What Is The Impact Of 73% Of India’s Wealth Being Cornered By 1% Of Its People?

The annual Oxfam survey revealed that 1% of Indians have accumulated as much as 73% of the total wealth generated in the country in 2017. It also suggested that Indians comprising the population’s poorest half saw their wealth rise by just 1% in the last year. What does this mean to a country which, under its constitution, is supposed to secure to all its citizens, equality of opportunity and economic justice?

Obviously, this report reflects poorly on Modi Sarkar’s performance, but it should be hardly surprising considering Modi is heading a government ruled by a right-wing party. But you might ask, why blame Modi? And the answer to that is his policies are focused almost entirely on the 1% and not on the rest. Why did he implement demonetisation (or digital economy, as it was later known) and GST overnight? While large enterprises were quick to adapt, it was the majority of small business and the self-employed who were hit the hardest. They suffered in silence and that silence was taken as a stamp of approval.

Other decisions too, such as charges on banking services, taking away subsidies on gas while giving subsidised land to companies like Patanjali and Adani, etc, are sucking the wealth from the poor and shifting it to the top 1%. Some may claim that this 1% are creating jobs and are distributing wealth and to be fair, this may work in small homogeneous countries like South Korea, but in a large diverse country like India, this trend is disastrous.

Rising income inequality leads to depressed aggregate demand. In simple terms, as inequality rises the demand for good and services begin to fall. The Banks are then forced to lower rates to encourage people to take loans and increase spending thereby accelerating the buildup of private debt. At the same time, those who benefit from increasing inequality search for high-yield investments and drive asset bubbles. As more and more people stop buying, companies will have to cut cost by laying people off. when people lose their jobs they are unable to pay their loan instalments. This increases the banks’ non-performing loans. Eventually, the bubble bursts and the government has to take over the burden of the banks in order to save the economy.

Till the bubble bursts, there are other economic and environmental repercussions. A few companies, who are patrons of the ruling party, enjoy an absolute monopoly. The policy to allow 100% FDI in single-brand retail stores will further consolidate wealth from the wallets of the majority into the accounts of a few. On the other hand, the 1% invest their wealth in loss-making companies like Amazon, Flipkart, Uber and Ola, all of whom would never have survived without this wealth. These companies offer huge discounts to customers. Local shops, retail stores, wholesalers and even taxi drivers end up losing customers because of these anti-competitive practices. So, on the one hand, we have wealth consolidation and on the other hand, we have rising unemployment. This further increases the economic gap at an increasing rate.

The only way to prevent this from happening is timely Government intervention. One such example of such intervention is the recent directions of the Income Tax department to Flipkart to reclassify discounts as capital expenditure instead of marketing expenditure. This means that they have to pay taxes on discounts given to customers. This is definitely a move in the right direction, but I don’t think this was done to level the playing field. I think the government was forced to take this decision because of falling GST revenue. If the government wants to decrease the economic gap, one of the things they have to do is to create a level playing field so that small businesses can compete against large online service providers.

You may wonder, why did the Modi government allow the economic gap to increase? To answer this question you have to understand how the right-wing perceives and justifies the rising economic gap. Say there are 10 people in a village and each one earns ₹10000 every month. If one of them makes mobile phones costing ₹8000, which everyone else buys, at the end of the month that one villager has accumulated a total wealth of ₹82,000 while the remaining nine villagers have a total of ₹18000. If you ask a right-wing supporter, he will say this is how the natural law of economics works. Right-wing economists often use this analogy to justify how the economic gap increases and how it is unavoidable no matter which income distribution policy is implemented.

However, this oversimplistic example hides some bitter facts. All Indians do not start off with ₹1000. Some barely earn ₹100 per day. The example also hides the fact that the other nine people have to be given an equal opportunity to sell goods or services to the rest. That doesn’t happen in many parts of India. There is also the question of what that one villager does with his accumulated wealth. Does he invest it to help the other nine villagers increase their income or does he store it in an offshore account to evade taxes? If he is really greedy, he may spend some of his wealth to get his buddy elected as the leader of the village and in turn pass laws that make it impossible for any other villager to sell mobile phones. Sounds familiar?

Besides the extremely poor, the biggest victim of rising economic gap is the natural environment. As economic gap increases, the wealthy and the poor have to encroach on the natural environment to sustain themselves as nature is the source of free resources. Well, it is not exactly free as it comes at a huge cost in the long term. But in the short term, it is easy to justify rising pollution, cutting of forests, destroying hills, diverting rivers, encroaching on eco-sensitive lands for housing, mining, transportation etc as means to create new wealth in order to “stimulate” the economy. Whether or not it actually closes the economic gap is debatable.

You might ask, what is the solution to this problem? Well, first it needs a change in the political, social and economic mindset. We need to set aside the engineered distractions of “Padmaavat”, cow vigilantism, Ayodhya, Triple Talaq, etc. All this will come once there is a change in government. We as citizens need to be vigilant of the policies of the government and we have to be vocal about or criticisms and suggestions. Yes, social media does play an important role in spreading the message. But if we want real change, we need to write letters to our elected representatives and the print media. If that doesn’t work, we need to be prepared to get out on the street and protest. We cannot allow our economic gap to increase, we cannot allow our children to leave school and work to supplement their family income, and we cannot allow our farmers to commit suicide just because we were too busy debating over issues like “Padmaavat”. I hope the Oxfam survey is a wakeup call for the youth of this country.