How the Covid-19 Pandemic Triggered the Rise of Inequality in India

The number of Indian billionaires grew from 102 in 2020 to 142 in 2021, the worst year yet for India during the pandemic. This was also the year when the share of the bottom 50 percent of the population in national wealth was a mere 6 percent. The combined wealth of the richest hundred Indians on the Forbes list stands at more than half a trillion USD.

By Team Mojo, 18 Jan 2022

Meanwhile, the abolition of the ‘wealth tax’ in 2016, steep cuts in corporate taxes, and an increase in indirect taxation have removed the rich from being the primary source of tax revenue. A 2021 OECD report for G-20 countries highlighted how there’s an inherent need to move beyond just improving individual taxes and looking at reformulating ‘tax systems’ to promote inclusive, sustainable, and equitable growth.

Unfortunately, not only has the taxation policy of the Indian government been pro-rich, it has also deprived India’s States of important fiscal resources—both particularly damaging in the context of the COVID-19 crisis.

The pandemic revealed how the dependent Indian States are on the Union government for technical expertise and financial support, despite a federal structure supported by India’s Constitution. In spite of health being a State subject, during the pandemic year, the Centre continued to retain more resources in non-divisible pools rather than devolving them to manage the pandemic.

The recent Pandora Papers investigation also highlights the loopholes that India’s rich exploit to conceal their assets and evade taxes. In 2021, the Central government also allocated smaller amounts to the critical health and education sectors than ever before. The inadequate governmental expenditure on health, education and social security has gone hand-in-hand with a rise in the privatisation of health and education, thus making a full and secure COVID-19 recovery out of reach for the common citizen.

It is imperative that the government revisits its primary sources of revenue generation, adopting more progressive methods of taxation and assessing its structural issues that permit such wealth accumulation by the rich. Additionally, the government should also redirect revenue towards health, education and social security, treating them as universal rights and as a means of reducing inequality, thereby avoiding the privatisation model for these sectors.

We call upon the government to recognise the unequal lives that Indian citizens live by measuring it and legislating to protect their interests. We call upon the government to redistribute India’s wealth from the super-rich to generate resources for the majority by reintroducing the wealth tax and to generate revenue to invest in the education and health of future generations by imposing a temporary one percent surcharge on the rich for health and education.


Today, we the undersigned millionaires, ask our governments to raise taxes on people like us. Immediately. Substantially. Permanently……Tax us. Tax us. Tax us. It is the right choice. It is the only choice. Humanity is more important than our money.

These words from the ‘Millionaires of Humanity’ are from an open letter of a coalition of 50 millionaires across the world, urging their governments to tax them in light of the COVID-19 crisis and its impact on the global economy. Conspicuous by their absence are billionaires from India where the growing wealth- and asset-related inequalities in every sphere of life —be that access to education, health or opportunity—have now, in the global pandemic, become even more apparent than they were earlier. Profit is the bedrock of capitalism and the pandemic offers us a unique opportunity to turn away from this singular pursuit of profit to one of welfare.

However, this will require courage to confront the inequalities of wealth and power that has led us to this point. In order to do that, one must recognise that the bulk of India’s citizenry lacks affordable healthcare, decent homes, good education for their children, and that it still suffers from decades of precarity in their livelihoods.

Since 2015, more and more of India’s wealth has gone to its richest one percent. In 2020, India’s top 10 percent held close to 45 percent of the country’s total national wealth. The richest 98 Indian billionaires had the same wealth (USD 657 billion) as the poorest 555 million people in India, who also constitute the poorest 40 percent. Of the 100 Indian billionaires on Forbes’ list, only three were women; only one, Savitri Jindal, made it to the top 10.

India had the third-highest number of billionaires in the world, just behind China and the United States. It now has more billionaires than France, Sweden and Switzerland combined, indeed there has been a 39 percent increase in the number of billionaires in India in 2021. This surge comes at a time when India’s unemployment rate was as high as 15 percent in urban areas and the healthcare system was on the brink of collapse.

