The Government of India (GoI) has claimed that its policies have generally driven rapid economic growth, making it the world’s fourth-largest economy. According to data from the World Bank, India’s income inequality, measured by the Gini coefficient, has dropped significantly. Between 2011-12 and 2022-23, India’s Gini coefficient fell from 28.8 to 25.5, placing it as one of the few countries worldwide ranking fourth for the most equitable society. However, this claim is misleading and is fundamentally flawed. Behind these numbers lie multiple caveats and other critical issues that undermine the assertion of a reduction in consumption inequality.
The report’s data is problematic, as it conflates two different expenditure surveys. The Household Consumption Expenditure Survey (HCES) of 2022-23, used to calculate inequality, is less comparable to the earlier data due to methodological differences. Recent advancements in consumption surveys are still available, but they do not track the same cola as the 2011-12 data, making the comparisons invalid. Additionally, the report incorrectly attributes improvements in the global adequacy of inequality measures like the Global Development Index (GDI) to claims of “income inequality” in the country. In reality, the Gini coefficient measures consumption inequality, not income inequality, and gap analysis is often used to defer some of the blame to global factors. World Bank and other organizations have historically used different inequality measures to evaluate across nations, which complicates the attribution of inequality trends.
Another major issue in the report is the increasing income inequality in India. Data from the rural-Kale Foundations International (KLEMS) reveals a steady decline in real household income per capita since 2004. India’s Gini coefficient for real income has jumped from 52 in 2004 to 62 in 2023, underscoring the growing disparity. This rise in income inequality is not solely a result of productivity growth or tech advancement but can be traced to trends in ruralization, poor infrastructure, and shifting societal values.
The challenge lies in understanding how the rise in income inequality affects real household consumption and income. While higher income growth can tend to reduce inequality in traditional sectors like manufacturing and services, it exacerbates structural challenges in more basic sectors. highlight traditional or dignified sectors, such as agriculture, where economic productivity might lead to a higher share of GDP but often underpinned by underpaid workers. The