DELHI: Economist Thomas Piketty believes inequality in India is comparable with that in Brazil and South Africa. Like the two other emerging economies, where the richest 10% of the population has a 60-65% share of total wealth, a similar scenario probably exists in India, he said. But lack of transparency over the country’s direct tax statistics means he is unable to undertake a precise measurement here.
Piketty, who made waves in 2013 with his seminal book Capital in the Twenty-First Century, delivered a special lecture organized by the Indian Council of Social Science Research at Jawaharlal Nehru University in New Delhi recently.
He said India’s inequality levels are comparable with those of other developing countries.
“But the reality is we don’t really know. There is an extreme lack of transparency in information about income-tax data. I really want to stress that it is almost impossible to access income-tax data because there is complete interruption of all-India income tax statistics publication since 2000 which existed for many decades.”
Piketty pointed out that there are many countries—such as China—which have no data on income tax. But India is probably the only country where data once existed in the public domain, and then ceased to do so after the government stopped sharing it.
“To my knowledge this is unique,” said Piketty, who works on wealth and income inequality.
Academics have analyzed economic inequality by using consumption and income surveys. But what sets Piketty apart is his use of data on direct tax to arrive at a conclusion.
Surajit Das, assistant professor of economics at JNU, explained Piketty’s approach: “Tax rates vary depending on income brackets. If we can get data on tax collection according to the income bracket and the number of people within each bracket, then we can calculate their share in the national income. Piketty applies this methodology to calculate inequality.”
He said this was a more reliable method to calculate the incomes of different sections of the population. “Income or consumption surveys are based on samples, not the entire population. Tax-based income analysis is more accurate. We need such data in India too. One does not want to know names of taxpayers—just anonymous statistics,” Das said.
US has highest level of inequality
Piketty presented his analyses of inequality in developed countries. The data showed that though all of them share the same economic context, the US has the highest level of inequality. In a graph comparing the US with European nations and Japan, he showed that since the 1970s, inequality has risen far more sharply in the US than in Europe.
He attributed the difference to the policies of different nations. “Data shows a direct correlation between parental income and level of education of their children in the US,” said Piketty. He said that in European nations it is different, because education is largely public-funded.
Piketty concluded by saying that he is in favor of high taxes for the wealthy. “If the government utilizes funds properly and enjoys people’s faith, then higher taxation is not a problem. However, if private capital wants to grow without paying higher tax, then there is a problem.”
The economist had his critics in the audience.
“Piketty’s data work is excellent. However, he does not look at the structural causes of inequality. For example, gender is missing in his analysis, as are other categories,” said Chirashree Dasgupta, associate professor at the Centre for Law and Governance, JNU.
Dhananjay Rai from the Central University of Gujarat, Gandhinagar, added, “Inequality also needs to be linked with unemployment. Without unemployment, there cannot be exploitation and inequality in capitalism. The issue is to look beyond capitalism.”
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