Growth lifts millions, but inequality deepens in India

TheWorld Inequality Report 2026 finds that the world is becoming richer, but increasingly unequal. One striking finding reveals that the top 0.001 per cent (approximately 56,000 adults) possess three times the wealth of half the world’s population combined—just 56,000 people. Furthermore, the report notes that the global bottom 50 per cent captures only 8 per cent of total income, measured at 2025 purchasing power parity (PPP). The same group owns merely 2 per cent of global wealth. In contrast, the top 10 per cent owns 75 per cent of total personal wealth and captures 53 per cent of total income in 2025.

There is also stark regional disparity in terms of average income. For instance, a person in South and Southeast Asia has an average monthly income of €601, while a person in Europe earns about €2,934 per month, which is 4.9 times higher.

In India, inequality remains among the highest in the world and has shown little movement in recent years. The top 10 per cent of earners capture about 58 per cent of national income, while the bottom 50 per cent receive only 15 per cent in 2025. Furthermore, the top 1 per cent earns 22.6 per cent of total income. Wealth inequality is even greater, with the richest 10 per cent holding approximately 65 per cent of total wealth, while the top 1 per cent alone holds around 40 per cent.

The income gap between the top 10 per cent and the bottom 50 per cent remained largely stable between 2014 and 2024. The average annual income per capita in India is approximately €6,200 (in purchasing power parity terms). For the top 1 per cent, the average annual income is €140,649, while for the bottom 50 per cent it is €940. In other words, the top 1 per cent earns roughly 150 times more than the bottom 50 per cent of the population in India. Top 10 per cent and Bottom 50 per cent Income Shares in India, 1950–2024

In 1982, the top 10 per cent had the lowest income share (30 per cent), while the bottom 50 per cent had the highest income share (23.6 per cent). Following economic liberalisation, however, the gap between the top 1 per cent and the bottom 50 per cent has widened steadily.

When inequality is examined alongside poverty rates, a clearer picture of India’s economic trajectory emerges. For instance, in 1977, the poverty rate (at $3 per day) stood at 59.7 per cent, and just after the LPG reforms in 1993, it declined to 47.48 per cent. Over the past 30 years, the country has successfully reduced poverty to 5.25 per cent as of 2022.

Since the 1990s, the exponential rise in inequality has coincided with high economic growth rates (5–8 per cent decadal growth) and a significant decline in poverty. This indicates that although inequality has increased substantially during this period, poverty has declined significantly. In absolute numbers, millions of Indians have moved out of poverty, with the number of poor falling from 442 million in 1993 to 75 million in 2022.

It is also observed that poverty declined at a faster rate in the post-liberalisation period than in the pre-liberalisation period, despite widening inequality. This is measured through the gap in pre-tax national income shares between the top 10 per cent and the bottom 50 per cent of the population in India.

In other words, two developments have occurred simultaneously in India: rising inequality and declining poverty (or increasing consumption expenditure). Post-liberalisation market-oriented reforms accelerated economic growth and expanded employment opportunities, enabling large sections of the population to cross the absolute poverty threshold. This was particularly evident in sectors such as construction, services, and informal urban employment.

However, the benefits of this growth were disproportionately captured by the top income deciles. This was driven by skill-biased technological change, higher returns to capital, and the rapid expansion of finance, information technology, and corporate services. In simple terms, while the rich have become richer, the notion that the poor have become poorer after liberalisation does not appear to be supported by strong data-driven evidence.

The challenge of reducing inequality, therefore, presents a complex policy dilemma. To reduce inequality, the state may either tax and redistribute the income of the rich to support welfare programmes for the poor, or expand the positive liberty of the poor by strengthening their capabilities through education, healthcare, and opportunities. However, both approaches require substantial fiscal resources, which may necessitate higher taxation of the rich.

This raises an important policy question: Should the state risk slowing economic growth by increasing taxes on the rich to reduce inequality and poverty? Or should it prioritise high economic growth with relatively lower taxes, which could potentially expand the tax base over time?

At the same time, existing studies do not provide clear and conclusive evidence that corporate tax reductions necessarily lead to higher economic growth. In the Indian context, therefore, the state continues to face a persistent policy dilemma—balancing redistributive taxation to mitigate inequality with an industrial policy regime that promotes employment generation for both skilled and unskilled labour.

(The first writer is Assistant Professor, Department of Public Policy, Manipal Academy of Higher Education (MAHE), Bangalore and the second writer is Assistant Professor of Economics at Centre for Economic and Social Studies (CESS), Hyderabad)