Rising Wealth Inequality in India

Inequalities in wealth and income are prevalent across the globe. There is perhaps no economy in the world that is not facing the challenges relating to inequalities in varying degrees. India is also faced with the challenge of increasing inequalities across states and regions on both fronts. Every year, through many surveys, different institutions and organizations highlight the issue of inequalities in India. A lot has been done to alleviate poetry but when it comes to inequalities, policy responses fail to address them.

After having a look at the data relating to wealth per adult in India, it is evident that the average wealth in India is found to be far higher than that of the median wealth. In 2022, the average wealth per adult was $18,048 and the median wealth was $4,107 in the same year. The average wealth was about four and a half times the median wealth in 2022.

Globalisation or Regionalisation?

COVID has been a learning experience for all countries across the globe. There is not a single country which was not negatively impacted; mostly in the form of supply-chain disruptions. As a result, countries have been focusing on domestic markets on both sides; demand and supply sides. So at present, their focus is revolving around increasing domestic production as well as consumption. This is more true in emerging economies like India, China, Brazil and South Africa. China is working on increasing domestic consumption while India, South Africa and Brazil are tirelessly working to increase manufacturing in their own domestic markets. However, all four countries of the BRICS bloc are working to increase their export share in global trade and this is pushing the globalisation movement forward.

However, since COVID supply-chain disruptions, many intellectuals have been talking about de-globalisation and predicting that de-globalisation would soon become a new phenomenon. It is quite possible that in the future de-globalisation may become more evident than today, but at present de-globalisation seems to be just another phrase being overused by academia! At least, the data says so.

What is Better? Efficiency or Fancy Degrees?

In 2013, the global rating agency S&P started discussing and threatening to put India in the junk category. However, today after just 10 years, the same S&P is declaring India as the fastest-growing economy in the world. What has happened in just 10 years that S&P has changed its mind and is the most optimistic about India? Is it magic or has this change just happened?

No. Surely, not. This did not happen just like that. For this, the Government of India has put in a lot of effort in the last 9 years and the fruits of those efforts are now visible in every aspect of life in India. It is a well-known fact that the effect of any structural reform is visible in any economy with a lag.

Indian Economy a Bright Spot but a Bumpy Ride

Most of the economic indicators clearly and reasonably indicate that the Indian economy will grow with a growth rate of not less than 6% in 2023. This is the highest rate of growth among the largest economies in the world while the global economy is slowing down. So without a doubt, it can be said that the Indian economy is a bright spot in the global economy when a soft to moderate recession is in offing in the world economy. This may look euphoric but this ride wouldn’t be an easy one but bumpy and full of many challenges.

At present the Indian economy is facing two big problems that need to be fixed in the short to medium term. The first and most significant problem is high inflation in the economy. This is a very costly situation for the Indian economy. To tame the inflationary situation, RBI has maintained a hawkish monetary policy and this policy stance is the biggest challenge for the economy as if the central bank continues to increase the interest rates in the economy, it would be very costly for the economy.

EAST vs WEST: Divergent Responses to the Russia-Ukraine War

The Russia Ukraine completes a year – much to the dismay and wonder of all, especially Russia which could not have expected this stiff resistance from a small neighbour. The world has responded with anger, anguish, dismay and much more, as the war has taken a toll on countries worldwide. There have been varied responses by countries across the world, and there are some questions and observations about the East vs West response.

The Asian response has been cautious and watchful and followed a nuanced path as the war has progressed. The current responsiveness of countries such as China and India is based on pragmatism to cope with the multiplier effect of the pandemic, compounded by the current conflict. As the post-pandemic global environment led to the worst-ever economic depression in decades, responses of countries have attempted to combine domestic issues of survival with social and ethical concerns. The current conflict has exacerbated the global crisis as prices of food, oil and fertilisers have skyrocketed across the world, complicating domestic issues for many Asian countries.

Adani, Valuation and Share Prices

Post Hindenburg’s report, a kind of saga unfolded causing temporary chaos in the Indian security market and raising large numbers of questions relating to Adani Group ranging from financial reporting to stock price manipulations to corporate governance. But it becomes pertinent to ask whether those questions are relevant or not.

