CNBC’s Inside India newsletter: India’s growing wealth divide

A metro train moves past buildings and slums, in Mumbai, India, 18 June, 2023. 

Nurphoto | Nurphoto | Getty Images

India’s growing affluent population and their outsized influence on the nation’s growth story is becoming the envy of many major markets.

The nation’s ultra-wealthy population — or people with at least $30 million — rose to 13,263 people in 2023, a 6.1% jump from the year before, data from Knight Frank shows. This number is slated to surge 50.1% between 2023 and 2028, making it the fastest growth rate for UHNWIs in the world, the same report stated.

These individuals are subtly driving India’s economic progress through their consumption patterns and investment behaviors.

Beyond the hype and expectation of growth, however, is the challenge of widening economic inequality.

The top 1% of income earners in India accounted for an unprecedented 22.6% of the overall income generated in the country between 2022 and 2023, a study by the World Inequality Lab (WLI) revealed. India’s metric is one of the highest in the world — surpassing levels in the United States and emerging markets like Brazil and South Africa.

There has been significant fluctuations in the statistic over the last eight decades. The nation’s top earners previously held just over 20% in the 1930s when India was under British rule. That share dropped during World War II to just over 10% for the most part between the 1940s and 1960s before plunging to 6.1% in 1982. It subsequently edged up gradually to hit 15.1% at the turn of the century.

India’s income gap (which is the difference in wages earned between different demographic) comes alongside a worsening wealth divide too.

The top 1% of India’s wealthy controlled 40.1% of the nation’s wealth between 2022 and 2023, the same WLI study showed. This is a considerable jump from the 12.9% they held back in 1961 when the researchers began their analysis.

The rise in India’s income and wealth inequality is not a result of the poor getting poorer, Sumedha Dasgupta, senior analyst at the Economist Intelligence Unit (EIU) flags.

Instead, the phenomenon comes as the “rich are getting much richer at a faster rate,” she told CNBC’s Inside India.

“India has over 300 billionaires, which is something that you would hardly consider possible for an emerging economy, [with] a strong growth rate, but also a track record of a very large population of poor people. So this has exacerbated the rich-poor divide,” she added.

India’s 3 household groups

A more pressing issue brought on by India’s wealth and income divide is the emergence of different categories of households with distinct standards of living.

Venture capital firm Blume Ventures categorizes Indian households into three groups based on their per capita income.

The first group, or India 1, as the firm calls it, captures the “consuming class.” Around 30 million households, or 120 million individuals, who have the disposable income to invest and purchase goods and services beyond necessities come under this category. They account for $800 billion or 60% of India’s total consumption.

The second group, or India 2, is made up of around 70 million households of relatively lower income from an “aspirant class” and are “heavy consumers and reluctant payers,” Blume Ventures noted in its Indus Valley Annual Report 2024. Individuals in this group include helpers and security guards.

The last group, or India 3, captures those who don’t “have the kind of income to be able to spend anything on discretionary goods,” the venture capital firm noted. These individuals have a per capita income of around $1,000 — similar to that in sub-Saharan Africa. Around 205 million households or a billion people fall into this group.

Meanwhile, research from non-governmental organization Oxfam shows that 63 million Indians are pushed into poverty annually because of health care costs. That translates to around two Indians becoming impoverished every second, solely on the basis of the cost of health care, the research said.

In terms of wage growth, Oxfam notes that it would take a minimum wage worker in rural India 941 years to earn what a top executive at a leading Indian garment company earns in a year.

Unequal education opportunities

The EIU’s Dasgupta attributes India’s vicious wealth and income gap cycle in large part to mismatched education opportunities.

“Widespread access to education is not something that is very easily accessible for a very large proportion of Indians. This is because of a significant reliance on government funded education, the quality of which has just been sub par and poor,” she noted.

Private schools — which is an option for children from households with a monthly income of around 30,000-50,000 Indian rupees ($355 to $592) — would typically offer a better quality of primary and secondary education.

Conversely, government schools — which are free or charge a nominal fee in the foundational years — can be plagued with issues such as “missing teachers or under qualified teachers, inadequate infrastructure and a generally lower quality of education imparted,” Dasgupta explained.

