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Hans India
3 days ago
- Business
- Hans India
Here is why India's declining consumption inequality deserves recognition
Therecent decline in India's consumption-based Gini coefficient—from 28.8 in 2011-12 to 25.5 in 2022-23, as reported by the World Bank—has prompted considerable scrutiny, particularly when juxtaposed with income-based estimates from the World Inequality Database (WID), which peg India's Gini at an ostensibly alarming 62 in 2023. Reconciling this apparent dissonance necessitates a closer interrogation of the underlying metrics, data sources, and conceptual frameworks. What follows is a reasoned engagement with the criticism—one that distinguishes methodological incompatibilities from substantive economic realities and highlights the perils of conflating fundamentally distinct measures of inequality. At the core of this divergence is a critical conceptual distinction: the difference between consumption inequality and income inequality. In a country like India—characterised by a large informal workforce, extensive in-kind transfers, and a rapidly expanding welfare architecture—income is often volatile, underreported, or difficult to capture comprehensively. Consumption, by contrast, tends to be smoother over time and more reflective of actual living standards. The World Bank's Poverty and Inequality Platform (PIP) adopts this logic, using either disposable income or consumption expenditure depending on national context. Firstly, it is worth pointing out that the World Bank in its paper titled 'The World Bank's New Inequality Indicator' gives a way of converting consumption gini to income gini and vice versa. The bank estimated that the average ratio of income-to-consumption Gini coefficients across 84 country-years where data was available for both is 1.13. Applying this directly to India's consumption-based Gini of25.5 yields an approximate income Gini of 28.8. This still places India at 12th, even under income-equivalent assumptions. This simple approximation gives a way of comparing welfare types within PIP database. This raises a pertinent question: why has this not been more widely acknowledged? The answer perhaps lies in the tendency to selectively emphasise outlier estimates. When the simple approximation given is used for comparison across nations, India's inequality even when measured in income terms is significantly lower than the United States and UK. Among the 48 nations where welfare approach is consumption based; India ranks third. India's consumption-based Gini coefficient of 25.5 in the PIP database is also internationally striking. China's consumption of Gini, for instance, stands at 35.7, according to the same database and using the same welfare concept. This 10-point difference is significant. Secondly, why is the impact of large-scale social welfare schemes conspicuously spared from criticism? In a country like India, where large-scale social welfare programmes—such as subsidized food, LPG, housing, rural employment, health insurance, and direct cash transfers—have significantly boosted the living standards of the poor, consumption will inevitably be higher and more equitably distributed than income. These forms of public provisioning raise welfare especially in rural and informal segments. In BE 2025, the Union Government's spending on beneficiary schemes amounts to ₹7.1 lakh crore, and states together add another ₹7.4 lakh crore. This totals to nearly ₹14.5 lakh crore. According to PLFS data, the average monthly earning by regular salaried worker is approx. Rs 21,000 and approx. Rs 14,000 for self-employed. The average earning per day by a casual labourer is Rs 433. Using these approximations and accounting for dependency assuming a family of four, this translates to an income of Rs 65,000 per capita. Assuming 80 per cent of the total beneficiary schemes reaches bottom 50 per cent, this translates into Rs 15,000 per year/per person accounting for leakages and overlaps through direct and indirect benefits. This uplift of approx. 20% in effective resources translates into consumption. Thus, even under these conservative assumptions, this significantly compresses effective inequality. These interventions have also led to a dramatic fall in poverty, with the extreme poverty rate dropping from 16.2 per cent in 2011–12 to 2.3 per cent in 2022–23. At the lower-middle-income line of $3.65/day, poverty fell from 61.8 per cent to 28.1 per cent. Before accepting WID's estimates at face value, shouldn't we ask what exactly they are measuring? Coming onto the WID database, their benchmark income concept is: 'Pre-tax, post-replacement national income', that is, before taxes and transfers, except for social insurance components like pensions and unemployment benefits. This means that they exclude most non-contributory welfare transfers — like India's Direct Benefit Transfers (DBT), food subsidies, LPG schemes, Ayushman Bharat, rural housing, and more. India's social protection system relies much more heavily on non-contributory transfers than contributory insurance. These