Economy & Equity

 The Future of Inequality│Abhijit Banerjee(MIT, Professor of Economics)
World Knowledge Forum

MIT Professor Abhijit Banerjee is an economist who believes in "good economics in hard times. Winner of the 2019 Nobel Prize in Economics, he is leading the global discourse on inequality. In this session, he will be in conversation with Yoonjae Whang, Professor of Economics at Seoul National University, who has used econometrics to understand the causes and solutions to some of the most pressing socio-economic issues, including optimal asset allocation, income inequality, youth poverty, and aging.

https://www.youtube.com/watch?v=CeKWVKMUIEQ 

One of the biggest problems affecting middle-income groups is that their incomes have stopped growing at the rate at which their expenses are rising. There is no longer a corelation between productive work and income gains.

According to income tax data and other reports, the average income for middle-class earners has stayed around Rs 10.5 lakh per year for more than ten years now. Adjusted for inflation, the real value of their earnings has dropped sharply. https://scroll.in/article/1082346/a-hidden-debt-crisis-is-silently-wrecking-the-dreams-of-indias-middle-class 

The consumer purchasing power of this income group has fallen by about one-third over the past decade. This means people can afford much less today than they could ten years ago, even though their salaries have stayed the same. As a result, many families are cutting down on essential expenses like healthcare, education and daily consumption just to balance their monthly budgets.

The constant stress of trying to manage monthly expenses with limited income is taking a mental toll. Many middle-class families live with daily financial anxiety – the worry of emergency expenses, the guilt of cutting corners and the fear of slipping further down the economic ladder. These burdens rarely appear in official statistics.

Government policy, so far, has not responded meaningfully. The new tax regime in Budget 2025 raised the zero-tax limit to Rs 12 lakh. While this sounds like major relief, it helps only those who do not claim exemptions and deductions.

Together, these data-trends show that the average middle class person is losing their economic strength and socio-emotional stability. What was once recognised as an aspirational class known for planning, saving, and striving is now borrowing, and struggling just to stay afloat and this indicates a serious concern.

by Deepanshu Mohan

15/05/2025

The wealthier the Indian families are, the lesser the income they report relative to their wealth, a paper by Ram Singh, Delhi School of Economics (DSE) director and a permanent member of the Monetary Policy Committee of the Reserve Bank of India, reveals, suggesting that wealthier families under-report their income.

https://theprint.in/india/not-politicians-indias-wealthiest-families-underreporting-incomes-finds-study-by-dse-director/2594503/ 

“On average, the total income reported by the bottom 10 percent of individuals is more than 120% of their wealth; for the wealthiest five percent of individuals, it is just about 3.7 percent of their wealth”, the paper, Do the Wealthy Underreport their Income?, states.

The study gives insight into the stark reality of rising inequality in the country where Indians with means remain better placed to under-report their income, for instance, by under-reporting their rental income, or disguising their taxable income as tax-free, than Indians with lesser means.

by Udit Bubna

States are increasingly borrowing to finance subsidies. This reduces fiscal space for capital and other developmental expenditure, compromising long-term growth.

While subsidies can be effective tools for poverty alleviation and reducing inequality, their fiscal sustainability has become increasingly questionable, particularly in the challenging post-pandemic economic environment.

by Kishan Narayan