The growing divide

Oxfam study points to sharpening inequality

If more compelling evidence is needed of widening inequality in India, the latest global wealth report of Oxfam, a non-government organisation, offers some compelling proof. Released on the opening day of the World Economic Forum in Davos, that annual celebration of wealth, the report, titled “Survival of the Richest: The India Story”, shows that just 5 per cent of the Indians own more than 60 per cent of the country’s wealth and the bottom 50 per cent share just 3 per cent. India’s rich appear to have done well for themselves during the Covid years, the study found, with the number of billionaires increasing from 102 in 2020 to 166 in 2022. In that period, the study calculates that India’s billionaires saw their wealth surge 121 per cent, or about Rs 2.5 crore every minute. This is a remarkable increase in wealth at the top of the pyramid at a time when the economy has suffered and unemployment remains rife.
 

Such skewed patterns are echoed in corporate India. A recent Business Standard analysis from PRIME Infobase shows the average top executive in India — that is, chief operating officers, managing directors, and senior honchos — now earns 241 times more than the median employee compensation. What is more, this figure is significantly higher than the already high 191 times in the pre-pandemic year of 2018-19. Average top executive compensation has also crossed FY19 levels as well, touching Rs 12.7 crore as against Rs 10.3 crore. This imbalance should come as no surprise, given that corporate India remains largely promoter-driven, with top jobs usually reserved for family members and relatives of promoters. Though there has been some shareholder protest against promoter-chief executive officers’ (promoter-CEOs’) pay package, Indian companies, with their docile boards, are unlikely to see the kind of massive 40 per cent pay cut that Apple CEO Tim Cook will take in 2023 after a shareholder vote following a sharp fall in the value of the company’s shares in 2022. The culture of enthusiastic self-reward among India’s senior management represents a moral problem in a country that still has an uncomfortably large number of poor people. As prime minister, Manmohan Singh had referred to this issue, urging CEOs and senior executives to exercise restraint.
 

The Oxfam study has chosen to suggest the re-imposition of a wealth tax, chalking out the scope for social investment that such “unrealised gains” could bring. The study refers — though not by name — to the wealth of India’s richest man and the potential benefits of financing primary education in India from taxing just 20 per cent of his wealth between 2017 and 2021. Though the solution sounds logical, India’s experience with wealth tax, which was introduced in 1957, has been an unhappy one with large-scale evasion and little diminution in inequality. In the 2016-17 Budget, then finance minister Arun Jaitley scrapped it on the grounds that the cost of collecting it far exceeded the accruals from it. The common sense but tougher solution to gross imbalances in incomes and wealth lies in the nuts and bolts of a country’s socio-economic policy — such as privileging investment in education and health and infrastructure — rather than heavy taxes that the rich in India will work hard not to pay.