Arshad Shaikh analyses the recently released Indian supplement of the Oxfam (Oxford Committee for Famine Relief) Report about inequality in India. Oxfam, an international charity focused on poverty alleviation, released its global report coinciding with the start of the World Economic Forum (WEF) in Davos, Switzerland. These reports by Oxfam (a British-founded charity by Quakers and Oxford academics) quickly grab headlines because of their startling findings and crisp captions. Oxfam has successfully managed to bring back the spotlight on wealth inequality and reignite the debate about the negative externalities of capitalism. The Oxfam India report is all the more important because of the sheer size of the people reeling under this grotesque inequality and the retreat of the state from welfare and social security. Oxfam believes taxing the rich is the primary way to reduce inequality. If there are other ways, they should also be probed and debated.
Inequality in the distribution of wealth is a natural phenomenon in any economy. The problem begins with the concentration of wealth in just a few hands with the rest getting only a small portion of the pie. The equitable distribution of wealth has been the quest of socialists, communists and those from the left-leaning ideologies. Even those who swear by the “invisible hand” have laws to break monopolies and prevent “market capture” by cartels. It may surprise many, but avoiding the accumulation of wealth is addressed by Islam through ways and means that are both simple and effective.
Income inequality caught the public eye with the publication of bestselling books such as The Economics of Inequality and Capital in the Twenty-First Century by Thomas Piketty, The Price of Inequality by Joseph Stiglitz and Poor Economics by Esther Duflo. The annual reports on wealth inequality published by Oxfam are hugely popular and given extensive coverage by mainstream media. Oxfam also prescribes solutions to get rid of the ever-increasing extreme inequality that they document so meticulously. It’s an unequal world out there and we can’t afford leave it that way.
THE STUNNING DISPARITY
The popularity of Oxfam reports can be attributed to the creative way they analyse and present their data. The aggregations, percentages, and ratios of the inequality in wealth presented in their reports are matched by normative statements on how this wealth could have been utilised in poverty alleviation, health or education. Their report contains spoon-fed captions that become news headlines and succeed in becoming the topic of national debate.
The Oxfam India report is titled “Survival of the Richest: The India Story.” The report reveals, “The country still has the world’s highest number of poor at 228.9 million. Six out of 10 Indians live on less than INR 262.4 per day Wealth inequality has stripped 70 percent of Indians from as basic a necessity as a healthy, consumable diet leading to the yearly deaths of 1.7 million owing to diseases resulting from a poor diet.”
Their press release issued on the occasion of the launch of their India supplement says, “Just five percent of Indians own more than 60 percent of the country’s wealth while the bottom 50 percent of India’s population possess only three percent of wealth. India’s richest man has seen his wealth soar by 46 percent in 2022. From 2012 to 2021, 40 percent of the wealth created in India has gone to just one percent of the population and only a mere 3 percent of the wealth has gone to the bottom 50 percent.”
BENDING THE SYSTEM
An unpleasant example of how the system is made subservient to serve the interests of the rich and powerful are highlighted in the report. In 2019, before the pandemic, the government reduced corporate tax from 30% to 22%. Newly formed companies would be taxed only 15%. This tax windfall was offered to India Inc despite the corporate sector reporting record profits. Meanwhile, a sluggish economy meant 84% of Indian households saw a decline in their income. Companies happily devoured the tax relief (between `1.5 to `2 lakh crore) and utilised the largesse to pay their creditors or enhance their profits. Sadly, none of this rebate went into new investment.
Another revolting fact presented in the report is the massive amount of bad loans that banks have written off. It is estimated that banks have forgone `11 lakh crore in non-performing assets (NPAs) over the previous six financial years since 2020-21.
The Oxfam report divulges that 88% of our entire revenue (i.e. `19.34 lakh crore) for 2022-23 came through taxation. The share of indirect taxes to the state exchequer has increased by 50%. According to Oxfam calculations, the bottom 50% spend 6.7% of their income on taxes for select food and non-food items while the middle 40% spend 3.3%. However, the top 10% spend only 0.4% of their income on these items. Thus, we may conclude that India’s bottom 50% pay six times more on indirect taxes as a percentage of income compared to the top 10%.
The broad conclusion that can be drawn from the above numbers is that the government is slowly shifting the burden of filling its coffers on the poor instead of the rich.
SPEND ON WELFARE BY TAXING THE RICH
The beauty of Oxfam’s reports on wealth inequality is that they not only highlight the problems in the economy but also suggest ways to get rid of these anomalies. According to Oxfam, 3% of wealth tax on the total wealth of Indian billionaires can fund the National Health Mission, the largest healthcare scheme in India. Taxing all the billionaires in our country at 2% would support the nutrition of malnourished in the country for 3 years.
The Out of Pocket (OOP) expenditure on healthcare is mainly due to the lack of decent public healthcare services. Increasing public spending on healthcare to 3% of the GDP can lower OOP expenditure to 30% of the overall healthcare bill. This increase in allocation for healthcare by the state (about a lakh crore rupees) could be raised by taxing the top 100 billionaires at 2%.
Oxfam recommends the Government of India enhance its budgetary allocation for education to the global benchmark of 6% of GDP. The government is already committed to it in its new National Education Policy (NEP 2020). Oxfam demands that the government must frame roadmap to achieve this 6% of GDP target.
The report asks the Government to ensure that workers in both the formal and informal sectors are paid basic minimum wages. The minimum wage should be equal to the living wages that can support a normal standard of living. The Qur’ān says that revenue acquired by the state will be distributed among the orphans, needy, etc. so that “it may not merely circulate between the rich among you.” (Surah Hashr, Ayat # 7).
The system of Zakat and Khums in Islam has the capability of ensuring an equitable distribution of wealth. Taxing the rich to reduce inequality is a universally accepted principle. The technicalities (whether it should be a flat rate or progressive and whether the tax should be on income or savings) can be discussed and debated. American political scientist, Michael Parenti seems to be describing India when he said, “The rich have grown richer, but their tax rate has declined. The poor have grown poorer, but their taxes have increased.” It’s high time we reversed this situation.