By Dr Santosh Kumar Mohapatra*
On August 18, 2023, Prime Minister Narendra Modi said India is making remarkable progress towards “achieving equitable and collective prosperity” as he cited some reports to assert the country stands at the cusp of a new era of economic progress and is on course to become Viksit Bharat’ or developed by 2047. In the past, he had described the present time as like ‘Amrit Kaal’.
He said the SBI Research has pointed out (based on ITR returns) that the weighted mean income has made a commendable leap over the last nine years, from Rs 4.4 lakh in AY (assessment year) 2013-14 to Rs 13 lakh in FY (financial year) 2022-23. In the past, he has resorted to the rise of GDP and per capita income as the measures of success for the Indian economy.
But the bitter truth is that every year, the income of people increases in nominal term or absolute value. Simply, inflation bloats the income in nominal terms. However, he did not consider the corroding effects of inflation on income. Just compare the cost of constructing a house or the value of an ounce of gold, the price of various coessential commodities, cost of health and education during 2014 and now. How prices have escalated eroding the purchasing power of people.
In nominal value, when GDP, per capita income and weighted mean income have grown, the Central government’s debt has grown too. The Central government’s debt was ₹ 58.6 lakh crore (52.2 percent of GDP) as of March 31, 2014, which went up by 174 percent to ₹ 155.6 lakh crore (57.1 percent of GDP) as of March 31, 2023. The rise of GDP and mean income do not reflect the ground reality and problems of poverty, hunger, and job precariousness plaguing the masses.
The ignominious fact is that India ranks 139th in the world in terms of per capita income, which means it is below 138 countries, even Bangladesh. When we talk of prosperity, we should know that India is home to the largest number of hungry, poor, homeless, modern slaves in the world.While Niti Aayog’s latest Multidimensional Poverty Index (MPI) considers 14.96 percent of India’s population as poor, the recently released MPI by UNDP put the figure at 16.4 percent, based almost on the same indicators. It means 20.79 Crore Indians are ‘multidimensionally poor’.
According to the State of Food Security and Nutrition in the World Report 2022, India is home to 22.43 crore undernourished people. Around 97 crore people are deprived of a healthy diet. According to the NITI Aayog report, in Modi’s own state Gujarat, over 38 percent of the population remains ‘undernourished’. Furthermore, Gujarat ranked second in terms of wasted and underweight children, at 25.1 percent and 39.7 percent, respectively.
Yes, there is prosperity but the question is: prosperity for whom? Certainly, no prosperity for 100 crores out of 140 crores of Indians. Some link prosperity with the rise of wealth.Global Wealth Report 2023 is brought to you jointly by Credit Suisse and UBS for the first time. Over the years, the report has explored a wide range of macro and micro themes around the development of wealth. Now in its fourteenth edition, the Global Wealth Report covers estimates of the wealth holdings of 540 crore adults around the world and across the wealth spectrum.
Global wealth declined for the first time since the global financial crisis of 2008.Measured in the current nominal USD, total net private wealth fell by USD 11.3 trillion (–2.4 percent) to USD 454.4 trillion at the end of 2022.Wealth per adult also declined by USD 3,198 (–3.6 percent) to reach USD 84,718 per adult at the end of the year.The US took the hardest hit by shedding $5.9 trillion alone, followed by Japan losing $2.5 trillion.
Similarly, household wealth grew by 3.4 percent in 2022, which was the lowest rate recorded in any year this century apart from 2008. It was also the only year this century, other than 2008, in which the total value of household financial assets declined even when exchange rate changes were discounted.
The key contributors to this situation were the reduced value of financial assets, a stronger US dollar, and elevated inflation. Much of this decline comes from the appreciation of the US dollar against many other currencies.Financial assets contributed most to wealth declines in 2022 while non-financial assets (mostly real estate) stayed resilient, despite rapidly rising interest rates.Along with the decline in aggregate wealth, overall wealth inequality also fell in 2022, with the wealth share of the global top 1 percent falling to 44.5 percent.
However, Global median wealth, arguably a more meaningful indicator of how the typical person is faring, did in fact increase by 3 percent in 2022 in contrast to the 3.6 percent fall in wealth per adult. For the world as a whole, median wealth has increased five-fold this century at roughly doubles the pace of wealth per adult, largely due to the rapid wealth growth in China. However, the number of USD millionaires worldwide fell by 3.5 million during 2022 to 59.4 million. This figure does not, however, take into account 4.4 million “inflation millionaires” who would no longer qualify if the millionaire threshold were adjusted for inflation in 2022.
However, according to our projections, global wealth will rise by 38 percent over the next five years, reaching USD 629 trillion by 2027. Growth by middle-income countries will be the primary driver of global trends. The wealth per adult to reach USD 110,270 in 2027 and the number of millionaires to reach 86 million while the number of ultra-high-net-worth individuals is likely to rise to 372,000. But the reprehensible thing is that the 2023 Multidimensional Poverty Index Report “Unstacking global poverty: Data for high-impact action” finds that 25 countries halved multidimensional poverty within 15 Years, but 110 crores still remain poor. According to the World Bank, 71.9 crore people — 9.2 percent of the world’s population — are living on less than $2.15 a day.