As per the Forbes billionaires report, in October 2021, the collective wealth of India’s 100 richest hit a record high of USD 775 billion and more than 80 percent of these families saw an increase in their wealth as compared to 2020, approximately three-fifths of (61 percent) of these billionaires added a whopping USD 1 billion or more to their collective wealth. Meanwhile, 84 percent of households in India suffered a decline in their income in the beginning of the pandemic. That wealth inequality is growing appears to be a reality.

About one-fifth of the increase in the rise of the richest 100 families was accounted for from the increase of the wealth of a single individual and business house—the Adanis.  Gautam Adani, ranked 24th globally and second, in India, witnessed his net worth multiply by eight times in a span of one year; from USD 8.9 billion in 2020 to USD 50.5 billion in 2021. According to the real-time data by Forbes, as of 24 November 2021, Adani’s net worth stands at USD 82.2 billion.

This tremendous growth in a span of eight months, during India’s deadly second wave, also includes returns from Adani’s newly bought Carmichael mines in Australia, and a 74 percent acquired a stake in the Mumbai airport. At the same time, Mukesh Ambani’s net worth doubled up in 2021 to USD 85.5 billion from USD 36.8 billion in 2020.

The Reserve Bank of India’s forecast for India’s GDP growth was projected in the range of (-)8.7 percent to (-)7.0 percent in 2020-21. To make things worse, more than 120 million jobs were lost, including 92 million from the informal sector in the same year. The fact that the government’s employment programme, MGNREGA, witnessed the highest number of enrolments in 2021 is testimony to the dire need of employment and income security for India’s absolutely poor.

Studies show that there has been a substantial increase in food insecurity in the country. According to the World Food Programme, India is home to a quarter of all undernourished people worldwide. The 2021 FAO report on The State of Food Security and Nutrition in the World states that there are over 200 million undernourished people in India.

Income and power inequality manifest themselves in unequal access to and in a reduced ability to negotiate education, health and other dimensions of well-being, for most marginalised citizens of India. In India, our system of governance perpetuates the myth of greater expansion and profits, leading to the greater good of all. This report demonstrates that wealth and inequality of power have made the pandemic deadlier, more prolonged, and more damaging to the livelihoods of the poor than ever before and that this has been made possible systematically due to institutional structures that continue to perpetuate this inequality.

We examine three strategies that work in tandem with each other to produce unequal economic outcomes. These are: a) India’s tax regime, b) a declining emphasis on social sector spending, and c) a push towards the increasing privatisation of public goods. To be sure, there are other regulatory structures that inhibit wealth and power equality in India. The three boxes in this document on Minimum Wages, The Gender Wage Gap and India’s Role in the Pandora Papers highlight legislations and realities that illustrate this point well

Wage employment can be subdivided into regular/salaried and casual wage employment. The last category usually consists of workers from economically poor households, who often are also those belonging to caste or religious minorities and are also very likely to be women.

While there has been an increase in regular/salaried employment, much of this work is of contractual nature, i.e., short- term or fixed-term contracts and is precarious in itself. In India, the main legislative instruments regulating wages are: Minimum Wages Act, 1948; Payment of Wages Act, 1936; Payment of Bonus Act, 1965; and Equal Remuneration Act, 1976.

According to the Minimum Wages Act of 1948, the purpose of seeking employment is to sell labour to earn wages so as to attain a ‘decent’ or ‘dignified’ standard of living. The wage or income that a worker obtains from his /her work is therefore, what enables him /her to achieve a fair standard of living. The Act states that one seeks a fair wage, both, to fulfil one’s basic needs and to feel reassured that one receives a fair portion of the wealth that one works to generate for society.

The same Act also states that society has a duty to ensure a fair wage to every worker, to ward off starvation and poverty, to promote the growth of human resources, and to ensure social justice without which, likely threats to law and order may undermine economic progress.

The Constitution of India makes it mandatory for the government to create an economic order in which every citizen finds employment and receives a ‘fair wage’ and in 1948, a Central Advisory Council created a Tripartite Committee on Fair Wages for this purpose. The Committee consisted of representatives of employers, employees and the government. Their task was to enquire into and report on the subject of fair wages to labour.

