Why inequality in India and the world shows little movement in recent years

What the report reveals about claims of decline in inequality

The World Inequality Report 2026 highlights two important findings. First, global income and wealth have reached historic highs. Since the beginning of the 19th century, income per person has increased more rapidly than population growth. 

While population increased at an average annual rate of 0.9 per cent between 1800 and 2025, per capita income grew at an annual rate of 1.2 per cent. In theory, this suggests that the world today has become richer and can provide every person with Rs 1.32 lakh (or €1,200) per month. However, the reality is far from this.

The second important finding of the report is that economic resources continue to be highly unevenly distributed. This is manifested in numerous ways. For instance, the top 10 per cent of the world population (around 56 crore people) receive 53 per cent of the total global income, while the bottom 50  per cent (around 280 crore people) receive only 8  per cent. 

More alarmingly, the top 1 per cent earn 2.5 times more than the bottom 50 per cent, while the top 0.1  per cent earn as much as the entire bottom half of the global population.

Although global income has grown at an annual rate of 1.1 per cent since 1980, data reveal that the richest 0.1% have seen disproportionately higher income growth rates, challenging claims of decline in inequality. At the same time, the middle 40 per cent experienced stagnation in income growth. 

Why middle-income groups demand closer attention

A similar pattern is observed in wealth distribution. The top 1 per cent owns 37 per cent of the total global wealth, while the bottom 50 per cent have access to only 2 per cent. 

It is important to distinguish between income inequality and wealth inequality. While income inequality measures the difference in the distribution of household or individual income (earnings, wages, investments) among the population of a country, wealth inequality measures the difference in the distribution of accumulated assets (net worth, property, savings). Both reflect economic inequality.  

However, high income and wealth inequality are not a recent phenomena. The report highlights that since 1820, the top 10 per cent of the world population have consistently captured more than 50 per cent of global income, while the bottom 50 per cent have never received more than 15 per cent. 

But the changing position of middle-income groups demands closer attention. The middle 40 per cent saw a rise in their income share between 1920 and 1980, followed by a decline in the share until 2000, and then witnessed a partial recovery thereafter. The historic decline in income inequality that data often mention has mostly benefited the middle class and not the bottom 10 per cent. 

Why rich countries tend to be more equal than poor ones 

The French economist Thomas Piketty uses the term “patrimonial middle class” in his book, A Brief History of Equality (2022), to refer to the middle 40 per cent. One way to understand how this group benefited from reductions in inequality is by examining wealth distribution before the First World War. 

In the early 1900s, the top 10 per cent owned 85 per cent of the global wealth. Although the share has now reduced to 50-60 per cent – still alarmingly high – it represents a substantial reduction. This has, in turn, benefitted the middle 40 per cent or the “upper middle”, whose share of wealth has increased over time. 

Both Piketty and the World Inequality Report have highlighted that rich countries tend to be more equal than the poor countries. However, this was not always the case. Relative equality among advanced economies became notable by the 20th century through state-led policies like the development and expansion of welfare systems, public services, and progressive taxation. 

Piketty’s core argument is that while redistributive policies helped reduce inequality, the progress has been very limited for the bottom 50 per cent. 

Factors behind India’s striking inequality

In the case of India, the report indicates that the top 1 per cent of the population holds 40 per cent of the wealth while the top 10 per cent hold 65 per cent. This places India among the most unequal countries in the world, with little evidence of a notable reduction in inequality. In terms of income inequality, the top 10 per cent earn around 58 per cent of the total income, and the bottom 50 per cent earn only 15 per cent. 

Researchers and scholars attribute India’s striking inequality to various factors, including the lack of quality access to education and healthcare, and the service-dominated nature of economic growth that emerged after the economic liberalisation. 

The “financialisation of wealth”, or the growing importance of activities like trading and  investments have increased the wealth share of the top 1 per cent. Historical data show that the income share of the top 1 per cent in India was around 13 per cent in 1922. This share declined between the 1950s and early 1980s, but increased again after the economic reforms, reaching an all-time high of 22.6 per cent in 2022. 

Land, gender, and climate 

Another striking feature of the Indian economy is land inequality and land fragmentation. Around 46 per cent of rural households in India are landless, while the top 10 per cent own 44 per cent of the total rural land. 

The 2026 inequality report also notes that villages with higher shares of Scheduled Castes and Scheduled Tribes tend to exhibit higher rates of landlessness. However, states like Kerala and West Bengal are seen as exceptions, where, it may be argued, land reforms played an important role in reducing inequalities.

Contrary to popular assumptions, greater market accessibility does not necessarily reduce inequality; proximity to towns, roads, and cities has often been insufficient in reversing historically rooted inequalities. 

Inequality also has gender and social dimensions. For instance, women in India continue to face low female labour force participation rates, historical inequality in labour income, wealth, and land ownership, and a disproportionate burden of domestic and care work. Similarly, other marginal and vulnerable groups are more likely to have unequal access to resources and income as compared to dominant groups. 

Moreover, climate change further intensifies these inequalities. While the poorest often account for low carbon emissions, they are more likely to be exposed to climate-related shocks like water crisis, heat stress, and extreme weather events. 

How to reduce inequality

The report argues that inequality can be reduced through meaningful interventions, including:

1) Increase in public investment in education and health.

2) Redistributive programmes like cash transfers, pensions, and unemployment benefits. 

3) The dismantling of structural barriers that shape unequal distribution of work and opportunities. 

4) The creation of a fairer tax system. 

Progressive taxation, where those at the top contribute taxes at higher rates, could help bring about transformative changes in education, health, and climate adaptation. However, debates around “taxing the wealthy” are often reduced to concerns that such measures may slow economic growth and trigger capital outflows. 

Therefore, it is often argued that poverty alleviation through inclusive growth is more crucial than mere inequality reduction. However, facts demonstrate the extent of inequality in India. For instance, a 2023 study by Sajith Pai and Amal Vats notes, “1% of Indians take 45% of flights, 2.6% of Indians invest in mutual funds, 6.5% of users are responsible for 44% of digital transactions on Unified Payment Interface (UPI).” 

Therefore, Piketty has argued that without a radical step like “redistribution of inheritance”, extreme inequality is likely to persist for a long time. 

Post read questions

Economic growth has not necessarily translated into reduction in inequality. Discuss in the context of the World Inequality Report 2026.

Examine the major dimensions of inequality in India. How do wealth, income, gender, and land inequalities reinforce one another?

Distinguish between income inequality and wealth inequality. Why is wealth inequality often considered more persistent and structural?

Examine the argument that India’s post-liberalisation growth model has intensified economic inequality.

To what extent can progressive taxation reduce inequality in developing countries like India? Discuss the challenges involved.

(Ritwika Patgiri is a doctoral candidate at the Faculty of Economics, South Asian University.) 

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