How Top 100 Indian Billionaires Can Play A Crucial Role In Reducing Income Inequality

According to Oxfam's report, India's top 10 per cent of the population holds 74.3 per cent of the total national wealth, while the bottom 90 per cent owns 25.7 per cent of national wealth.

The report puts the gravity of this inequality problem at the centrestage.

In fact, if we look at the increase in wealth of India's top 11 billionaires during the pandemic, we can see that the amount could sustain the NREGS scheme or the health ministry for the coming 10 years.

Increase in the wealth of top 11 billionaires — Rs 7,20,989 crore

Health budget 2020-21 – Rs 67,112 crore

NREGS budget 2020-21 – Rs 63,000 crore

These Rs 7,20,989 crores are equal to 10 years of the health budget/NREGS scheme.

To put this in a better perspective, let's look at these numbers from what former RBI Governor Raghuram Rajan had to say.

Earlier this year, he estimated that the government would require just Rs 60,000 crore to provide a cash dole to India’s workers in the informal sector rendered jobless by the lockdown.

India’s health budget for this year was just Rs 68,000 crore, and the Education budget less than Rs 1 lakh crore.

The extraordinary wealth gains that billionaires have made during the pandemic come at a time when Covid-19 may double the poverty in India. Even a 25 per cent fall in their incomes due to the pandemic will make 354 million more Indians poor.

It’s not that these billionaires have not made any philanthropic contributions for Covid-19-related causes, but the financial assistance looks woefully inadequate compared to the gains made by them.

For instance, at least nine billionaires from the country donated $541 million for Covid-19-related causes in financial donations, manufactured goods, equipment, or other commitments.

That's the most in the world after the US and China, said a BloombergQuint report.

Even if we double the amount of donations made by these top billionaires, it would be somewhere around $1 billion. Compare this to the amount of gain created by just the top 11 billionaires, which is approximately close to $98 billion.

So, in percentage terms, the donation doesn’t amount to more than one per cent of the gain in wealth made by the top 11 billionaires during the pandemic period.

How these top billionaires are capable of reducing the income inequality

Given the outrageous pandemic wealth accumulation by these top billionaires, there is a section of intelligentsia that doesn’t shy away from advocating levy of a progressive tax on the accumulated wealth by this super-rich during the pandemic period.

“We are going to tax Jeff Bezos, Elon Musk, Mark Zuckerberg and the other billionaires' outrageous pandemic wealth accumulation so we can provide healthcare to all our people,” said US Senator Bernie Sanders in a tweet on August 8.

Indian think tanks can always take a leaf out of that advice and collect some additional resources that could be utilised for accelerating growth. But we are also aware that despite having resources at our disposal, the issue of income inequality has been ignored for far too long by policymakers.

Ironically, this inequality has come to haunt us very badly, especially during the Covid-19 pandemic. Inequality in access to health, education, and nutrition has been exposed during the last 10 months.

Or, alternatively, the think tanks can work out a plan where these billionaires can play a more constructive and participatory role in the act of nation-building.

But before that, it makes more sense to understand how almost all the top billionaires wish to leave their legacy behind. Because people blessed with an obscene amount of money have this deep desire to live for ever — they always strive for some 'eternal glory' that will outlive them.

Keeping this deep-rooted desire in mind, the government can design a policy framework where this lot of top 100 billionaires can play a crucial role in helping the government reduce the existing income inequality.

It's a lot like taking help from an elder son/daughter to tackle a family issue-where the son/daughter is resourceful enough to assist in every possible manner. The proposal includes:

1. Asking these top 100 billionaires to come up with a small group of 20 like-minded people to form five different Special Purpose Vehicles each devoted to a particular cause like health, housing, education, employment, and energy.

2. This group of 20 people working together for a particular cause will be responsible for adopting a group of villages to execute their vision (including everything from planning and execution to assessment and feedback). The government may assist them in identifying the most backward villages in need of urgent intervention.

3. The annual financial allocation made by these groups into different SPVs will get a total tax exemption along with mention in the budgetary documents. This group of people has a proven record of success. They are resourceful enough to get things done quickly and hence can be relied upon to deliver the outcomes that could assist the country in getting close to SDG.

Apart from the intrinsic motivation to play a crucial role in the overall development of this country, the billionaires are also driven by the possibility of bringing a large chunk of people who are at the bottom of the pyramid within the fold of common consumers.

This can be appreciated more if we understand the underlying mechanism through which income inequality affect the rich.

How exactly does inequality affect the rich?

“The main mechanism through which inequality affects growth is by undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development,” the OECD found.

Children from the bottom 40 per cent of households (a massive chunk of the population) are missing out on educational opportunities. That makes them less productive employees, which means lower wages, which means lower overall participation in the economy.

While that's obviously bad news for low-income families, it also hurts those at the top. If you're a billionaire owner of a retail or manufacturing company, you want people to be able to afford the stuff you're selling. For instance, Henry Ford offered his workers high wages not out of any altruistic impulse, but because he wanted them to buy his cars.

Concluding Thought

There is no doubt this lot of extraordinarily rich and successful people are already doing their bit through donations and philanthropy. The proposed strategy would give them a reliable structure to work around while assisting the government in meeting the necessary goals of providing livelihood, education, and healthcare to unfortunate Indians at the bottom of the pyramid.

Don’t you think it’s time we start trusting this exceptional lot more than what we have done so far?

Piyush Kamal is an economist and educator and was formerly with the IRS.