CNBC’s India Insider: India’s growing wealth gap | Wilnesh News

This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big players behind its meteoric rise. Like what you see? You can subscribe here.

Indian The growing affluent population and its outsized impact on the country’s growth story are becoming the envy of many major markets.

By 2023, the number of ultra-rich people in the United States (those with at least $30 million) will increase to 13,263 people, a 6.1% increase from the previous year. Knight Frank data shows. The same report said this number is expected to surge by 50.1% between 2023 and 2028, making it the fastest growing ultra-high net worth individual country in the world.

These people are subtly driving India’s economic progress through their consumption patterns and investment behaviors.

However, alongside the hype and expectations for growth is the challenge of growing economic inequality.

The top 1% of India’s population will account for an unprecedented 22.6% of the country’s total income between 2022 and 2023. World Inequality Lab (WLI) unveiled. India’s indicator is one of the highest in the world, surpassing the levels of the United States and emerging markets such as Brazil and South Africa.

The statistics have fluctuated significantly over the past eight years. In the 1920s and 1930s, when India was under British rule, the country’s top earners accounted for just over 20%. During World War II, the share fell to just over 10% for most of the 1940s through the 1960s, before falling to 6.1% in 1982.

India’s income gap – the difference in wages between different segments of the population – has also been accompanied by a worsening gap between rich and poor.

The same WLI study shows that India’s top 1% control 40.1% of the country’s wealth between 2022 and 2023. That’s a sizable jump from the 12.9 percent that was controlled in 1961, when the researchers began their analysis.

Sumedha Dasgupta, senior analyst at the Economist Intelligence Unit (EIU), points out that rising income and wealth inequality in India is not the result of the poor getting poorer.

Rather, it’s happening because “the rich are getting richer at a faster rate,” she told CNBC’s “Inside India.”

“India has more than 300 billionaires, which is hard to imagine for an emerging economy that has strong growth rates but also has a record of large numbers of poor people. So this exacerbates the situation of the rich – the rich and the poor. The gap,” she added.

3 family groups in India

A more pressing issue posed by India’s wealth and income disparity is the emergence of different categories of households with different living standards.

Venture capital firm Blume Ventures has divided Indian households into three groups based on their per capita income.

The first group, or “India 1” as the company calls it, captures the “consumer class.” Approximately 30 million households (or 120 million individuals) with disposable income to invest and purchase goods and services other than necessities fall into this category. Their consumption amounted to US$800 billion, accounting for 60% of India’s total consumption.

Blume Ventures noted in its report that the second group, India Group 2, consists of about 70 million “aspirational class” households with relatively low incomes who are “heavy consumers and those who are unwilling to pay.” 2024 Indus River Basin Annual Report. Individuals in this group include aides and security guards.

The venture capital firm noted that the final group, the “India 3”, covers those who “do not have sufficient income to purchase non-essential goods.” Their per capita income is about $1,000 – similar to that in sub-Saharan Africa. Approximately 205 million households or 1 billion people belong to this group.

at the same time, Research by the NGO Oxfam Data shows that 63 million Indians are pushed into poverty every year due to medical expenses. This means about two Indians are pushed into poverty every second, taking into account only healthcare costs, the study said.

In terms of wage growth, Oxfam noted that it would take a minimum wage worker in rural India 941 years to earn what a top executive at one of India’s leading apparel companies earns in one year.

Unequal educational opportunities

Dasgupta of the Economist Intelligence Unit attributes much of India’s vicious cycle of wealth and income disparity to a mismatch in educational opportunities.

“For a large section of India, widespread access to education is not an easy thing. This is because of the heavy reliance on government-funded education, whose quality has been sub-par and poor,” she pointed out.

Private schools – an option for children from families earning around 30,000-50,000 Indian rupees ($355 to $592) a month – generally offer better quality primary and secondary education.

In contrast, public schools – which are free or charge nominal fees at the preparatory level – are likely to be plagued by problems such as “missing or insufficient qualified teachers, inadequate infrastructure and a generally lower quality of education,” Dasgup Tower explained.

“Parents in rural areas have no incentive for their children to receive education from the age of 13-14. Parents want their children to work and contribute to the family, but they are simply not sure what kind of income their children will receive.” Being able to rely on the education they receive later can Offer,” she argued.

Being educated in a public or private school ensures that children in India receive an education and at least a meal that they might otherwise miss. In the long term, insufficient access to basic education affects productivity, employability, and even health, especially among populations with lower per capita incomes.

India’s poorer residents typically seek employment or work as laborers in low-skilled jobs such as agriculture and construction, and often struggle to find employment in high-skilled jobs such as manufacturing or even services.

Going forward, Dasgupta’s recommendation is to devote more resources to improving primary education standards and enrollment and graduation rates.

The emphasis on education is already evident with the allocation from the Ministry of School Education and Literacy The latest national budget was INR 73,498 crore. Although it represents only 6.6% of the total budget allocation, it is the highest amount ever allocated to the department.

What else do you need?

In addition to improving education, experts have called for other measures such as higher taxes on India’s super-rich and a greater emphasis on job creation to boost labor force participation.

So far, the country has not imposed a wealth tax but has introduced other measures such as higher income taxes on the wealthy, a capital gains tax and a surcharge on high-income individuals. Response from a Recent survey conducted by the Earth4All initiative and the Global Commons Alliance It shows that 74% of Indian respondents are in favor of taxing the super rich.

Shumita Deveshwar, chief India economist at TS Lombard, said a more appropriate remedy for India would be to cultivate more avenues for growth by attracting investment from domestic and private investors.

She told CNBC’s Inside India program: “Compared with other emerging markets, India is a fast-growing economy that attracts global investors, but FDI (foreign direct investment) inflows slowed down to the lowest level in five years in fiscal 2024. lowest point.

Although foreign direct investment flows increased by 48% year-on-year between April and June 2025, the economist warned that “these flows are likely to be unstable and have not yet been supported by a strong recovery in domestic private investment.”

Deveshwar added: “The only sustainable solution to ensuring wealth inequality does not increase is to ensure increased private investment, particularly in manufacturing, which can get people off the farm and into higher-skilled jobs.”

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