are not counted in the WID's income concept, even though they materially raise real income and purchasing power. This creates a systematic downward bias when WID measures inequality in India by ignoring the redistributive effect of these targeted schemes and Inflating the apparent concentration of national income at the top. So, under WID's income inequality framework, we are essentially saying that major upliftment schemes in India — have zero impact on measured inequality. Secondly, WID relies heavily on tax records to compile its database. Now, even if we look at tax records, Gini coefficient estimated using ITR data of taxable income of individuals shows that individual income inequality has decreased from AY15 (FY14) to AY23 (FY22) from 0.472 to 0.402. 43.6 per cent Individual ITR filers belonging to the Income group of less than Rs four lakh in AY15 (FY14) have left the lowest income group and shifted upwards. A comparison of disparity in income during FY14 and FY23 shows that there is a clear rightward shift in the income distribution curve signifying people in lower income brackets are increasing their income to converge towards their share in population. The bell-shaped curve for AY24 speaks more!! In FY14, the share of the top one per cent in total income was 1.64 per cent, which fell to 0.77 per cent in FY21. Furthermore, tax buoyancy of 1.1 alongside falling cost of collection shows better compliance and hence must not be misread as rising inequality. If India's official tax data shows improving progressivity, and large-scale consumption surveys indicate a sustained reduction in inequality, then it is worth asking why WID estimates tell such a different story. To argue that India remains deeply unequal based solely on selectively elevated income estimates is much like claiming the country lacks water because Rajasthan faces water scarcity. Inequality, like deprivation, is not monolithic—it varies across dimensions, regions, and measurement tools but that does not invalidate the broader progress being made. Any evaluation that ignores these dynamics in favour of a narrow, partial view risks obscuring the very progress it seeks to critique. As we move forward, two takeaways are critical. First, improved reporting is not the same as increased disparity—and we must resist reacting to shadows cast by better data. Second, and most importantly, welfare economics must always return to its core question: what improves the lived experience of the bottom half? In that, India's story over the past decade is less about divergence at the top and more about convergence at the base—quiet, broad, and measurable in the resources people use. (The authors are a member of the 16th Finance Commission and Group Chief Economic Advisor, State Bank of India and the other an Economist at State Bank of India. Views are personal)
The Hindu
5 days ago
- Business
- The Hindu
Indian inequality and the World Bank's claims
Inequality is an important concern for the political economy of a democracy. However, the Indian inequality debate is often characterised by the selective use of data to make exaggerated claims that fuel misperceptions rather than result in a better understanding. The sharp reactions to a recent World Bank report ('India Poverty and Equity Brief: April 2025') are an illustrative case in point. The World Bank report claims that India has almost eradicated extreme poverty. Further, it claims, the country has significantly reduced consumption inequality since 2011-12, in terms of consumption patterns of the population. In terms of the Gini coefficient, a measure of inequality, the report (without separating the consumption and income inequality-based estimates) has placed India among the top four least unequal countries. These findings have created quite a stir, as the media and the public are accustomed to reports claiming very high inequality in India. What has happened? What it is based on The World Bank's claims about the Indian inequality are based on the official Household Consumption Expenditure Survey (HCES) data for 2022-2023. This data is collected using the modified mixed reference period (MMRP) method, which employs the state-of-the-art statistical technique. As the World Bank report correctly observes, 'The MMRP is considered an improvement and alignment with international best practices...' The World Bank has adjusted the Indian data to account for some but not all government-provided free goods and services. The World Bank finds that during 2011-12 and 2022-23, India registered a major decline in consumption inequality; in this period, the consumption-based Gini coefficient dropped from 28.8 to 25.5. Critics of the report argue that the World Bank has underestimated the inequality, as the HCES data does not capture consumption by the rich. It is a valid critique, but India is not an exception. This limitation applies to all survey data in all countries and, in itself, does not question the broad ranking of countries. Even if we discount the precision of the World Bank's inequality estimates, a significant improvement in India's