What's missing from Forbes 2017 Rich List? Discussion on Income Inequality

While Prime Minister Narendra Modi on Wednesday slammed critics of economic slowdown, on Thursday, Forbes India dropped its annual list of India’s 100 richest tycoons which showed that the combined wealth of the country's richest 100 Indian's rose more than a fourth to $479 billion.

“Despite India's economic slowdown, the country's 100 richest have collectively enjoyed a bumper year thanks to a buoyant stock market. While the Indian billionaire factory continued to churn out new names from diverse sectors, the price of entry rose to a record high. The top 100 club is getting more exclusive with each passing year,” said Naazneen Karmali, India Editor of Forbes Asia.

Although Reliance Industries Ltd (RIL) chairman Mukesh Ambani retained his crown, the rankings,  computed through stock prices and exchange rates as of September 15, included a few new entrants this year, such as airline tycoon Nusli Wadia (No. 25, $5.6 billion), Dinesh Nandwana (No. 88, $1.72 billion) of  Vakrangee; Vijay Shekhar Sharma (No. 99, $1.47 billion) of  Paytm; and Rana Kapoor (No. 100, $1.46 billion) of Yes Bank.

Overall in 2017, India added 101 Billionaires, ranking it 4th in the list of countries with most billionaires, after USA (565), China (319) and Germany (114).

“The aggregate wealth of the top 100 has risen 26% over last year, despite the struggle of some sectors like pharma. In fact, the entry point to the list is at its highest ever, at $1.46 billion, with several billionaires waiting in the wings. Clearly, India’s entrepreneurial energy is flourishing despite challenges,”  said Sourav Majumdar, Editor, Forbes India.

Despite India's "flourishing entrepreneurial energy", several economists are pointing to the worrying trends of rising income inequality in India. 

A recent paper titled  from 'British Raj to Billionaire Raj' by Lucas Chancel, a professor at Science Po in Paris, and Thomas Piketty of the Paris-based Ecole des Hautes Etudes en Sciences Sociales in fact suggested that  when compared with other countries, India had the highest gap between the growth of the top 1% of the population by income and growth of the full population between 1980 and 2014.

Although the authors noted that the “unequal growth dynamics” in the same time period are also seen in  China, US and France, “India’s dynamics are, however, striking: it is the country with the highest gap between the growth of the top 1% and growth of the full population."

Comparing  income levels and income thresholds for different groups and corresponding adult population size in 2013-2014, the study also noted that  the "Top 1% earners earn on average INR 3.1 million (22 times national average) versus INR 43 734 (0.3 times national average) for the bottom 50% and INR 86 841 (0.6 times national average) for the middle 40%."

While there has been some criticism on the estimates of the exact figures used in the study despite a warning on the limitations of available data sources by the authors, there is no denying, even by the critics, that the extent of concentration in wealth has been steadily increasing since the 1990s.

A 2016 study by economists Ishan Anand and Anjana Thampi, for instance, similarly demonstrates that in 2012, the top 1% in India accounted for nearly 28% of the country’s wealth, an increase of 11 percentage points since 1991.

On the other spectrum, the share of the bottom 40% of the country’s wealth, the study says, declined from 5 % to less than 4% over the same period.