UPSC Editorial Analysis: India’s Equality Ranking and the Reality of Rising Inequality
Kartavya Desk Staff
*General Studies-3; Topic: Inclusive growth and issues arising from it.*
Introduction
• Recently, India was claimed to be the fourth most equal country in the world, a statement that stems from a selective reading of a World Bank
• This claim is based on the decline in India’s consumption-based Gini coefficient, but does not reflect the broader reality of income and wealth inequality.
• A nuanced reading of the data reveals significant disparities that remain entrenched in India’s socio-economic landscape.
Understanding the Gini Coefficient
• The Gini coefficient is a statistical measure of distribution often used to gauge inequality of income or wealth.
• It ranges from 0 (perfect equality) to 100 (perfect inequality).
• There are different types: Income-based Gini Consumption-based Gini Wealth-based Gini
• Income-based Gini
• Consumption-based Gini
• Wealth-based Gini
• The type of data used significantly alters the picture of inequality. In India’s case, consumption-based Gini is relatively low, but income and wealth Gini indices paint a different story.
The Government’s Claim and the World Bank Report
• The Union Government claimed India is the 4th most equal country globally based on the fall in the consumption-based Gini coefficient from 28.8 in 2011–12 to 25.5 in 2022–23.
• This metric suggests some improvement in equality of consumption.
• However, the World Bank report explicitly cautions that: The decline may reflect methodological limitations. Survey underreporting, especially among the rich, can artificially lower inequality. Inequality in incomes and wages remains alarmingly high.
• The decline may reflect methodological limitations.
• Survey underreporting, especially among the rich, can artificially lower inequality.
• Inequality in incomes and wages remains alarmingly high.
The Illusion of Equality Through Consumption
• Consumption data, while useful, understates real inequality because: The rich consume a smaller proportion of their income and save/invest the rest. The poor spend most of what they earn, making their consumption more visible. Black money, underreported assets, and luxury consumption are often excluded from surveys.
• The rich consume a smaller proportion of their income and save/invest the rest.
• The poor spend most of what they earn, making their consumption more visible.
• Black money, underreported assets, and luxury consumption are often excluded from surveys.
• Hence, consumption equality does not necessarily mean income or wealth equality.
Rising Income Inequality
• According to the World Bank: Income-based Gini coefficient in India rose from 52 in 2004 to 62 in 2023. This puts India among the most unequal nations in terms of income distribution.
• Income-based Gini coefficient in India rose from 52 in 2004 to 62 in 2023.
• This puts India among the most unequal nations in terms of income distribution.
• India ranked 176 out of 216 countries in income equality in 2019, far below its 2009 rank of 115.
• The median earnings of the top 10% were 13 times higher than the bottom 10% in 2023–24.
Implication: Economic growth in India has disproportionately benefited the top tier.
Wealth Inequality: A Starker Reality
• India’s wealth-based Gini index is estimated at 75, indicating extreme inequality.
• According to the World Inequality Lab and Oxfam: The top 1% own 40.1% of the country’s total wealth. They also account for 22.6% of the national income. The bottom 50% earn only 15% of the income and own just 6.4% of the wealth.
• The top 1% own 40.1% of the country’s total wealth.
• They also account for 22.6% of the national income.
• The bottom 50% earn only 15% of the income and own just 6.4% of the wealth.
• This concentration of wealth exacerbates intergenerational inequality, education disparities, and access to opportunity.
Calorie Consumption and Nutrition Inequality
• The UN FAO ranks India 102 out of 185 countries (2019) in per capita calorie intake.
• Low calorie consumption reflects hidden hunger, food insecurity, and poor access to nutritious food, especially among the poor and rural populations.
• This further discredits the claim that improved consumption metrics equate to improved well-being.
Wage Disparity and Labour Market Inequality
• Wage inequality remains persistent across rural-urban, gender, and caste lines.
• NSSO and Periodic Labour Force Survey (PLFS) data show: Casual labourers and informal workers earn significantly less. Gender wage gap remains around 19-25%. SCs/STs and Muslims are underrepresented in formal, high-paying jobs.
• Casual labourers and informal workers earn significantly less.
• Gender wage gap remains around 19-25%.
• SCs/STs and Muslims are underrepresented in formal, high-paying jobs.
• The growing gig economy, while providing flexibility, often lacks social security and minimum wage guarantees, exacerbating insecurity for low-wage workers.
Rural-Urban Disparities
• Urban India accounts for a disproportionately large share of income, services, and infrastructure.
• Rural consumption, though improving, still lags behind urban areas.
• The rural-urban divide is further worsened by regional disparities, with southern and western states outperforming eastern and central regions in health, education, and per capita income.
Structural Reasons Behind Persistent Inequality
• Education: Disparities in access to quality education and dropout rates among marginalized communities.
• Health: Unequal access to healthcare services and high out-of-pocket expenditure.
• Digital Divide: Technology access remains limited in rural and low-income households.
• Asset Ownership: Land, real estate, and financial assets are concentrated in the hands of a few.
• Jobless Growth: Economic growth is not translating into proportionate employment opportunities.
International Comparisons
• Gini Index Comparisons (Income-based): India: 62 (2023) Sweden: ~28 Germany: ~31 USA: ~41 South Africa (most unequal): ~63
• India: 62 (2023)
• Sweden: ~28
• Germany: ~31
• South Africa (most unequal): ~63
• India stands closer to South Africa than to advanced democracies, contradicting the claim of being among the most equal societies.
Policy Blind Spots and Government Narrative
• The government has focused on optics, selectively quoting favourable data.
• It has increasingly questioned official statistics, sidelining inconvenient facts.
• A healthy democracy requires honest introspection and data transparency to create effective and inclusive policies.
Way Forward
• Strengthen Statistical Infrastructure: Improve NSSO and PLFS methodologies. Capture informal sector and high-income data more accurately.
• Improve NSSO and PLFS methodologies.
• Capture informal sector and high-income data more accurately.
• Progressive Taxation: Enforce wealth taxes or inheritance taxes. Reduce regressive indirect tax burden on the poor.
• Enforce wealth taxes or inheritance taxes.
• Reduce regressive indirect tax burden on the poor.
• Redistributive Welfare Schemes: Strengthen Direct Benefit Transfers, food subsidies, and employment guarantees. Expand universal basic services like education and health.
• Strengthen Direct Benefit Transfers, food subsidies, and employment guarantees.
• Expand universal basic services like education and health.
• Formalization with Protection: Ensure labour rights and minimum wage for gig and informal sector workers.
• Ensure labour rights and minimum wage for gig and informal sector workers.
• Empower Marginalised Groups: Focus on education, entrepreneurship, and financial inclusion for SCs/STs, minorities, and women.
• Focus on education, entrepreneurship, and financial inclusion for SCs/STs, minorities, and women.
Conclusion
• The recent claim of India being the fourth most equal country in the world rests on narrow and misleading metrics. While consumption inequality has reduced, income and wealth disparities have widened sharply.
• Inequality in India is a deeply structural issue, demanding data integrity, political will, and inclusive policymaking. Acknowledging the reality is the first step towards achieving a truly equitable society.
Discuss the limitations of consumption-based inequality measures in understanding socio-economic disparities in India. (250 Words)