In the 1950s, 1960s and 1970s, “wealth redistribution” was kosher. The 1974 Hindi movie Amir Garib had Dev Anand play the role of Manmohan, who has a day job as a hotel singer and, at nighttime, transforms into a masked vigilante, Bagula Bhagat, robbing the rich (amir) and spreading their ill-gotten wealth among the poor (garib).
There was a reason. India, at the time of Independence, was a highly unequal society. Much of the wealth of its people was held in the form of land. About 91.4 per cent of the country’s total annual household savings in 1950-51 was in physical assets such as land, dwellings and gold. That share declined to 71.9 per cent in 1970-71 and 60.6 per cent in 1980-81.
Moreover, a lot of this wealth was concentrated in a few hands — mainly absentee/non-cultivating landlords and intermediaries whose primary concern was to extract maximum rent from tenants, who had little surplus left for investing in land improvement or raising farm productivity. There was general political consensus, then, for land reforms. These ranged from abolition of the zamindari system of intermediaries between cultivators and the state to the imposition of land ceilings.
Zamindari abolition resulted in some 25 million erstwhile tenant-cultivators becoming owners with permanent and heritable interests in their holdings. Land ceilings, together with tenancy reforms recognising the cultivation rights of sharecroppers and granting them legal protection against eviction, led to roughly 8.3 million hectares getting effectively redistributed. That was hardly 6 per cent of the country’s cultivated area.
The mixed record on land reforms was, however, not due to any absence of political consensus. Successive five-year plan documents emphasised state actions for giving land to the tiller, which were also endorsed at chief ministers’ conferences. Their not-so-satisfactory implementation owed more to a lack of political will and administrative zeal than consensus per se. A significant chunk of the declared surplus land being held up in litigation, and not available for distribution, didn’t help either.
The point to highlight is that the land reform laws, in effect, infringed upon the right to property. Yet, these legislations — not to speak of nationalisation of banking, insurance, railways, airlines, oil, coal and many other industries — had broad political acceptance. So did the estate duty, the wealth tax, the gift tax and a 97.75 per cent maximum marginal rate of income tax.
Those assaults on private property, unimaginable in today’s times, encountered little political resistance. The sole opposition voice came from the Swatantra Party, which won 44 seats in the 1967 Lok Sabha elections within eight years of its founding — far more than the Aam Aadmi Party could or can perhaps ever.
As the economic historian Aditya Balasubramanian has shown in his work (Toward a Free Economy: Swatantra and Opposition Politics in Democratic India), it was the only party to protest against the 17th amendment of the Constitution (to protect land reform legislation passed in many states from being struck down) and also bank nationalisation and abolition of privy purse payments to the royal families of the erstwhile princely states. But Swatantra Party received no great support or funding from the business class that was as hesitant to take on the ruling establishment then, as it is now. The once-successful political startup faded into oblivion by the mid-seventies.
Much water has since flown under the bridge — right from the removal of the estate duty (“inheritance tax”) in 1985 and, of course, the 1991 economic reforms. Businessmen are no longer Bagula Bhagat’s unscrupulous traders and, instead, lauded as wealth creators. Symbolic of the shift in popular culture and attitudes is the 2007 Bollywood blockbuster Guru, where Abhishek Bachchan — who acts as Gurukant Desai, the protagonist with shades of Dhirubhai Ambani — bluntly states, “public se kya darna sahab, main khud public hoon (why fear the public Sir, I’m the public myself)”.
That shift has to do, firstly, with the increasing financialisation of wealth. Physical assets constituted just 38.6 per cent of gross household savings during the five years ended 2021-22. The balance of 61.4 per cent was accounted for by bank deposits, investments in shares and debentures, small savings, insurance policies and provident and pension funds.
Secondly, this wealth is more widely dispersed than before. The most obvious indicators are the current 150 million-plus demat share-holding and some 84 million SIP (systematic investment plan) mutual fund accounts in the country.
A recent World Inequality Lab working paper on India points to the share of national income going to the top 1 per cent falling from 11.5 to 6.1 per cent between 1951 and 1982 — ostensibly because of socialist policies — and then rising consistently to reach an all-time high of 22.6 per cent in 2022. The top 1 per cent’s national wealth share similarly declined somewhat from 12.9 to 12.5 per cent between 1961 and 1981, only to soar — particularly after 1991 — to touch 39.5 per cent in 2023.
What the analysis misses out, though, is that the base itself — both aggregate income and wealth — has expanded now to accommodate many more people in the middle, if not the top. There are some who view India as a Billionaire Raj, comprising 200 or so individuals. The fact is that the country also had around 8,50,000 “dollar millionaires” (those possessing net assets of $1 million or more) in 2022, according to the Swiss investment bank Credit Suisse. Add to them, the millions of investors and other sections of the propertied middle class, both in urban and rural India.
In absolute terms, these numbers would be large enough to make for a conservative vote bank that can punch much above their weight. The social base of India’s capitalist class, too, has widened beyond the traditional Bania-Marwari to incorporate a host of agrarian and provincial mercantile communities.
Simply put, the political economy of India has changed considerably to transcend the simple binaries of amir-garib. The old expropriate-and-redistribute model has lost its political viability. The withdrawn 2014 land acquisition act amendments and the 2016 demonetisation were probably the last experiments at expropriation. Income and wealth inequality may have to be addressed through policies focusing more on job generation, universal access to quality education, skill development and progressive taxation than radical redistribution.
harish.damodaran@expressindia.com
