Economy & Equity

India inhabits three different economic realities within its borders, India 1, the affluent and digitally empowered elite; India 2, the aspirational middle class caught in stagnation; and India 3, the invisible majority struggling for survival. https://thewire.in/economy/three-indias-economic-divide-mexico-indonesia-sub-saharan-africa 

The Indus Valley Annual Report 2025, published by Blume Ventures, paints a striking picture of India’s economic landscape, not something we are completely unaware of, but confirming our fears of a deeper divide. 

India 1: The wealthy elite driving growth

India1 represents the top 10% of earners, who enjoy access to global markets, financial investments, and premium consumption. They are the biggest beneficiaries of India’s digital public infrastructure, venture capital boom, and policy incentives favouring high-income sectors.

India 2: The aspirational yet struggling middle class

If India 1 is equivalent to Mexico in the world, India 2 is Indonesia, says the report.

The emerging aspirant class, heavy consumers yet reluctant payers. Comprising about 300 million people with a per capita income of US $ 3,000, this class includes salaried professionals, small business owners, and skilled workers. Unlike India 1, this group faces stagnant wages, rising costs, and limited social security. 

Consumer spending is what drives India’s GDP, and this middle segment – not really ‘middle’ if one is to look at the exact numbers – the in-between segment’s share of discretionary spending is only one-third. 

India’s Household share of savings has dropped from 84% in FY00 to just 61% in FY23, and now India has a much lower savings rate than its Asian peers at 30%, while China is at 44%. Indian’s financial savings have gone down to 5.1% in FY23 from 10.1% in FY00. 

India 3: The Forgotten and Marginalised Majority

In Blume Venture’s consumer stack, if India 1 is Mexico, India 2 is Indonesia, then India 3 is Sub-Saharan Africa. Over 1 billion of the population remains excluded from India’s digital economy, financial growth, and policy priorities.

India 3 represents the daily wage earners, informal sector workers, and rural labourers, the forgotten and the marginalised. And they are definitely not the ideal consumers, with almost no income at their disposal on discretionary goods. 

The harsh realities of India 3 are only visible when they die in large numbers in stampedes, in a pandemic, or simply of hunger. 

This is the 90% informal workforce of India, which lacks any kind of job security, or health benefits. They are the ones currently powering India’s gig economy, without the fair wages, and labour rights. The access of this population to quality education and healthcare still remains a distant dream, leading to intergenerational poverty. 

by Kavita Kabeer

01/03/2025

The word 'freebies' reflects the class privilege of those using the term, including members of the judiciary, industrialists, business executives, journalists or people occupying high positions who deride social welfare schemes even as they themselves receive all kinds of benefits. https://thewire.in/law/justice-br-gavai-freebie-parasites-assault 

During a hearing on civil writ petitions pertaining to provision of adequate shelter facilities to homeless persons in urban areas, Supreme Court Justice B.R. Gavai chose to criticise the practice of freebies for harming the national work ethic.

To think that a monthly cash transfer of Rs. 2000-3000 is enough to make the poor lazy defies logic and reason.  If labourers are indeed not going to work, this is not because of free rations, they are just not getting decent wages for agricultural work. The latest Economic Survey points to stagnating or decreased rural wages.

The International Labour Organization (ILO) has found that there is a stark lack of decent employment opportunities in India. Cash transfers have been offered because severe unemployment afflicts the capitalist world, including India.

Many of the so-called freebies are a constitutional requirement for social and economic justice in a country that is ranked among the most unequal countries in the world. The World Inequality Database shows that economic inequality in India was higher than the colonial period, and termed it as a Billionaire Raj.  India has not even been able to ensure that all its people receive basic food and nutrition, healthcare, housing, educational access, etc. In most other countries, universal access to reasonable quality goods and services that constitute basic needs is seen as the responsibility of the state, these are not viewed as freebies. 

The government recently announced a slew of extra retirement benefits for Chief Justices of India and Supreme Court judges (not to be confused with freebies). Similarly, tax cuts given to the corporate sector are not to be confused with freebies. Even as many welfare schemes are seen as wasteful, there is predictable silence over the billions of rupees worth of bad loans, owed to the public sector banks, being written off the banks’ balance sheets.

There can’t be a better example of freebies than the write-offs of non-performing assets (NPAs) of large corporate loans in the last few years paid for by Indian taxpayers.

by Zoya Hasan

20/02/2025

A key feature of the rising income inequality is due to the growing importance of capital income derived from interest, dividends, retained earnings and rents. https://thewire.in/economy/the-dark-underbelly-of-indias-rising-income-inequality 

There is a reason why India’s economic growth has been so lop-sided. Nobel prize winning economist Amartya Sen noted that since independence, India’s income inequality has been mainly driven by low investment in good-quality education and healthcare. So, while the educated and healthy workers in upper-income groups take advantage of new opportunities to make more money in a growing economy, poorly educated and unproductive workers in low-income groups struggle to make ends meet.

Today, India is one of the most unequal countries in the world where the top 1% income group captures a larger share of the pie than it does in South Africa, Brazil, or the United States (World Inequality Report 2022).

A key feature of the rising income inequality within countries is due to the growing importance of capital income derived from interest, dividends, retained earnings and rents. This has been observed in India too, where increasing share of capital incomes of the rich has been one of the key drivers of rising income inequality in the post-liberalisation period. Meanwhile, data shows that the incomes of people in the middle 50% of the distribution are shrinking.

by Dev Kar

24/09/2024

In real terms, the income of people employed in the formal sector remained stagnant for over a decade and declined during the past 5 years (-0.3% CAGR). The real average income contracted by 0.9% YoY in FY24. https://thewire.in/economy/anomalous-it-collection-masks-the-fiscal-knot 

The analysis of the recent Income Tax Returns data (FY24, CBDT) reveals that post-pandemic recovery in annual earnings of individuals has been muted. At Rs. 8.2 lakh (individuals plus HUF), it slowed to 4.5% in FY24, averaging at 5.8% on a 5-year CAGR, which is barely enough to match inflation.

by Dhananjay Sinha

13/09/2024