-growing major economy in the world—GDP grew 8.4% in the final quarter of 2023, according to data released last week. Many analysts expect it to pass Germany and Japan to become the world’s third-largest economy. Deloitte South Asia CEO Romal Shetty thinks that will happen by 2027.

Much of this growth stems from favorable demographics. Last year, India surpassed China to become to the largest nation by population. It’s also the only top-five economy that’s young—40% of people there are under age 25. And India will stay relatively young because it’s the only top-five economy where births exceed the replacement rate.

EM to DM in 25 Years

India’s Prime Minister, Narendra Modi, wants to turn India into a developed country “within the next 25 years.” That is ambitious, but not implausible.

Modi, who’s up for reelection this year, has been opening the economy to foreign investment since he came to power in 2014. Foreign direct investment reached $71 billion for the 2022–23 financial year, and India’s information technology minister says they’re targeting $100 billion in annual FDI “in the next few years.”

Modi is turning India into a manufacturing hub through programs like Make in India, capturing business from Western companies seeking a cheaper and friendlier alternative to China. Manufacturing accounts for 17% of India’s GDP, but projections show that figure reaching 25% as early as next year.

Electronics manufacturing is growing particularly fast, almost doubling between 2017 and 2022. It’s expected to reach a compound annual growth rate of 24% from now to 2027.

Apple, for example, plans to make roughly a quarter of all iPhones in India within 2–3 years. This will help the company minimize its dependence on China. Foxconn, a Taiwanese electronics manufacturer and major Apple supplier, is spending $1.5 billion to set up shop in India as well.

India’s Digital Infrastructure—a Leader in Fintech

For the past decade, Modi has been building out India’s digital infrastructure, called India Stack, to facilitate growth and modernization. India Stack (developed under Infosys co-founder Nandan Nilekani) is underpinned by India’s biometrics-based national ID program, Aadhaar. The system sounds a bit invasive to my American ears, but its benefits are undeniable. 99% of Indians have signed up for Aadhaar because it gives them access to digital banking and other aspects of modern life that you and I take for granted.

The numbers are telling. Today, at least 78% of Indians over the age of 15 have a bank account. That’s a massive leap from 2011, when only 44% of Indians over 15 had one.

In today’s India (and other emerging markets), your smartphone is a gateway to e-commerce, insurance, banking… everything. What sets India apart is its digital payment system, combined with broad access to the internet. A smartphone can be had for $12 from Reliance Jio. Mobile data is cheap and readily accessible.

Bridging the East-West Divide

India comes with its fair share of risks. The unemployment rate for new graduates under age 25 tops 40%. And the political environment is tense—a problem India’s high unemployment and stark class divides exacerbate.

That said, India will both drive and benefit from the core active investment themes I’m focused on—the multipolar world, reshoring/friendshoring, and AI. I’ve written before that in the coming years, most nations will fall into one of two spheres: the US sphere or the China sphere. Few will be able to do business with both, but India will be one of them, and Indian companies will benefit.

Historically, it’s been difficult for Western investors to access India. In recent years, a host of India ETFs have been created—some better than others. Many are stuffed with companies that have little revenue coming from India, or with state-owned entities.

One way to gain exposure to India’s expanding middle class and fast-growing digital economy is the India Internet & Ecommerce ETF (INQQ). Last week, I spoke with Kevin Carter, the ETF’s founder. He made a compelling case for India’s e-commerce growth. The demographic trends are striking.

Still, Indian stocks are pricey, having run up considerably over the past year. They’ll have to grow into their price-to-earnings ratios. Be sure to do your own due diligence.

Have you made an investment in India? What do you think of India’s growth story? Are there other emerging markets you like better, and if so, why? You can drop a comment or question in our Global Macro Update Community space by clicking here.

Thanks for reading.