international ranking is a fact. Of course, we should not confuse consumption inequality with income inequality. The decrease in India's consumption inequality is substantial and indisputable. To address the data issue, let us assume that the problem of missing elite consumption is more pronounced in India — say, the HCES rounds do not capture consumption by the top 5% families at all. In that case, going by the consumption expenditure data, it is irrefutable that the consumption inequality has decreased between 2011-12 and 2022-23 for the remaining 95% of the population covered in HCES data. The HCES data show that the country's consumption basket is healthier today than ever. Between 2012 and 2023, the per capita availability of milk and eggs has increased by 45% and 63%, respectively. The availability of fruits, vegetables and protein products has increased. The share of cereals in the food bill, as well as calorie intake, has decreased, while that of healthier products has increased, for all strata. All this improves the diet for the 95%, rather than the richest groups, whose consumption already matches the best in the world. The dietary intake improvements are most striking for the bottom 20% of households in rural and urban areas, even if we ignore the free food and cash transfers received by these groups. The share of rural households consuming fresh fruits (to a different frequency) has increased from 63.8% in 2011-12 to 90% in 2023. The 2022-23 and 2023-24 rounds of consumption data irrefutably demonstrate that extreme poverty has been almost eradicated. Whether we use the Rangarajan, Tendulkar, or the multi-dimensional poverty index of NITI Aayog, poverty has declined significantly. Based on the International Poverty Line of $3 between 2011 and 2023, India has pulled around 27 crore people out of extreme poverty. Independently, the nightlight data show a significant increase in ownership rates of pucca homes and paved roads in rural areas over the last 10 years, owing to the Pradhan Mantri Gramin Awas Yojana and Pradhan Mantri Gram Sadak Yojana. Among the poorest 20% of households, more than 40% own a vehicle today, compared to just 6% in 2011-12. This enables rural workers to work part-time in nearby cities without having to migrate. If we factor in these and the other policies targeted at the bottom of the pyramid, such as Ayushman Bharat, the aggregates of welfare for the poor would look even better. Examining income levels True, it is important to examine income inequality separately from consumption inequality. There is no official income survey data yet. The mainstream media and commentators use the income shares of the top 1%, as estimated by the World Inequality Lab (WIL) to argue that the income inequality is very high in India, disregarding critical limitations of these estimates. Given the lack of data on income distribution, the WIL uses the income tax data to estimate top income levels. They use the old consumption data and estimates of the income-consumption relationship to estimate income for low- and middle-income households. The latter estimates unrealistically assume that consumption expenditure exceeds income for 70%-80% of households. How can it be that all families, except the top 20-30%, spend more than they earn, year after year? As an inevitable consequence of using such an implausible assumption, the income of the bottom 80% gets underestimated. This reduces their estimated share of national income. Conversely, shares of top income groups are overestimated. Even if we ignore these limitations, we do not find an increase in income inequality. Taking the WIL estimates as they stand, the national income shares of the bottom 50% have increased from 13.9% in 2017 to 15% in 2022. During the same period, the share of the top 10% has decreased from 58.8% to 57.7%. The high national income shares of the top 1% are a matter of concern. However, since 2017, the income shares of the top 1% have increased by only 0.3 percentage points. Research by this writer indicates that a part of this increase is attributable to improved income reporting by affluent groups in response to the Centre's anti-tax evasion measures since 2016-17. Better reporting should not be mistaken for increased inequality. Furthermore, the WIL inequality estimates used by the media and commentators are based on pre-tax income levels. However, it is the post-tax and post-subsidy/transfer income that matters to people. Therefore, to be meaningful, income inequality estimates should be based on the post-tax rather than the pre-tax income. For instance, in the assessment year 2023-24, the top 1% of all taxpayers accounted for 72.77% of the total tax paid. Even in the individual category, the top 1% paid 42% of the total tax paid. Arguably, wealthy individuals should pay more taxes, but the point is that even at the existing tax rates, the actual post-tax income of top-income taxpayers is only 65%-75% of the levels used in headline-grabbing estimates. For low-income groups, in contrast, the income levels used are smaller than the actual effective income, which