Inequality in Consumption, Income, and Wealth: Interconnections and Implications

Consumption, Income, and wealth, these three forms of inequality have different implications and are interconnected in complex ways. 

Firstly, let's analyze consumption inequality. According to the Delhi Socioeconomic Survey of 2018, 90% of Delhi families were spending less than ₹25,000 per month, and 98% were spending less than ₹50,000 per month. However, it is important to note that Delhi's per capita income is three times higher than the national per capita income. When we consider this, we find that approximately 90% of families in Delhi are spending less than ₹8,500 per month, and 98% are spending less than ₹16,500 per month. 

Interestingly, consumption inequality is not as high as income inequality. This can be attributed to the fact that higher earners have a larger fraction of their income available for savings rather than consumption. Consequently, wealth inequality is typically greater than income inequality, and income inequality is not as pronounced as consumption inequality. 

Data from the Price Survey conducted a couple of years ago compared to data from 2015-2016 showed that the bottom 60% of the income distribution experienced a decline in income, while the top 20% saw an increase. This indicates a widening of income inequality. The World Inequality Report further revealed that the top 1% earned 22% of the income, whereas the bottom 50% only earned 13%. 

Additionally, the Credit Suisse report demonstrated that the richest 1% of the population held 51.5% of the wealth, while the top 10% owned 77.4%. In contrast, the bottom 60% only had 4.7% of the total wealth. It is essential to note that these reports focus on the formal economy and primarily consider the financial sector, which excludes the significant black income generation occurring in India. 

The exclusion of black income generation leads to an underestimation of inequality. Including this black income generation in the calculations would increase the 1% top earners' share from 22% to 40%, significantly worsening income inequality. Moreover, wealth inequality becomes even more pronounced when considering the additional income generated through wealth itself. This indicates that wealth not only adds to current income but also generates its own income, magnifying the inequality further. 

In conclusion, while consumption inequality is relatively less severe than income and wealth inequality, it is essential to focus on the latter two. Income inequality highlights the significant disparities between the top earners and the rest of the population, with the richest segment capturing a disproportionately large share of the income. Meanwhile, wealth inequality accentuates how a small fraction of the population holds a significant majority of the nation's wealth. By including black income generation and considering income derived from wealth, we realize that the actual levels of inequality are even higher. This calls for urgent attention and action to address the deep-rooted income and wealth disparities in India.