How India has become an unequal republic Christophe Jaffrelot 

, Kalaiyarasan A.

jeyaranjan@minnambalam.com

All India Debt and Investment Survey

Indian Human Development Survey

Consumption Expenditure Survey

How India has become an unequal republic

7 min read . Updated: 27 Jan 2021, 06:07 AM ISTChristophe Jaffrelot , Kalaiyarasan A.

 Inequality based on class, rural-urban metrics and religion has risen. The pandemic
will only make things worse
 The elites who benefited thanks to the public sector, IITs, IIMs in the era of economic
planning are the same class of people who benefited the most post the 1990s pro-business
reforms
 Inequality is broadly found to have risen in India between 1990 (which
marked economic reforms) and 2020. There are three processes behind this
rising inequality, which became apparent in the early 2000s. First, the much-
touted pro-market reforms in industry in the 1990s ended up being pro-business
reform.
 Second, the failure of India’s industrialization strategy, including the recent
make-in-India campaign. Unlike China, India could not break its stagnant
history of industrialization. Instead, the services sector emerged as the driver of
economic growth, replacing industry and benefiting a tiny elite. Therefore,
India could not generate enough jobs.
 Third, the deepening agrarian crisis. The continued differential in growth and
productivity between the farm and non-farm sector is the key factor that is
driving the peasant crisis today. Their protest is partly an outcome of this rising
inequality. Notwithstanding the merits and demerits of the three farm reforms,
 the protests expose the unstated deep anxieties of farmers and their future
prospects in the changing political economy.
 Finally, beside its underclass and farmers, another victim of this rising
inequality is India’s religious minority, Muslims. We also comment on India’s
record on poverty reduction.
 We show three axes of inequality—based on class, rural-urban metrics and
religion. To do so, we use three measures of inequality: consumption, income
and wealth based on the availability of data. While consumption data is used
regularly, data for income and wealth is more infrequent. We use All-India
Debt and Investment Survey (AIDIS) for wealth, Indian Human Development
Surveys (IHDS) for income and National Sample Survey (NSS-CES) for
consumption expenditure.
 The class divide
 There has been a sharp rise of inequality in terms of class since the 1990s.
Broadly speaking, consumption inequality is relatively lower than that of
wealth and income, but even that has risen over time from 0.33 in 1994 to 0.40
in 2012. Since there is an upper limit on immediate consumption (or spending),
unlike accumulated wealth, for instance, consumption inequality tends to be
lower in most countries.
 If we disaggregate by deciles, the richest 10% control 63% of wealth in 2012
followed by 41% in income and 35% in consumption. Thirty years before, the
wealth was relatively less concentrated; the share of the richest decile was
51.6% (see Chart 1). It’s quite evident the enormous rise in inequality has been
driven by growth in the richest decile.
 Deepening disparity

 The rising inequality is termed as “billionaire raj" by Lucas Chancel and

Thomas Piketty. They show the sharp rise of income, particularly of the top
1%. They present an overall U-shaped curve of inequality in the last 70 years—
declining inequality from 1950s to 1980s followed by a sharp rise thereafter.
Also, they contest the hypothesis about the rise of a middle class in India. In
 their analysis, it is the top 10% who benefited the most as compared to the
middle 40%.
 In terms of inequality among countries, Hai-Anh Dang and Peter Lanjouw
place India amongst the top countries with highest inequality globally—as it
stands second only to West Asian countries when measuring the income share
of the top 10% in 2016.
 The religious divide
 Another dimension where India stands out in inequality is the worsening
position of religious minorities, particularly the Muslims. The wealth share of
Muslims to their population has worsened from 0.65 in 1992 to 0.57 in 2012;
the corresponding figures for Hindus rose from 0.99 in 1992 to 1 in 2012. This
indicates Muslims’ wealth is considerably short of their population.
 In 2005, the Sachar Committee Report showed that Muslims were on the
margins in terms of political, economic and social relevance and that their
average condition was comparable to, or even worse than, the country’s
backward communities including Dalits in certain indicators. Since then, the
situation has worsened. In terms of income, Muslims earn, on an average, 77%
of what Hindus earn in India in 2012 (see Chart 2).
 But the gap is smaller in poor states (Muslims earn 95% of what the Hindus
earn in Madhya Pradesh, 91% in Uttar Pradesh and J&K and 82% in Bihar) in
comparison to the states below the Vindhyas (where the percentages are 71%,
73%, 74% and 75% for Tamil Nadu, Kerala, Maharashtra, and Karnataka
respectively). Undivided Andhra Pradesh is an exception in the South—
Muslims earn about 89% of what Hindus do, probably because of Hyderabad.
 The gap is the largest in West Bengal, Gujarat and Haryana (where Muslims
earn only 33% of what Hindus earn). Muslims earn only 71% of what Hindus
earn even in Delhi. In sum, Muslims earn less than Hindus in all the states
except Rajasthan where they earn 108% of what Hindus earn.
While we don’t have consistent data for income to follow the trend in the post-2012,
the recently surfaced ‘suppressed’ NSS data released by the Ministry of Statistics and
Programme Implementation in June 2019 shows further deterioration of Muslims,
particularly of its youth.