is higher, due to the all-time high welfare transfers that account for more than 8% of GDP. On a post-subsidy, post-tax income basis, over the last decade, we will find a decrease in income inequality in recent years. The other story about India Admittedly, we must travel a long way before we can claim to be an egalitarian society. Inequality in accessing quality health and education is a serious concern. For a country of our size and diversity, inevitably, there are many lived realities. However, the story of India is not just about poverty and inequality any more; it is about progress and aspirations too. While being mindful of the current problems and challenges ahead, let us also celebrate the country's successes. Ram Singh is Director, Delhi School of Economics, Member, Monetary Policy Committee of the Reserve Bank of India (RBI) and Member, Technical Expert Group for the First Household Income Survey, Ministry of Statistics and Programme Implementation (MoSPI), Government of India. The views expressed are personal
Indian Express
5 days ago
- Politics
- Indian Express
World Bank claims a drastic reduction in inequality in India. There is more to the story
Written by Deepanshu Mohan A recent World Bank report has claimed a drastic reduction in inequality in India between 2011 and 2022. However, it misses a fundamental conceptual and measurable distinction between income surveys and consumption surveys. This distinction is critical, as an income-based Gini index is typically higher — reflecting greater inequality — whereas a consumption-based Gini is lower, particularly in low- and middle-income countries where such surveys are more common. Beyond these methodological issues, normative concerns around how inequality is conceptualised and measured also deserve deeper scrutiny — something the World Bank report fails to elucidate. In addition to the World Bank study, the Ministry of Statistics and Programme Implementation (MoSPI) released the Sustainable Development Goals (SDG) National Indicator Framework Progress Report 2025, which tracks India's performance across 17 SDGs using 284 indicators. While this report is a valuable tool for aligning India's metrics with global targets, it primarily emphasises administrative progress and aggregate outcomes — overlooking disparities at the ground level in access, affordability, and inclusion. These dimensions are critical to measuring and understanding relative poverty and inequality. This is where the Access (In)Equality Index (AEI) 2025, developed annually by the Centre for New Economic Studies (CNES), offers a vital complement to the current debate on inequality assessment. Grounded in the context and patterns of economic development in low- and middle-income countries, the AEI draws on official data sources and reorganises indicators through a disaggregated, intersectional lens using the 4A framework: Availability, Affordability, Approachability, and Appropriateness. These are then assessed across five measurable pillars: Access to Basic Amenities, Access to Healthcare, Access to Education, Access to Socio-Economic Security, and Access to Legal Recourse. Take, for example, the Basic Amenities pillar. The AEI correlates with SDG-NIF indicators drawn from SDGs 1, 6, 7, and 11—including SDG 6.1.1 (proportion of households with piped water supply), 6.2.1 (households with improved sanitation/toilet facilities), 7.1.1 (households using clean cooking fuel or electricity), and 11.1.1 (access to affordable, safe housing under schemes like PMAY-U). The SDG-NIF Progress Report 2025 presents some encouraging trends. Piped water coverage, for instance, rose from 21.33% in 2019–20 to 80.22% in 2024–25. Access to clean cooking fuel reportedly exceeded 100% coverage in some years, indicating strong programmatic reach. Similarly, over 97% of schools had separate toilets for girls by 2023–24. However, the AEI ranks states not only on the presence of infrastructure but also on its functionality, usability, and inclusivity. Goa, for instance, scores highest in the Basic Amenities pillar (0.97), while Jharkhand (0.31), Bihar (0.38), and Odisha (0.39) lag significantly behind. Although the SDG-NIF reports progress in bringing water 'within premises,' the AEI shows that only 25% of states have piped water coverage exceeding 50%. This implies that in most states, households still fetch water from outside their homes—a burden that falls disproportionately on women. In healthcare, the AEI aligns with SDG 3: Good Health and Well-being, referencing indicators like institutional delivery rates (SDG 3.1.2), immunisation coverage (SDG 3.b.1), out-of-pocket expenditure on health (SDG 3.8.2), and the doctor-to-population ratio. Yet, the AEI provides a more nuanced view by disaggregating access by geography and affordability. While Goa (93%) and Tamil Nadu (89.9%) report high levels of adequate antenatal care, Nagaland reports just 20.7%—highlighting critical gaps in maternal healthcare in the Northeast and other hilly regions. In terms of socio-economic security, both the SDG-NIF and AEI engage with indicators from SDGs 