It is not that the Adani Group is beyond question. There are a large number of serious questions that should be asked and are being asked as well. However, a lot of people have suddenly woken up to ask questions relating to the valuations of the Adani Group stocks post-Hindenburg saga and the withdrawal of FPO by Adani Enterprises.

Adani Group: What has Changed?

Adani FPO has now been oversubscribed by 1.12 times amid huge chaos created by Hindenburg's report on Adani Group and doubts about the success of the FPO. From the data available about the subscribers, it is crystal clear that the non-institutional investors including family offices of wealthy families along with anchor investors have played an important role in the success of FPO.

As far as the subscribers’ interest in the FPO was concerned, for two days, there was hardly any taker of the FPO in the retail and NII segment. However, the investment from Abu Dhabi-based International Holding Company (IHC) worth $400 million in the FPO completely changed the environment and the prices of Adani Group companies not only stopped falling but some shares witnessed an increase.

Hindenburg’s Report on Adani and Its Ramifications

Hindenburg Research has come up with a report on the Adani Group which clearly alleges that the Adani Group firms have been involved in financial window dressing and stock market manipulations. These are very serious allegations with huge consequences and repercussions for the Adani Group in particular and the Indian economy in general. The shares of the Adani Group companies are on free fall since the report has gone public. Not only this but the report has also negatively affected the sentiments and volatility in the Indian stock market and many other stocks have to bear the brunt as a result of negative sentiments in the market.

Increasing Intellectual Bankruptcy in India

With the decision of the Supreme Court of India, all the questions regarding the constitutionality of the demonetisation of currency notes by the Indian government in 2016 are now settled forever. A 4:1 verdict establishes that due process was followed and the Reserve Bank of India was in the loop. However, the questions regarding the economic and social impact of demonetisation would never die down and should not. A fair and unbiased discussion, as well as an assessment of this key but knee-jerk policy decision, is necessary so that this episode of demonetisation could be used as a case study for future policymakers.

The Government of India demonetised ₹500 and ₹1,000 currency notes in 2016 with the stated objectives to clean illicit money and cashless economy which eventually proved to be a very costly affair for the economy. However, after six years of demonetisation, it can easily be said that ideally none of the stated objectives was ever achieved apart from the cleansing of the counterfeit currency notes from the market.

गहराता भारतीय अर्थतंत्र

आईएमएफ के आर्थिक पूर्वानुमान के अनुसार भारतीय अर्थव्यस्था में 2022 में 7.4% व 2023 में 6.1% की दर से वृद्धि होगी। हालाँकि इस बात की पूरी संभावना है आईएमएफ अपने अगले पूर्वानुमान में इस वृद्धि की दर को मानसून में आए अनियमितता को जगह देते हुए रीवाइज किया जाएगा और ये दरें कुछ कम हों। ये वृद्धि दरें ऐसे समय में और भी महत्त्वपूर्ण हो जाती हैं जब भारत के लगभग सभी पड़ोसी देश आर्थिक समस्याओं में घिरे हैं किन्तु तब भी भारतीय अर्थव्यवस्था इन कठिन परिस्थितियों में अपनी आर्थिक गतिविधि को बहुत प्रभावित होने से बचा पाने में सक्षम रहेगी।

पड़ोसी देश श्रीलंका पहले ही डिफॉल्ट कर चुका है और वहाँ की आर्थिक परिस्थितियों को ठीक करने की दिशा में भारत सबसे बड़ा सहयोगी सिद्ध हुआ है। पाकिस्तान की आर्थिक स्थिति बहुत खराब है और बहुत कठिन शर्तों पर बाह्य आर्थिक सहयोग मिलने की संभावना बन पा रही है। बाँग्लादेश अपने बाह्य भुगतान के लिए आईएमएफ से सहयोग की माँग कर रहा है। म्यामांर, मालदीव व नेपाल की आर्थिक स्थिति भी बहुत स्थिर नहीं है। कुल मिलाकर सार्क में भारत व भुटान को छोड़कर सभी देश आर्थिक परेशानियों से घिरे हैं।