The Committee on Fair Wages defined three different levels of wages — a) a living wage b) a fair wage and c) a minimum wage. The Committee was of the view that a minimum wage must provide not ‘merely for the bare sustenance of life, but for the preservation of the efficiency of the worker’ which includes some measure of education, medical support and basic amenities. The authority of fixing this wage lies with the government — Central or State as does the authority to revise this.

The Code on Wages, 2019 which aims to regulate wage and bonus payments is relevant to the informal sector workers (ISW) particularly because of the clause on minimum wages. The Code prohibits all employers from paying wages below the minimum standard which the centre or the state governments notify and states that the minimum wages will get reviewed by the respective governments at an interval not beyond five years. However, the minimum wage is not uniform across India.

It differs based on the state, area within the state based on development level(zone), industry, occupation, and skill-level. Moreover, the lack of regulatory mechanisms in the informal sector makes it difficult to monitor if the workers receive their due wages. India’s national minimum wage (called the National Floor Level Minimum Wage (NFLMW)) has remained the same since 2020 at INR 178 per day.

The Satpathy Commission in January 2019 recommended changing the minimum wage to INR 375 per day, and NFLMW to INR 9,750 per month with certain regional variations, based on consumption expenditure and employment data. However, the Ministry of Labour and Employment just increased the NFLMW by a meagre 1.13 percent, from INR 176 per day in 2019 to INR 178 per day.

Breaking down the overall minimum wage increase offered in wage categories —when one examines the most recent notice on minimum wages of unskilled workers — in Category A (the highest paid), we find that even for this category, the raise is only by 1.4 percent i.e. a wage of INR 411 per day will now increase to INR 417 per day. Similarly, the minimum wage of semi-skilled workers increased by just 1.3 percent, going up from INR 449 per day to INR 455 per day; and that of skilled/clerical workers increased from 1.6 percent, from INR 488 per day to INR 495 per day.

These perfunctory increases do little to help India’s wage inequality. For instance, data from the last census shows that while the average worker was being paid INR 247 per day in 2011–12, the median wage shows that half of India’s wage earners earn half of the already measly average, i.e., INR 150 or less.

Census data also shows that regular salaried workers earn more than double the daily wage earnings. As per another report by Oxfam India, the top 1000 companies in India have not been complying with national wage laws. Decent wages remain hard to come by for most Indians. India, along with Sub-Saharan Africa, accounts for the highest increase in global levels of poverty.

According to a Pew research report, the estimated number of the poor in India was projected to be 59 million in 2020, however, this number doubled to 134 million during one year of the pandemic. This has had devastating consequences on India, with the poorest and most vulnerable bearing the hardest blows.

The NCRB reports that daily wage workers topped the categories of people who died of suicide in 2020, followed by self-employed and unemployed individuals. A system that supports the proliferation of new billionaires also fails to deliver to those in the country who need it the most.

In October 2021, over 380 Indians (among others) were named in the Pandora Papers, a large (11.9 million documents) collection of leaked files, detailing the existence of 29,000 offshore companies and private trusts from Vietnam to Belize and Singapore, set up by 14 global corporate services firms, created solely for the purposes of tax evasion.

The papers named India’s ultra-rich and explained to India’s have nots, how the rich have been evading taxes by taking their accumulated undeclared wealth abroad. More than INR 20,000 crore, worth of undeclared foreign and domestic assets, till early 2021 were documented. This was at a time when the global pandemic had unleashed its second wave.

The papers reveal how people have set up complex multi-layered trust structures for estate planning. Estate planning is a legitimate and legal act under the Indian Trusts Act, 1882 and recognises offshore trusts. A ‘trust’ can be set up offshore, wherein the trustee holds assets on behalf of individuals/organisations that are to benefit from it. The use of offshore trusts, as revealed in the Panama Papers, has been to pass on wealth intergenerationally bypassing death/inheritance tax, which is the only tax left for India’s ultra-rich to pay after the abolishing of estate duty and wealth tax.

