In his budget speech Hon’ble finance minister Mr. Arun Jaitley mentioned that only 24 lakh individuals show income more than INR 10 lakhs. By giving reference to the number of international flyers and luxury car buyers, Mr. Jaitley mentioned that ‘we are largely a tax non-compliant society’, but the reality of disparity in incomein the Indian economy cannot be ignored.
Recently, Lucas Chancel and Thomas Piketty published a report on Indian income inequality that analyses the alarming statics of Indian income earners.
According to this paper, the share of top 1% earners in national income reached to 21.7% in 2013-14 from 6.2% in 1982-1983.The share of income of top 1% earners started reducing from mid-1950s to early-1980s. This trend reversed in mid-1980s, when India adopted economic liberalization. It could also be on account of reduction in the income tax rate which was in the range of 60% to 97% during 1970 to 1980.
While the liberalization has its own advantages and reduction in tax is justifiable, the gap between poor and rich is increasing rapidly.During 1980 to 2014 the income of bottom 50% population in India grew by 89% whereas that of top 1% earners grew by 750%.
As per the income-tax statistics the top 1% earners represents less than 78 lakh individuals out of approx. 59 croreable income earning individuals (Considering approximately 45% population is in the age group of 25 to 64 years). Further, the average annual income of approximately 39 crore adults is less than INR 87,000 whereas that of 7,784 top earners is INR 26.65 core rupees.
Various Governments have been attempting to tackle the concerns of unequal income earners, but the increasing inequality leaves us with a question about every Indian’s social responsibility towards nation building. Various individuals would have already realized and fulfilling their social responsibility by various means including with the help of NGOs, however there could still be quite a few people who are yet to act on this front.
Corporate India has been contributing its share in view of Corporate Social Responsibility (CSR) and now it’s time for Indian nationals to take up own share. One hopes that the Indian Government would consider introducing Individual Social Responsibility (ISR) regulations.
The following are the suggestions in relation to the ISR:
Applicability: The higher income earners could contribute certain percentage towards ISR if a particular threshold of income, wealth is met e.g. Individuals having income above INR one crore or wealth above INR 25 crore could be obligated to contribute 2% of the income or wealth towards the ISR obligations.
Obligations: Similar to CSR the ISR obligations may include eradicating hunger, poverty and malnutrition, promoting preventive healthcare, promoting education and promoting gender equality, setting up homes for women, orphans and the senior citizens, measures for reducing inequalities faced by socially and economically backward groups.
Administration: Like many other obligations, the ISR could be administered under a self-declaration method. Further, the India Income-tax authorities could be entrusted with the responsibility to randomly audit the declarations.
While the ISR in itself may not be the complete solution for eradication of poverty and bridging the inequality gap, however this could be a small but important step for towards nation building.