Data and distortion: Decoding inequality in India

Deccan Herald

13-07-2025

In July 2025, the government's Press Information Bureau celebrated a World Bank brief that proclaimed India had become the fourth most equal country in the world, citing a Gini index of 25.5. According to the World Bank's 2025 Poverty and Equity Brief, India's consumption-based Gini coefficient declined from 28.8 in 2011–2012 to 25.5 in 2022–2023. The Gini index is a widely used measure of inequality, where 0 denotes perfect equality and 100 indicates perfect inequality. A lower Gini index, therefore, implies a more equal distribution of income or consumption..However, the brief itself clarified that this figure refers to the consumption Gini index calculated using the 2022-2023 Household Consumption Expenditure Survey (HCES) and warns that inequality may be underestimated due to data and sampling limitations. Therefore, the celebratory headlines following the PIB release were based on a measure of consumption inequality, while many international rankings use income-based Gini indices—a mismatch that calls for closer scrutiny. .The 2022–2023 HCES marked a significant methodological shift from earlier rounds. It adopted the Modified Mixed Recall Period (MMRP), using shorter recall periods (e.g., 7 days) for frequent purchases like food and longer periods (e.g., 365 days) for less frequent purchases like durable goods, replacing the fixed 30-day Uniform Recall Period. Additionally, it valued all goods, including those provided free or at subsidised rates, at their market price rather than the price actually paid by households. These adjustments led to capturing higher levels of reported consumption..These methodological changes play a key role in the low consumption-based Gini index for India. While these changes have garnered some critics, they are largely in line with global best practices. However, the World Bank brief does provide a caution that 'sampling and data limitations suggest that consumption inequality may be underestimated' in India..The critical point remains that the Gini coefficient reported in the World Bank brief is based on consumption, not income. Consumption-based Gini indexes are typically lower than income-based Gini indexes. Understanding this difference is key to interpreting claims about India's relative equality in a global context. Wealthier households typically save a large share of their income, resulting in a smoothing of consumption that hides the volatility of income. As a result, their consumption patterns appear more equal than their income. Thus, India's consumption Gini index cannot be equated to other countries' income Gini index to conclude where India ranks in terms of equality. .By contrast, income-based measures tell a very different story. The World Inequality Database (WID) estimates India's income Gini at 62 in 2023. It classifies India as one of the most unequal countries in the world and also claims that inequality in India has been steadily increasing ever since liberalisation. It is also referenced within the same World Bank brief as an alternative viewpoint. However, these numbers come with their critics..WID relies heavily on tax records to compile its database. Several Indian economists point out that changes in tax policy and compliance can skew these trends..For instance, rising incomes reported at the top may partly reflect better tax compliance (as rates fell), not a real jump in inequality. Similarly, tax evasion is another major factor that is difficult to account for. Therefore, while the WID paints a grim picture, its methodology has been challenged in India..Similarly, a private think tank called PRICE has conducted intensive income surveys and finds a higher Gini than the World Bank's but lower than WID's. PRICE reports India's income Gini at about 41 in 2022–23. This implies that income inequality in India is substantial, though still below WID's level of 62. Of course, household income surveys have their own pitfalls. Self-reported income is notoriously unreliable, with people often under-reporting, especially at the top. Recent RBI research confirms that the wealthiest Indians report incomes far below what their assets would imply. .While the claim that India is the 4th most equal country in the world is not supported by the evidence, understanding the extent of inequality in India is limited by the lack of quality data. Consumption data shows low inequality, while income data shows higher inequality, and each data source comes with its limitations. Recognising this, MoSPI has recently pledged to conduct an All-India Household Income Survey. This will be India's first full-scale income distribution survey in decades..The planned survey will be guided by experts and is intended to incorporate global best practices in design and coverage. Until it is conducted, we must rely on piecemeal indicators and treat headline claims with caution..For now, all evidence suggests that India is far from the 'equal' club. Until better data is available, it is important to keep an open mind to all these data points and their caveats and not be swayed by oversimplified headlines..(The writer is an independent researcher)