What is surprising is that when the overall world witnessed a decline in wealth, the average wealth per adult in India has grown at an annual rate of 8.7 percent since the year 2000. As of the end of 2022, the average wealth per adult stood atUSD 16,500. In 2022, the wealth in India rose by 4.6 percent or $675 billion to $15.4 trillion.
India’s net worth per adult increased by 2.8 percent, fuelled by a growth in total assets of 2.7 percent and a marginal increase of 1.2 percent in debt (per adult). Non-financial assets per adult grew by 3.7 percent, while financial assets per adult declined slightly by 0.7 percent.India lags behind in comparison to China’s financial numbers, with China’s wealth per adult surging at a rate of 14.0 percent per year, resulting in a figure of USD75,731 at the end of 2022.
But, amid this progress, a disconcerting trend emerges that economic disparity and wealth inequality in India have surged over the years, with a Gini coefficient of an already high 74.6 in 2000 rising to 82.5 in 2022. The wealth share of the top 1 percent in India also remained relatively unchanged, reaching 40.4 percent in 2022. The 2022 World Inequality Report showed that the gap between the rich and the poor in India is at a historical high, with the top 10 percent holding 57 percent of national income – more than the average of 50 percent under British colonial rule (1858-1947). The ‘World Inequality Report 2022’ also dubbed India as a “poor and very unequal country with an affluent elite”
What is disquieting is that In India, during the pandemic (from March 2020, through to November 30, 2021) the wealth of billionaires increased from ₹ 23.14 lakh crore to ₹ 53.16 lakh crore while more than 4.6 crore Indians, meanwhile, was estimated to have fallen into extreme poverty in 2020 (nearly half of the global new poor according to the United Nations). It means if we measure prosperity in terms of wealth, rich people have accumulated more wealth while there is growing mass pauperization and impoverishment simultaneously.
The stark wealth inequality in India is a result of an economic system rigged in favour of the super-rich over the poor and marginalized. This shows that the rich have become richer and the benefits of growth are garnered by a few only.
However, prosperity is far more than wealth; it is when all people have the opportunity and freedom to thrive. Prosperity is underpinned by an inclusive society, with a strong social contract that protects the fundamental liberties and security of every individual. In a prosperous society, people live in peace, free from the threat of violence, oppression, and crime.
Everyone’s inherent dignity is respected, and freedom of speech, worship, and assembly are protected. Governing institutions act with integrity, are accountable to citizens, and are subject to the rule of law. Stable families and supportive communities instill the values that shape the culture and build the bonds of trust needed for society to flourish. Prosperity is driven by an open economy that harnesses ideas and talent to create sustainable pathways out of poverty.
In a prosperous society, property rights are protected, so investment can flow. Business regulation enables entrepreneurship, competition, and innovation. Open markets and high-quality infrastructure facilitate trade and commerce. Fiscal and monetary policies are used responsibly to foster employment, productivity, and sustained economic growth.
The Institute for Global Prosperity (IGP), United Kingdom refocuses the attention on what supports prosperity and what makes life worth living. More specifically, the foundation for a prosperous life is based on a good quality of life, secure livelihoods, access to key public services, good quality, and genuinely affordable homes, and a sense of inclusion and belonging in the economic and social life of a city.
Prosperity is also about having: clean air, water and adequate nutrition, access to education, a role and a voice in society, rights and freedoms to shape the choices and decisions that affect people’s lives. True prosperity is when all people have the opportunity to thrive by fulfilling their unique potential and playing their part in strengthening their communities and nations.
England-based registered charity Legatum first began establishing metrics around prosperity in 2006 when they engaged a team of Oxford University professors. Together, they sought to define the pillars that would allow us to understand the overall quality of life for a nation’s people, using an evidence-based approach. Looking beyond economic indicators, they identified metrics that affect well-being, such as family relationships, the role of the community, and the environment. The report produced from this work was the foundation upon which the Prosperity Index was established.
India ranked 103rd of 167 on the Legatum Prosperity Index 2023. India ranked 99th out of 142 countries in Prosperity Index in 2015. It means in terms of prosperity, out of 167 countries, India is behind 102 countries. Since 2015, India’s position has gone down by 4 places. In its various components, India ranks abysmally too such as 138th in Safety and security; 112th in Personal Freedom, 54th in Governance, 124th in Social Capital, 70th in Investment Environment, 39th in Enterprise Conditions,84th in Infrastructure and Market Access, 89th in Economic Quality, 125th in Living Conditions, 112th in Health, 106th in Education, 161st in Natural Environment. India performs most strongly in Enterprise Conditions and Governance but is weakest in Natural Environment.
India is also termed a flawed democracy and democracy is sliding as manifested in various indexes. Media is subverted. There is growing corruption and violence. Society is torn asunder. Religious sentiments people are exploited for political dividends. Family life is crumbling, peace is declining with the invasion of Western civilization. Due to rampant consumerism and hedonism, people have grown more insensitive and greedier. Hence apart from addressing wealth inequality, preventing erosion of social and moral values carries a significant challenge for the nation’s landscape.
The author is an Odisha-based eminent columnist/economist and social thinker. He can be reached by e-mail at [email protected]
DISCLAIMER: The views expressed in the article are solely those of the author and do not in any way represent the views of Sambad English.