India must fill data gaps on inequality before policy can address it properly

livemint.com:

Credit Suisse began compiling estimates of wealth inequality across the globe after the 2008 global financial crash. Its 2023 report combines data from surveys, financial accounts, regulatory information and rich lists to rank countries based on wealth inequality. As in other years, India stands out as a country with an exceptionally high concentration of wealth.

A recent research paper by economists Ishan Anand and Rishab Kumar arrives at similar conclusions. Correcting for under-estimation of wealth in India’s official debt and investment surveys, their estimates suggest a marked rise in wealth inequality over the past decade. Estimates by French economist Thomas Piketty and his colleagues based on survey and tax data suggest that the share of the super-rich in India’s income pie has been growing since the 1980s.

Note, all these estimates have their share of problems. Survey data on income and wealth allow better assessment of inequality as compared to consumption surveys. Yet, they too provide underestimates of the true levels of income and wealth.

Tax data tends to capture only a small fraction of the income distribution in developing countries. When such countries witness tax reforms that lead to better assessment of top income earners, the resulting improvement in tax collections can be misconstrued as evidence of growing inequality. Rich lists can help correct for the missing information on the super-rich (say the top 0.01%) but are unhelpful when it comes to estimating the true incomes and wealth of the rest of the affluent class (say the top 10% of income-earners).