Economic Inequality in India
Introduction
A 2024 World Inequality Lab (WIL) paper highlights the stark economic inequality in India, comparing it to the "Billionaire Raj" and the British Colonial Raj.
Key Findings
- The top 1% in India earned 22.6% of pre-tax income in 2022-23, surpassing the colonial peak.
- The Gini coefficient for pre-tax income is 0.61, suggesting extreme inequality.
- In contrast, India's consumption Gini based on NSO surveys is around 0.25, indicating greater equality than the US, China, and most developed countries.
Analysis of Income Measures
Discrepancies arise from different methodologies:
- WIL measures pre-tax, pre-transfer income, omitting taxation and redistribution effects.
- Distortions occur as lower decile incomes are partly modeled, and top profits are attributed to individuals without being disposable income.
Redistribution and Welfare
- India's redistribution is largely in-kind (e.g., PDS, PMAY, Ayushman Bharat) and doesn't appear in conventional statistics.
- This skewed perception leads to a misunderstanding of actual inequality levels.
Post-Fiscal Inequality
- A study by SP Jain Institute shows the pre-fiscal market income Gini as 0.348, lower than the reported statistic.
- When welfare transfers are monetized, the inequality falls to around 0.27.
Conclusion
Despite a lower per-capita income, India's fiscal interventions have achieved post-fiscal equality comparable to advanced welfare states. The real measure of inequality is closer to 0.27, reflecting true living standards rather than skewed global frameworks.
