Economic growth and Indian wealth-income ratios in the long run: 1860–2018

Abstract

This paper presents new series on the evolution of wealth-income ratios in India. I construct a new macro-history dataset, covering the period 1860–2018 and containing historical series on the composition and level of national wealth, national income, savings, investment and prices. These data show a gradual rise in India's national wealth-to-national income ratio (β = W/Y) since the mid-twentieth century, with the main takeoff occurring around the end of the twentieth century. I ascribe this pattern to the steady increase in saving rates since independence which were themselves the consequence of income shifts in favor of higher saving sectors under India's mixed economy era. Prior to 1950, wealth-income ratios fluctuated a lot on account of land prices and low economic growth. These series offer an alternative timeline of wealth concentration in the absence of long-run distributional data. In colonial India, land was dominant in national wealth, and its ownership was concentrated. In recent decades the importance of capital and urban land—both also concentrated in ownership—has increased.