Inequality is not natural but is rather the manifestation of biased economic and social policies. Changes in the structure of the economy or broader changes in non-economic, political, social, cultural, or other spheres have a major impact on inequality. ‘Human capital’ inequality negatively influences economic growth rates because inequality transfers income from low-saving households in the bottom and middle of the income distribution, especially in countries like India, to higher-saving households at the top of the pyramid.

The sum total of the effect of this wealth transfer is a reduction in consumer spending, which slows demand and demand-driven growth. Economist and Nobel Laureate Abhijit Banerjeemakes the same observation when he suggests that the only way to reverse India’s economic slow-down is to stimulate demand or put more money in the hands of the people.


Progressive taxation ensures that the tax burden is higher for the wealthy than it is for those with lower incomes. The idea behind such a system is that it allows for the wealthy to in some sense, fund via taxes, a basic standard of living for lower-income families, paying for basics such as shelter, food, health, education and transportation among other things. A progressive taxation system allows low-income households to spend a significant portion of their meagre income on cost-of-living expenses, and as such is one of the least distortionary policy tools available to help control the rise in inequality by redistributing the gains from growth.

This tool needs to be put to use now, given that the COVID-19 pandemic, which may have started as a health crisis, is now an economic one. A 2021 OECD report for G-20 countries called for a fundamental restructuring of the fiscal policies of all G-20 countries to ‘build back better. The previous year, 2020, saw a number of countries looking to use progressive taxation, taxing the richest to fund recovery.

Countries such as Argentina have passed a one-off wealth tax on the wealthiest Argentines which brought in around USD 2.4 billion to help address pandemic costs of the people of Argentina and were levied up to 5.25 percent on their total assets. Indeed, the IMF supports the idea of levying higher taxes on the rich to ‘pay for the enormous cost of tackling the COVID-19 pandemic’.

A similar tax on the rich in India would go a long way in generating much-needed resources to fund essential public services like health and education, especially during the pandemic. For instance, a 4 percent wealth tax on 98 richest families in India can take care of the Ministry of Health and Family Welfare for more than 2 years, the Mid-Day-Meal programme of the country for 17 years or the Samagra Siksha Abhiyan for 6 years.

Similarly, estimates suggest that a 1 percent wealth tax on 98 richest billionaire families can finance the Ayushman Bharat scheme for more than seven years and the Department of School Education and Literacy of the Government of India for one year.

In another estimate, it was found that by taxing just these super-rich families only 1 percent of their wealth, India could fund its entire vaccination programme cost of INR 500 billion (USD 6.8 billion). These have been backed by Indian citizens as well. Instead, the burden of taxation in India currently rests on the shoulders of India’s middle class and the poor and not addressing the proposal for a one-time tax on the wealthy, for Covid recovery, has resulted in the government using the only other available option i.e., raising funds through indirect tax revenue which penalises the poor. Even before the pandemic hit, in FY 2019-20, tax collection was lower than in previous years.

The fall in tax collection was mainly on account of the cut in the corporate tax rate, announced in September 2019. The reduction of corporate taxes from 30 percent to 22 percent during the year 2019-20 (to attract foreign direct investment) has resulted in a loss of INR 1.5 lakh crore, which has contributed to the increase in India’s fiscal deficit.

Several studies point to the narrowing of India’s historic gender wage gap. However, there are as many studies that continue to document a persistent and sizable wage differential between the genders when examined by levels of education, types of unemployment, work industries and geographies.

Development economists have also used earning functions of male and female workers, decomposing wage differentials into two component parts called the ‘endowment effect’ in the literature reflecting innate productive capacities and the other termed as a ‘discrimination effect’ because its reason is unexplained.

Perhaps the most disturbing aspect of these studies is that the ostensible discrimination component is large, suggesting that women who do participate in formal labour markets simply get paid less because they are ‘women’. In 2008, economists Madheswaran and Khasnabis found that discrimination was widening for salaried women and in 2014 Duraisamy and Duraisamyxl found that wage differentials between the genders varied widely, depending on the work type chosen —reinforcing the social norm that some professions are indeed still considered to be the domain of men alone.

