The economic inequality has become a linchpin of modern politics. Inequality such as income, wealth, caste, gender creates grievance and heart burning among those who experience it in any realm of life. Outlining the trajectory of economic inequality in India since Independence reveals a nuanced landscape. Since Independence, India has experienced considerable sprout in economic activities and growth, yet the benefits of this growth have not been evenly spread. The rich are able to garner a large chunk of share of growth.
The era of economic liberalization brought forth fresh avenues and prosperity for middle and richer section of the society, but it also contributed to rising inequality with concentration of wealth in hands of few and impoverishment masses. This obnoxious trend was further exacerbated by pro-rich/corporate policies of ruling dispensations and economic upheavals triggered by the Corona pandemic. 

Amid the ongoing debate on wealth and inheritance tax, a new research paper titled “Proposals for a Wealth Tax Package to Tackle Extreme Inequalities in India” by A World Inequality Lab study, was released in the midst of 18th general elections in the country, propose a comprehensive tax package on the ultra-wealthy to tackle the massive concentration at the very top of the wealth distribution and create valuable fiscal space for enhanced crucial social sector investments.
The paper said that the taxation proposal needs to be accompanied by explicit redistributive policies to support the poor, lower castes, and middle classes. The paper noted that the taxation proposal needs to be extensively debated, with a consensus on specific details of the design emerging from a broader democratic debate on tax justice and wealth redistribution in India.
The paper proposes a 2 per cent annual tax on wealth over Rs 10 crore and a 33 per cent inheritance tax on estates exceeding the same value alone would generate a massive 2.73 percent of GDP in revenues. This will raise enough resources to double the current public spending on education, which has stagnated at 2.9 per cent of GDP over the past 15 years, well below — less than half — the 6 per cent target set by the government’s own National Education Policy 2020.
Under the moderate and ambitious variants, the paper introduces further progressivity in the tax schedules along with increase in tax rates. In the moderate variant, for instance, it proposes increasing the marginal wealth tax rate from 2 percent to 4 percent for net wealth exceeding Rs 100 crores. “This would be coupled with a 33 percent inheritance tax on estates between Rs 10 and 100 crore and a 45 percent tax on estates exceeding Rs 100 crores,” the authors said. This would yield 4.6 percent of GDP in annual tax revenues.
Under the ambitious package, with identical thresholds but higher tax rates (3 percent -5 percent for wealth tax and 45 percent -55 percent for inheritances), tax revenues could be as large as 6.1 percent of GDP, the paper said.

The paper says such taxation proposals are only going to affect 0.04 percent of adults, meaning, 99.96 percent of the population will remain unaffected by the tax. The top 0.04 percent (i.e. roughly those with net wealth exceeding Rs 10 crore) alone hold over a quarter of the total wealth of the country. Their total wealth amounts to a whopping 125 percent of India’s GDP.
The authors in their working paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj”, released on March 20 had said inequality in India has skyrocketed since the early 2000s and India’s income inequality at 100-year high; worse than colonial era.
Co-author Anmol Somanchi highlighted that Indian billionaires are largely an upper caste club. A progressive wealth tax package of the kind we propose is most likely to benefit lower castes and the middle classes at the detriment of only a tiny number of ultra-wealthy upper caste families. “In that respect, besides addressing extreme wealth inequality, such taxes could also play a small role in weakening the rigid link between social and economic inequalities in India.