There is “no incentive for a parent in a rural area to put their child in the educational system for 13-14 years. Parents want their children to work and contribute to the household and are simply not sure of what kind of income that child will be able to provide later based on the education they received,” she argued.

Access to schooling — public or private — ensures that India’s children are educated and also have least one meal, something which they may otherwise not have. Poor access to foundational education impacts productivity, employability and even the standard of health — particularly among those in the lower income per capita tiers — in the long term.

India’s poorer residents typically seek employment in low-skilled roles like agriculture and construction or as laborers, and typically face difficulty getting employed in higher skilled roles in manufacturing or even services.

Going forward, Dasgupta’s suggestion is for more resources to be ploughed into improving primary educational standards as well as enrollment and completion rates.

Signs of a focus on education are already visible with the Department of School Education and Literacy being allocated 734.98 billion Indian rupees in the recent national budget. Albeit a mere 6.6% of the total budget allocation, this is the highest amount ever allocated to the department.

What else is needed?

Besides improving its education, experts have called for other measures such as more taxes on India’s super-rich and greater focus on creating job opportunities to improve the labor force participation.

So far, the country does not have a wealth tax but has other measures such as higher income tax rates for the wealthy, capital gains tax, and surcharges for high-income individuals. Responses from a recent survey by the Earth4All initiative and Global Commons Alliance indicated that 74% of those polled in India were in favor of a tax on the super-rich.

Still, a more pertinent remedy for India would be to foster more avenues for growth, by attracting investments from both domestic and private investors, Shumita Deveshwar, chief India economist at TS Lombard, suggests.

“India is the fast-growing economy relative to other emerging markets and is making global investors sit up and take notice but FDI [foreign direct investment] inflows slowed to a 5-year low in FY24,” she told CNBC’s Inside India.

While FDI flows were up 48% year-on-year in the first quarter of 2025 between April to June, the economist cautioned of the “risk that these flows can be lumpy and are not yet supported by a strong recovery in domestic private investment.”

“The only sustainable solution to ensuring wealth inequality doesn’t get exacerbated is ensuring greater private investment, especially in the manufacturing sector which can pull people out of farms and into higher skill-level jobs,” Deveshwar added.

SoftBank-backed Swiggy makes market debut. Shares of the Indian food delivery giant soared 15% on their trading debut Wednesday. The company raised 113.27 billion Indian rupees in its IPO that closed on Monday, which was reportedly oversubscribed more than three times. Swiggy’s listing is India’s second-largest this year and comes hot on the heels of Hyundai Motor India’s $3.3 billion IPO in October.

India’s central bank chief flags global inflation risk. Global central banks may have engineered a soft landing during a period of “continual and unprecedented shocks,” but India’s central bank chief Shaktikanta Das cautioned at CNBC-TV18′s Global Leadership Summit that there is still room for global inflation to return and economic growth to slow down. “The headwinds from the geopolitical conflicts, geoeconomic fragmentation, commodity price volatility and climate change continue to grow,” he said.

Top Indian banker dismisses bitcoin. Bitcoin has been grabbing headlines in the past week given President-elect Donald Trump’s bullish stance on the cryptocurrency. However, Uday Kotak who is founder and director of the Kotak Mahindra Bank said he is “not excited by it.” His cautious stance is in line with RBI Governor Das’ concerns that bitcoin poses risks to financial stability, monetary stability and the overall banking system.

Indian stocks have disappointed investors this week. The Nifty 50 index is down 2.54% since Monday while the index is up 8.3% since the start of the year.

The benchmark 10-year Indian government bond yield has continued rising in the past week, currently standing at 6.854%.

Nifty 50 year-to-date

On CNBC TV this week, Hiren Ved, the director and CIO of Alchemy Capital, said the domestic stock market is in a consolidation phase, explaining that company earnings had been “tepid” due to seasonal factors and the election earlier this year.

Meanwhile, analysts spoke to CNBC Pro [subscriber content] on what Trump’s election victory would mean for global investors. Capital Economics expects most Asian currencies to weaken by up to 5% against the dollar over the coming year, not least because of the expected higher interest environment in the U.S.

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