Opinion World Inequality Report 2026: India’s growth model is leaving the ‘middle’ behind

The WIR data is unsparing, positioning India’s top one per cent as holding an income share of 22-23 per cent, a concentration of earning power comparable to the historically stratified societies of Brazil and South Africa. Although India is celebrated as a fast-growing economy, the benefits have largely bypassed the base.

The bottom 50 per cent earns less than the global average of its peers, even in purchasing power parity terms. The wealth outcomes are even more skewed, with the top 1 per cent now commanding nearly 40 per cent of the country’s total wealth, a figure that has surged since the 1990s, while the bottom half is left with a negligible sliver.

Crucially, the WIR identifies a structural red flag: The hollowing out of the “middle”. The middle 40 per cent in India captures only about 30 per cent of total income, significantly lower than the 40-45 per cent seen in more equal economies. This implies that India is not building a broad-based consumer class but rather a dual economy consisting of a tiny, hyper-prosperous elite and a vast, struggling majority.

However, any form of outcome-based analytical data can only describe what has happened; to understand why opportunity remains so fiercely rationed, the multidimensional Access (In)Equality Index (AEI) 2025, developed by the Centre for New Economics Studies at O P Jindal Global University, can help.

Moving beyond income, the AEI evaluates, every year, the “4As” of access — availability, affordability, approachability, and appropriateness — across five critical pillars. What the AEI data exposes is a pattern of structural access rationing where the institutional channels that convert growth into capabilities remain constricted.

This structural ossification is not accidental but follows a decade of distinct fiscal choices. A backward-looking trend analysis reveals that while central capital expenditure on physical infrastructure has surged to record highs, the state’s investment in human capital has effectively stagnated.

Budget data shows that combined public spending on education has hovered stubbornly around 4 per cent of GDP for the last decade, far below the long-stated 6 per cent target, while healthcare expenditure remains near 1.2-1.5 per cent. Even as nominal budget allocations rise, they have failed to keep pace with the combined pressures of inflation and population growth.

Consequently, real per capita investment in a child’s future has barely moved. This contraction is visible in the scholarship architecture, where coverage may have expanded numerically, but the real value of support has eroded, reducing it from a tool of mobility to a mere compensatory transfer. The result is an economy rich in physical infrastructure but poor in human capability, a trade-off that disproportionately hurts the hollowing middle class and the bottom 50 per cent.

The NITI Aayog’s SDG India Index 2023–24 highlights this contradiction through the lens of geography. While composite scores have risen to 71, the data reveals a deepening divergence between economic growth and social access. This paradox is sharpest in high-growth states like Gujarat.

While NITI Aayog data shows Kerala and Uttarakhand topping the SDG charts with scores of 79, Bihar languishes at 57, underscoring a massive capability gap. This feeds into a broader trend where inter-state inequality has modestly converged, while intra-state inequality has exploded. The benefits of growth within states are increasingly captured by urban hubs and capital owners, leaving rural peripheries behind.

Another example is the rural–urban divide, which acts as a primary filter for this inequality. The AEI data shows that while 92 per cent of urban households have access to clean cooking fuel, only 49.8 per cent of rural households do. Similarly, while 58.9 per cent of urban India enjoys piped water within their premises, a mere 22.5 per cent of rural India possesses this basic necessity.

This lack of infrastructure imposes a time tax on the rural poor, particularly women, contributing to a female labour force participation rate of just 15.7 per cent, one of the lowest in Asia. Even more disturbing is the horizontal inequality revealed when the AEI interrogates community-wise trends.

The synthesis of these two reports offers a formidable challenge to current policy thinking. The WIR warns that inequality is not just horizontal but vertical, driven by the collapse of public wealth. Redistribution is insufficient if delivery mechanisms are broken and state capacity is hollowed out.

A modest wealth tax on the ultra-rich, as suggested by the WIR, potentially raising 0.45 per cent to 1.11 per cent of global GDP, could fund the massive public investments needed to close the gaps identified by the AEI.

But money must be directed specifically toward the “4As”, ensuring that schools are not just built but are approachable for ST communities; that hospitals are not just available but affordable for the rural poor. India’s inequality problem is not just a matter of redistribution but of state capacity. Without rebuilding public wealth and public institutions, redistributive taxes will have nowhere productive to land.

Mohan is professor of Economics and dean, O P Jindal Global University. He is currently a visiting professor at the London School of Economics and a visiting academic fellow at University of Oxford. Singh studies at the Jindal School of Government and Public Policy and is a research analyst at the Centre for Economics Studies, O P Jindal Global University