Inequality denial starter kit

Misleading analyses of poverty, complacency from policymakers and elites, will only exacerbate India’s ballooning inequality crisis

“...obstinate ignorance is usually a manifestation of underlying political motives.” — Michal Kalecki, ‘Political Aspects of Full Employment’, The Political Quarterly, 1943.

IN A RECENT working paper, we document long-run trends of income and wealth inequality in India. We find that inequality declined post-independence, began rising in the 1980s and has skyrocketed since the 2000s. Between 2014-15 and 2022-23, the rise of topend inequality has been particularly pronounced in terms of wealth concentration. India’s top 1 per cent shares are now at their highest historical levels, making the Billionaire Raj more unequal than the British colonial Raj and squarely placing India among the most unequal countries in the world. We firmly stand by these findings. Nonetheless, given the complexities in inequality measurement, we welcome constructive debate on ways to improve our series, particularly for the last decade when data quality has significantly deteriorated, as amply highlighted in our paper.

On March 27, two articles simultaneously appeared, questioning our results. One was co-authored by the Chief Economic Advisor (CEA) to the Government of India (V Anantha Nageswaran and Deeksha Supyaal Bisht, ‘Ten reasons why Piketty’s paper gets it wrong on inequality in India’, Livemint, March 27) and the other by a former part-time member of the Prime Minister’s Economic Advisory Council (Surjit S Bhalla and Karan Bhasin, ‘The devil is in the footnote’, IE, March 27). After carefully reviewing both articles, we found little constructive criticism, but plenty of misrepresentation and misunderstanding. This is perhaps not surprising — it is hard to be both judge and jury when working closely with a government. These articles are better read as textbook cases of inequality denial in action — the authors pick one element irrelevant to our inequality estimates and twist it out of context to cast doubt over robust results. By the time the air is cleared, the damage is already done.

Let us unpack how “inequality denialism” operates in this case.

Bhalla and Bhasin’s (BB) critique is largely built around footnote 36 (page 24) in our paper that highlights the tentative nature of minor findings. Nageswaran and Bisht (NB) also refer to the same footnote as a “QED moment”. Now, this “gotcha” drama would have been worth some money if the footnote had absolutely any relevance to the core of the debate — our inequality estimates. Alas, it does not, whatsoever.

It only pertains to our claim that the Indian tax system might be regressive when viewed from the lens of net wealth (rather than incomes); that is, the tax liability as a fraction of net wealth might be falling as one gets wealthier. BB and NB pick this footnote about the tax system and spin a false impression that it somehow applies to our inequality estimates —itdoesnot.

After wasting many precious words misconstruing our footnote, BB move on to comparing our estimate of the top 1 per cent income share with two earlier papers — Abhijit Banerjee and Thomas Piketty (2005; BP) and Lucas Chancel and Thomas Piketty (2019; CP).

We could certainly dive into the weeds, as two of us already have (‘The opaque 1%’, IE, February 3, 2018), except that BB seem to have made an elementary error. They state that “… the 1999 estimate of the top 1 per cent has been inflated to read 21 per cent”. After a forensic investigation, we fail to find where BB got this figure from. In our recent paper (Appendix Table B.1) as well as in CP, the top 1 per cent income share for 1999 is reported as 14.7 per cent. Therefore, BB’S claim that we “… get a ladder increase in inequality estimates for many years earlier with each update”, is simply false. Our best guess is that they have carelessly misread the bottom 50 per cent share in 1999 (20.7 per cent) as the top 1 per cent share. No wonder they find nonsensical growth rates. Case dismissed.

A final word: The striking similarities between their botched critique of rising inequality and their error-ridden and misleading analysis of poverty are hard to miss.

Despite privileged access to all sorts of administrative data, the CEA has done little to shed light on economic inequality. When a serious academic attempt has been made, the least one could expect of him is the “tedium of ploughing through 85 pages”. NB’S article is high on polemics but fails to deliver any substantive critique. For instance, how is multidimensional poverty relevant to income and wealth inequality? Similarly, to counter our claim that the tax system might be regressive when viewed from the lens of net wealth, NB cite two very interesting papers showing that the tax system is progressive in terms of in

After carefully reviewing both articles, we found little constructive criticism, but plenty of misrepresentation and misunderstanding. This is perhaps not surprising — it is hard to be both judge and jury when working closely with a government. These articles are better read as textbook cases of inequality denial in action — the authors pick one element irrelevant to our inequality estimates and twist it out of context to cast doubt over robust results. By the time the air is cleared, the damage is already done.

comes (which we never denied in the first place), while conveniently ignoring Ram Singh’s (2022; CDE-DSE working paper no. 331) novel work that came to the same conclusion as us. NB are certainly right in saying that improved tax compliance could spuriously increase income inequality in our series, but did they skip page 33 in the paper (section 7.5) where we explicitly address this concern?

Quoting data from PRICE’S ICE360 survey, NB state that our paper “...by singularly focusing on the top 1 per cent misses India’s emerging middle class”. This is a strange accusation since we carefully study the full distributions of income and wealth, not just the top 1 per cent. We even specifically highlight depressed growth rates in the middle of the distribution (page 28). Be that as it may, NB also seem blissfully oblivious to the fact that we too utilise PRICE’S ICE360 survey as an alternative to NSSO’S PLFS. What do we find? Between 2015-16 and 2020-21, the bottom 50 per cent income share fell sharply from 14.4 per cent to a shocking 9.8 per cent, contrasted with a marginal increase in our benchmark Plfs-based series (Appendix Figure B.3). The CEA cannot have the cake and eat it too — we let him have his pick. We would have liked to address his other concerns too but are now out of space.

One could certainly quibble with our methodology and estimates, but to those willing to objectively engage with reality, India’s vulgar inequalities are staring back at us from all directions. Inequality denialism is, of course, not unique to India, as we have seen at close quarters in the US and elsewhere. Worryingly, however, this sort of complacency from policymakers and the elites will only exacerbate India’s already ballooning inequality crisis.

The authors are affiliated to the World Inequality Lab at the Paris School of Economics

C R Sasikumar