India's Rich Have Got Richer During the Pandemic: Oxfam

Oxfam has found that taxing India’s wealthiest, even in small proportions, is enough to fund major government schemes that could be instrumental in uplifting those from the lower economic strata.

New Delhi: Oxfam has released a report on economic inequality in India, which is found to have only deepened during the COVID-19 pandemic. This can be attributed to caste and class disparities, such as the physical remoteness of certain Scheduled Tribes (STs) from resources that foster upward social and economic mobility, or the inheritance of wealth and caste privilege. 

A major indicator of economic inequality is income disparities. Oxfam has found that not only has the bulk of wealth is concentrated in the net worth of a small chunk of the population, but this has increased largely due to the pandemic. Particularly, the outbreak of COVID-19 has led to the diminishing of wealth for the bottom 50% of the Indian population. In 2020, their income share was only 13% of national income, and just 3% of national wealth. In other words, the pandemic has led to much contraction of the income and wealth of the bottom 50% of India. 

Meanwhile, the top 30% owns over 90% of India’s wealth. Additionally, the top 10% own over 72% of wealth, and the richest 5%, nearly 62%. These figures top those of the pre-pandemic years (2018-19), which shows that the richest have only gotten richer during the pandemic. 

A similar trend can be seen in absolute numbers; the number of poor people in India is 228.9 million, while the number of billionaires has increased from 102 (2020) to 166 (2022). Thus, the report has found that income inequality has only increased, and much of this could be attributed to the pandemic. 

Another factor related to  economic inequality in India is the hiking of the Goods and Services Tax (GST). Before the virus hit, the government had reduced corporate tax slabs from 30% to 22%, which resulted in a loss of 1.84 lakh crores in revenue. To compensate for this loss, excise duties and GST on the prices of petroleum and diesel were substantially increased. This was done in tandem with slashing down exemptions. 

What this led to was an unequal impact on rural and urban areas of India, most tangible in inflation. It was found that inflation was 7.56% higher in rural India than in urban regions in September 2022. The absolute numbers of both dropped in October 2022, but the gap still showed an increase of 2.5 times within a month’s time. This is especially felt in the increase in food prices in rural and urban areas, with the hike in food prices nearly twice in the former cities. Once again, this case in the report goes to show that during the pandemic, economic fissures have further widened. 

A major recommendation Oxfam puts forward to reduce economic inequality is taxing the rich. The report dedicates an entire section to putting forward reasons for this, which can be summarised as so:

1. 1% wealth tax on Indian billionaires is enough to fund the National Health Mission, India’s largest healthcare scheme. It would be able to provide Rs 36,960 crores for three years.

2. Taxing the top 10 billionaires at 5% would cover healthcare costs for tribal areas for five years.

3. Taxing India’s billionaires at 2% would support the nutrition of India’s malnourished for three years, through the Supplemental Nutrition Programme (SNP).

4. The finds from taxing India’s billionaires at 2% could be used to increase expenditure on health.

5. Taxing the wealthiest 10 billionaires at 1% would cover this shortfall between the amount requested for the Samagra Shiksha (centrally-supported scheme for school education) and what the ministry of education granted them, for three years. Taxing 4% would cover the entire amount of funds requested for two years. 

6. Taking India’s top 100 billionaires at 2.5%, or the top 10 at 5% would yield an amount enough to bring out-of-school children back to receive quality education (Rs 1.4 lakh crore).

7. 2% taxes levied on the top 100 billionaires would fund the mid-day meals scheme that was proposed by the National Education Policy 2020 (NEP 2020).

8. The amount needed to fill vacancies in elementary schools (Rs 2040.3 crore) can be raised by taxing the 10 richest Indian billionaires at 1% (funding for 13 years), or by taxing the 100 richest Indian billionaires at 1% (funding for 26 years).

Overall, Oxfam has found that taxing India’s wealthiest, even in small proportions, is enough to fund major government schemes that could be instrumental in uplifting those from the lower economic strata. This would be a step in reducing economic inequality. 

The report concludes with a list of recommendations. Taxing the wealthy (specifically the top 1%) is the first of these, mostly owing to the reasons elaborated on above. The impact of taxing the rich could perhaps help in breaking the connection between government policy and the interests of India’s wealth, which tends to make the latter even richer. Additionally, easing the tax burden on the poor and marginalised could aid in reducing economic inequality, along with improving access to public services (health and education). The latter could foster socioeconomic upliftment. The final recommendation Oxfam gives is to strengthen the safety and bargaining power of India’s labour force. This would entail ensuring social protection (as 90% of labour is part of the informal economy) through monitoring and tracking mechanisms.