1 (No Poverty), 5 (Gender Equality), 8 (Decent Work and Economic Growth), and 10 (Reduced Inequalities). National-level data shows steady progress: the labour force participation rate (LFPR) among individuals aged 15–59 increased from 61.6% in 2022–23 to 64.3% in 2023–24. Banking outlets per 100,000 population rose from 59.9 in 2015–16 to a peak of 267.5 in 2021–22, before stabilising at 144.3 in 2023–24. ATM expansion has been more modest, growing from 16.5 to 18.5 in the same period. The AEI contextualises these outcomes by exposing disparities in access to employment, financial infrastructure, and income equity. Andhra Pradesh leads in the socio-economic security pillar with a score of 0.70, followed by Goa (0.60), while Bihar (0.18), Assam, and Manipur (around 0.21 each) perform the worst. Notably, all five southern states feature among the top eight performers, whereas many northeastern states consistently rank at the bottom—reflecting the role of policy focus and institutional strength. In education, both SDG-NIF and AEI monitor indicators aligned with SDG 4: Quality Education. While SDG-NIF time-series data shows improvement, the AEI reveals large disparities in actual access and quality. The proportion of secondary and higher secondary schools with internet access increased from 46.3% in 2015–16 to 78.5% in 2023–24. However, AEI data shows that in over half of Indian states, less than 50% of schools have functional computers, and only 25% of states surpass 75% coverage. In terms of digital readiness, only Kerala and Gujarat exceed 60% school-level internet coverage. The Access to Legal Recourse pillar, aligned with SDG 16: Peace, Justice, and Strong Institutions, assesses the functionality and inclusiveness of judicial systems. The SDG-NIF paints a modest picture: courts per lakh population increased from 1.82 in 2016 to 1.93 in 2024, and judges from 1.33 to 1.55 in the same period — suggesting incremental capacity building. The AEI adds an equity lens by incorporating gender-disaggregated data on representation in legal institutions. Sikkim leads with 33.3% of judges being women — an encouraging sign. By contrast, states such as Bihar, Uttarakhand, Manipur, Meghalaya, and Tripura report 0% women judges, underscoring persistent gender exclusion. Moreover, the SDG-NIF records that 1.2% of women aged 18–29 reported experiencing sexual violence before the age of 18 (2019–21), a figure likely understated due to underreporting and cultural stigma. The writer is Professor of Economics and Dean, IDEAS, Office of Interdisciplinary Studies; Director, Centre for New Economics Studies, OP Jindal Global University; and currently Visiting Professor at the London School of Economics and Visiting Research Fellow, University of Oxford. Ankur Singh and Aditi Desai, Research Analysts at CNES, contributed to this column
Time of India
6 days ago
- Business
- Time of India
India among world's most equal societies: World Bank report
Dr. Prashant Prabhakar Deshpande has post-graduated in Economics with a Gold Medal in 1976 and was awarded a Ph.D in Social Sciences from Nagpur University in 2007. A latest World Bank report places India among the world's most equal societies ranking it the 4th most-equal country globally ahead of the G20 and G7 nations. According to the report, behind this success is a consistent policy focus on: Reducing poverty; Expanding financial access, and; Delivering welfare support directly to those who need it the most. According to the report, extreme poverty dropped to 2.3 % in 2022-23 with 171 million people moving out of extreme poverty between 2011 and 2023 considering these figures to be important and impressive considering that India is a vast and diverse country with many areas till recently being considered unreachable. The figures, according to it best reflect: The economic growth achieved, and; How the various policies of the government are designed to ensure poverty is erased from India. India's global standing in equality According to the latest World Bank data, India's Gini Index stands at 25.5 placing it among the most equal countries in the world in relative terms. India's score is much lower than China's 35.7 and 41.8 for the United States, as also more equal than G7 and G20 countries many considered advanced economies. India falls into the moderately low inequality category which includes Gini scores between 25 and 30, only a fraction away from joining the low inequality group including countries: Slovak Republic with a score of 24.1; Slovenia 24.3, and; Belarus 24.4. India also has a better score than all other 167 countries for whom the World Bank has released data. Globally, only 30 countries fall into the moderately low inequality category including several European countries with strong welfare systems, including: Iceland, Norway, Finland, and; Belgium, also featuring growing economies like: Poland, and; wealthy nations like the United Arab Emirates. India's journey towards a more equal society is reflected in its Gini Index over the years from being 28.8 in 2011 reaching 25.5 in 2022, this steady shift showing