Deshpande in 2015 demonstrated that the gender wage gap also varies widely by education, with women in higher education and earning quintiles occupying managerial positions being able to better recognise wage discrimination. In 2011, Belser and Rani, found that the lower end of the labour market wage distribution consists of mostly women and recently Deshpande in 2021 found that many women have simply gone on to self-select themselves out of the labour market altogether.

During the financial year 2020-21, taxes from goods and services halved in the June quarter compared to the same period last year, income tax collections fell 36 percent and corporate taxes came in 23 percent lower. On the non-tax receipts front, the proceeds from disinvestment in 2020- 21 have fallen far short of the estimated target of INR 2.1 lakh crore, which was more than three times the disinvestment proceeds of 2019-20. Put together, these statistics show that the pandemic weakened the capacity of the government to generate revenue from both tax and non-tax sources.

How did the government then raise revenue during the pandemic period? Data demonstrates that the Gross Tax Revenue (GTR) during the first eight months of 2020-21 was INR 10.26 lakh crore, 42 percent of annual estimation, 12.6 percent lower when compared to the same period of the previous year. This decline was a result of the reduction in all direct taxes and major indirect taxes, except excise duty. In particular, the shortfall in direct tax collection contributed to 92 percent of the shortfall in GTR.

The shortfall in direct tax was compensated through an increase in the share of indirect tax. In FY21, the share of income tax (23.2 percent) in the GTR exceeded the contribution from corporate tax (22.6 percent). The Central Goods and Services Tax (C-GST) also contributed a similar share (22.5 percent). The contribution from union excise duties rose sharply from 12 percent to 19.2 percent compensating for the loss in share from corporate tax which fell sharply from 27.7 percent to 22.6 percent. The Centre earned nearly INR 8.02 lakh crore from taxes on petrol and diesel during the last three fiscal years, of which more than INR 3.71 lakh crore was collected in FY21 alone.

This compensating of revenue through an increase in union excise duties on petrol and diesel (together called excise) resulted in a rise in the prices of essential commodities such as food grains and vegetables which affected the poor much more than they did the wealthy. The share of indirect taxes increased by up to 50 percent of the GTR in FY 2019, as opposed to 43 percent in FY 2011. The combined share of customs and excise duties and value-added tax reached an all-time high of 10.5 percent of GDP during 2016-17, with the previous high of 10.1 percent in 1987-88.

This high was following a three-year-long steady increase in customs or excise duty on commonly used goods, such as petroleum products, metals and sugar, automobiles, and consumer durables. These increases coincided with a steady increase in Service Tax to 18 percent in 2017 (under GST) from 12.4 percent in 2014.

Not only were indirect taxes used to fund India’s COVID-19 recovery, but the Centre also delegated its responsibilities under the Disaster Management Act, 2005 to State governments. Unfortunately, India’s State governments were not in a position to deal with the situation without the necessary infrastructure, both human and physical, and adequate financial resources.

Data shows that Union government policies were, and continue to be, structurally so designed as to undermine India’s State-led federal structure by creating a dependency on the Central government for technical expertise and financial support. In spite of health being a State subject, the Centre retained more resources in non-divisible pools rather than devolving them to manage the pandemic.

The increase in the resources in the non-divisible pool during 2020-21 (RE) is on account of two cesses levied on fuel i.e. Special Additional Duty of Excise on Motor Spirit, and Road and Infrastructure Cess. Collection from these sources, as stated earlier, grew from INR 1.66 lakh crore in the Budget Estimate (BE)to INR 3 lakh crore in the Revised Estimate (RE), which is also due to the increase in duty announced on fuel mid-year, post the budget.

In the 2021-22 budget, the government announced a new cess in the form of an Agriculture Infrastructure and Development Cess. The collection from health cess was estimated to be INR 800 crore in 2021-22. While cesses and surcharges add to the Union government’s resources, these do not strengthen States’ finances, given the fact that the benefits of these fiscal increases are more politically determined than by what decentralisation demands.