*The latest wealth index by New World Wealth that looks at multimillionaires has ranked India eighth in the global rich list. This article contends that looking at absolute numbers may be misleading. Accounting for population and economic differences across countries, it shows that while India does not stand out in terms of income going to the top 1%, it does in terms of income going to the top 0.1%.*

**It´s the population**

**Accounting for differences in income and inequality**

*too few*millionaires relative to the United States, after making the income correction? Not really: if two countries have the same level of relative inequality but different average incomes, a halving of average income predicts a change in the percentage of (multi)millionaires in the population by a factor that typically

*comes down by more than half*, the exact prediction depending on the distribution of wealth. This is (in part) because “millionaire” or “multimillionaire” is a threshold concept: a fixed monetary figure (US$1 million for the former, US$10 million for the latter) has to be crossed. One good way to explore the predicted change is to employ a Pareto distribution of wealth, along with the population-weighted average Gini coefficient for wealth distributions (which is a bit over 0.65, and calculated from this link)

^{12}. Then a halving of per-capita income is expected to lower the (multi)millionaire share of the population by a factor of approximately 2.38. If we really go out on that limb and plummet from the heights of US per-capita income (US$ 50,660) to that of India (US$ 1,550), we would expect both the millionaire share and the multimillionaire share in India to be approximately 1.28% that of the United States.

*millionaires*are concerned (and after we have corrected for economic differences). But the case of

*multimillionaires*tells a rather different story. In India the multimillionaire share is 0.001% of the population, while in the United States it is 0.058%. Taking ratios, we see that the multimillionaire share in the population in India is 2.06% of the corresponding share in the United States. This number is surely high relative to the prediction of 1.28%.

**Table 1. Actual shares vs. predicted relative shares of millionaires and multimillionaires**

*Notes and Sources*:

*Relative Income*is country per-capita income relative to US per-capita income (from the World Bank Databank).

*M-Share*is millionaire divided by population, in percent, and

*MM-Share*is multimillionaire divided by population, in percent (from Times of India, New World Wealth, WealthInsight, and United Nations).

*Predicted Relative Share*uses Relative Income and a Pareto distribution, along with the population-weighted average of within-country wealth Ginis (approx. 0.67) to generate predicted relative share of millionaires and multimillionaires in each country relative to the United States, in percent.

*Relative M-Share*and

*Relative MM-Share*are the actual relative shares generated from columns 3 and 4, by expressing those numbers relative to the US numbers, in percent.

**Take-away points**

*Lesson:*for India, always do the percentages, whether for multimillionaires or for farmer suicides. We might then learn something.

*A version of this article has appeared in the Economic Times, and on Debraj Ray´s Blog.*

*Notes:*

- The Gini coefficient is a standard measure of income inequality whose value ranges from 0, which represents complete equality to 1, which represents complete inequality. Suppose we plot the proportion of total income of the population (say, y) that is cumulatively earned by the bottom x% of the population. This is called the Lorenz curve. If a 45-degree line captures this relationship, then there is perfect equality and the Gini coefficient is 0. Otherwise, the Gini coefficient is the ratio of the area that lies between the line of perfect equality and the Lorenz curve.
- The Pareto distribution is a distribution commonly used to study the right tail of a distribution, which in the case refers to income or wealth. It captures the way a larger fraction of the wealth of any society is owned by a smaller percentage of the people in that society.