that India has made consistent progress in combining economic growth with social equity. The Gini Index The Gini Index is a simple yet powerful way to understand: How equally income, wealth or consumption is distributed across households or individuals in a country. It ranges in value from 0 to 100. A score of 0 means perfect equality. A score of 100 means absolute inequality. The higher the Gini Index, the more unequal the country. Poverty reduction driving greater equality According to the report 171 million Indians have been lifted out of extreme poverty over the past decade. The share of people living on less than 2.15 US dollars a day, which was the global threshold for extreme poverty till June 2025 fell sharply from 16.2 % in 2011-12 to just 2.3 % in 2022-23. Key government initiatives India's progress towards greater income equality is the result of various government initiatives aimed at: Improving financial access; Delivering welfare benefits efficiently, and; Supporting vulnerable and underrepresented groups. Together, these Schemes have helped: Bridge gaps; Boost livelihoods, and; Ensuring growth reaches all sections of the society. Some of the key government schemes and initiatives include: PM Jan Dhan Yojana with 55.69 crore people holding Jan Dhan Accounts giving them direct access to government benefits & formal banking services. Aadhaar enables the creation of a unique digital identity for residents across the country with more than 142 crore Aadhar cards being issued forming the backbone of welfare delivery ensuring that benefits reach the right person at the right time through reliable authentication. Direct Benefit Transfer (DBT) streamlining welfare payments reducing leakages and delays with the cumulative savings having reached Rs.3.48 lakh crore as of March 2023. Ayushman Bharat Scheme provides health coverage of up to Rs.5 lakh per family per year. As of July 3, 2025, with over 41.34 crore Ayushman Cards having been issued as of July 3, 2025, the scheme being supported by more than 32,000 empanelled hospitals across the country. In addition, the government has also launched the Ayushman Vay Vandana scheme to extend this coverage to all citizens aged 70 and above regardless of income. Under the Ayushman Bharat Digital Mission over 79 crore health accounts have been created to link individuals to digital health services. Stand-Up India Scheme providing loans between Rs.10 lakh and Rs.1 crore to SC/ST and women entrepreneurs for setting up greenfield enterprises with more than 2.75 lakh applications having been sanctioned with total Rs. 62,807.46 crore as of July 3, 2025. Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) continues to serve the most vulnerable sections of society with the scheme having reached 80.67 crore beneficiaries offering free food grains and ensuring that no one is left behind during times of crisis as of December 2024. PM Vishwakarma Yojana supporting traditional artisans and craftspeople with collateral-free loans, toolkits, digital training, and marketing support with 29.95 lakh individuals having registered under the scheme helping preserve livelihoods and promote inclusive growth across rural and semi-urban areas as of July 3, 2025. Epilogue India's path to income equality has been steady and focussed. Its Gini Index score reflects real change in people's lives with more families now having access to: Food; Banking; Healthcare, and; Jobs. India has shown its ability to balance economic reform with strong social protection through targeted schemes like Jan Dhan, DBT, and Ayushman helping close the long-standing gaps, at the same time helping people create wealth and secure livelihoods on their own terms through programmes such as: Stand-Up India and; PM Vishwakarma Yojana. As the world looks for models that combine growth with fairness, India has successfully demonstrated that equality and development are not separate goals when supported by sound policy and inclusive intent they move forward together. Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
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Business Standard
15-07-2025
- Business
- Business Standard
Has Indian inequality declined? Post-tax income data holds the answer
Many who are accustomed to media reports claiming high inequality in the country have responded to the WB's claims with scepticism or outright dismissal Ram Singh Mumbai Listen to This Article A recent World Bank (WB) report has claimed that between 2011-12 and 2022-23, India significantly reduced consumption inequality. India's Gini coefficient (a measure of inequality) is ranked as the fourth-lowest in the world. The WB's estimates of Indian inequality are based on the official Household Consumption Expenditure Survey (HCES) 2022-23 data, after accounting for some but not all government-provided free goods, and excluding consumer durables. Many who are accustomed to media reports claiming high inequality in the country have responded to the WB's claims with scepticism or outright dismissal. The critics argue that, as HCES data does not capture consumption
