Bharat Bhushan | Why India More Unequal Than Sub-Saharan Africa

Despite rapid growth, India’s income and wealth distribution profile resembles that of most unequal countries globally, including Sub-Saharan Africa.

The World Inequality Report 2026, released on December 10, shows that in India the top 10 per cent earners corner 58 per cent of the national income, while the bottom 50 per cent have only 15 per cent. The top one per cent alone have 22.6 per cent of the income – which is the highest since colonial times.

Wealth inequality is even more astounding. The richest 10 per cent account for 65 per cent of the wealth, with the top one per cent capturing 40 per cent of it. The bottom 50 per cent account for just six per cent of the wealth.

India is among the most unequal large economies, ahead of Brazil and the United States in terms of income inequality and second only to South Africa in concentration of wealth. India’s inequality surpasses that of many underdeveloped economies.

In Niger, Malawi, Tanzania and Ethiopia, for example, top 10 per cent earners typically capture 40-45 per cent of income, which is significantly less than India’s 58 per cent. Wealth concentration is less because absolute wealth is modest and the elite control a smaller share than in India. Even the bottom 50 per cent account for 20-25 per cent of the income, higher than India’s 15 per cent.

Even in Bangladesh (with top 10 per cent capturing about 42-44 per cent of income) and Nepal (top 10 per cent account for about 45 per cent of income), the overall income inequality is less than that in India. Even in Uganda, wealth inequality is far less than India with the top one per cent holding less than India’s 40 per cent. However, one must be careful not to over draw conclusions based on this data because lower inequality does not mean better living standards. Inequality data may also be less precise in these countries.

What is clear though is that in India’s case, despite higher GDP, growth benefits the rich disproportionately. This knocks the bottom out of the Prime Minister’s now forgotten slogan of “Sabka Saath, Sabka Vikas” (development for all and together).

There are several reasons why income and wealth remain concentrated at the top. While wages have remained stagnant for most workers, corporate profits, stock market gains and real estate appreciation have driven the accumulation of wealth. The tax system in India is regressive, relying heavily on indirect taxes like GST burdening the poorer households more than the wealthy -- the rich and the poor pay the same amount when buying essentials. Excise duties on fuel, alcohol and tobacco, for example, also have a greater impact on poorer households. This reduces demand, depresses consumption, and increases inequality.

Direct taxes like income tax and corporate tax contribute less to the total revenue of the government than indirect taxes. In 2019, the Narendra Modi government slashed corporate taxes to attract investment, reducing the burden on the owners of capital with no benefit to wage earners. There is no inheritance tax, allowing the wealthy an unchecked inter-generational transfer of their wealth, limiting redistribution.

The government tom-toms record tax collections -- suggesting that the tax system has become more efficient under Prime Minister Modi -- but it has not been able to pair this with a strong redistributive mechanism. The record tax collection could have been used to expand social spending

Social spending in India also remains fairly low. The public expenditure on health, education and welfare is way below prevailing global averages. Since 2014, India’s healthcare expenditure has been about 1.2 per cent of the GDP, rising above two per cent only during the Covid-19 years. It remains way below the global average of around six per cent of the GDP, thus limiting quality as well as access.

The spending on education, a major means of upward mobility, has stagnated around three per cent of the GDP, below the government’s own declared target of six per cent in the New Education Policy. Qualitatively, education has been systematically made non-competitive by reorienting it ideologically.

The government can claim that it has many flagship welfare programmes like PM-Kisan, Ayushman Bharat and PMGKY, among others, with a combined cost of Rs 5 lakh crores per annum. However, they remain limited in their redistributive scope. That Budget estimates often exceed revised actual social spending, shows a weak capacity to deliver. Limited social spending restricts upward mobility and further deepens inequality.

Labour reforms could have played an important role in addressing inequality. However, the Narendra Modi government, through the four labour codes introduced late this year, critics suggest, has diluted worker protection, weakened collective bargaining rights and reduced safeguards against arbitrary dismissals.

Facilitating higher female participation and earnings would have helped increase savings and asset ownership among women, thus reducing wealth concentration at the top. However, female labour participation rate in India remains among the lowest globally, at just 15.7 per cent. Informal labour among women dominates with limited wage growth and weak protections, keeping a large section of the labour force vulnerable. The Modi government could have gone for gender-sensitive reforms by narrowing wage gaps, enforcing equal pay, stronger protection against discrimination, childcare support, safe transport and flexible hours to expand household incomes and reduce income inequality.

Significantly, the real wages of workers in both agriculture and industry have shown virtually no significant growth between 2014-15 and 2022-23. During Mr Modi’s first term, farm wages grew only by three per cent in real terms while non-farm wages grew by 3.3 per cent. In his second term, however, agricultural wage growth turned negative, with farm wages falling by 0.6 per cent and non-farm wages by 1.4 per cent. As for industrial wages, they lagged behind productivity growth, reducing the purchasing power of the workers. While real wages in manufacturing and construction showed minimal increase, that is often eroded by inflation.

The Narendra Modi government’s policy priorities emphasised infrastructure, digitisation and creating a business-friendly environment rather than welfare expansion and redistribution of income and wealth.

The solution to addressing income and wealth inequality is not rocket science -- it means redistribution through progressive taxation, increased and structural social spending and welfare schemes, labour reforms to afford wage protection and increasing female participation in the labour force. The reason why governments don’t readily adopt these solutions is because such policy changes are politically contentious and affect those who underwrite their politics.

The writer is a senior journalist based in New Delhi