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LATEST NEWS UPDATES | Misleading Picture of Household Wealth -CP Chandrasekhar and Jayati Ghosh

Misleading Picture of Household Wealth -CP Chandrasekhar and Jayati Ghosh

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published Published on Jan 11, 2022   modified Modified on Jan 13, 2022

-The Hindu Business Line/ NetworkIdeas.org

In recent years, when the economy as a whole performed poorly, reports on how old and new businesspersons accumulated huge volumes of wealth in short timespans have been commonplace. There is also evidence that conspicuous consumption is on the rise. This has led observers to conclude that income and wealth inequality in India has increased. Hard evidence on the extent of that increase is difficult to come by. One reason is that official surveys of trends in income in different income classes are not available. Using consumption surveys and treating consumption expenditure as a proxy for income does not help. Surveys of consumption expenditure and its distribution inadequately capture the gains registered by high-saving upper income group households and individuals and, therefore, fail to accurately reflect trends in inequality. Moreover, these surveys are known to significantly underestimate consumption in the upper percentiles of the distribution.

Unlike in the case of income, we do have direct surveys of asset holdings by households, conducted as part of the periodic All India Debt and Investment Surveys (AIDIS) which, in principle, should help assess trends in the levels and distribution of wealth at the household level. However, these too have many shortcomings. The information is based on asset holding as reported by those canvassed, which could lead to underreporting, especially in the case of the richer households that may not have reported the incomes used to acquire assets. The methods of attaching a value to the assets identified are not always robust. The coverage and valuation of holdings of financial assets are unreliable. And, given the difficulties of valuing household durable assets, including bullion, which is a major form of wealth holding among the middle- and upper-income groups, they have in recent rounds been left out of the survey. All this would, as in the case of the consumption expenditure surveys, result in considerable underestimation of wealth holding, and much more so in the highest asset holding classes.

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(This article was originally published in the Business Line on January 10, 2022)


NetworkIdeas.org, 11 January, 2022, https://www.networkideas.org/featured-articles/2022/01/misleading-picture-of-household-wealth/?fbclid=IwAR2SayAuOCFypsfFgkPWoTt-VRGtWjFJ6kXJJ-ipQlzOovkec0gt0PPIWJg


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