The Dark Underbelly of India’s Rising Income Inequality – Dev Kar/Wire

“A key feature of the rising income inequality is due to the growing importance of capital income derived from interest, dividends, retained earnings and rents.“

“There is a parallel between the significant increase in unreported (and hence, untaxed) incomes and the rise of an opaque global financial system which afford greater anonymity and ease in the transfer of black money from developing countries like India. In other words, the income and wealth of those who are effectively connected to the global financial system increased much faster than the rest of the population who do not have the necessary financial capacity or knowledge…

“Research at the IMF shows that when rapid rates of economic growth largely benefit the rich, growth itself may be derailed. While many poor countries have been able to achieve impressive rates of economic growth, they face the far more serious challenge of sustaining them rather than to simply get growth going. One way inequality short-circuits economic growth is by limiting the increase in personal consumption, which is often a major driver. After all, there are limits to how much more the rich can consume out of a rising income. They cannot make up for the decline or stagnation in the consumption of the vast majority whose inflation-adjusted incomes are stagnant or eroding.”

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