Latest news with #GiniIndex
The Hindu
29-07-2025
- Business
- The Hindu
Why the Gini Index is wrong about India
The Gini Index ranked India among the world's most equal societies, by giving the country a score of 25.5. This places India in a 'moderately low' inequality category. While this may be cause for celebration, the lived reality in India paints a very different picture. Inequalities, lived and those captured in statistics, permeate into everyday life in urban and rural India. The question that therefore arises is, on what basis can India be considered one of the world's most equal societies? While there is sufficient critique on the flawed methodology used in the Gini Index, this article highlights the general state of inequality that plagues India. While gender, economic, health, educational, and social inequalities have always been endemic to India, with technology and a modern ways of life, new forms of inequality such as digital and banking inequality have arisen. Forms of inequalities One of the fundamental forms of inequality is wealth inequality. A ride through any busy street in urban India in a luxury car which costs an average of ₹30 lakh, driven by a chauffeur who earns and supports a family on approximately ₹3 lakh per year, will highlight the stark wealth inequality that exists. Statistics also supports this reality. According to a study titled 'Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj', in 2022-23, 22.6% of the national income went to just the top 1% of the population. Further, the study mentions that data on wealth inequality is challenging to capture because of the large-scale prevalence of informal employment, low-income levels, and high thresholds for non-taxable incomes, which means that data on tax pertains to less than 10% of the adult population. The reason for the lack of data itself is indicative of inherent wealth inequality, as a large part of the population has to rely on the informal sector for employment, earning significantly less than those employed in the formal sector. Gender inequality is another fundamental form of inequality in India. Women have historically been marginalised from the workforce and comprise about 35.9% of the worker population ratio. The number is starker at senior and middle management levels where women accounted for only 12.7% leadership roles as of 2024. While India has the third largest startup ecosystem in the world, women-run start-ups stand at only 7.5% of all active startups in the country. Social norms aggravate gender inequality in terms of spending family resources on the girl child, and in matters of inheritance. With rapid development of technology, access to digital technology is crucial to broadly navigate through modern day life such as easily accessing formal banking channels. While India has made commendable progress in providing access to the Internet to a large part of the population, a careful analysis of the numbers points to a severe digital divide. Lack of access to the Internet and to digital technology exacerbates the digital divide, leading to lack of opportunities for a certain demography. For instance, only 52.7% schools have functional computers, and Internet is accessible in only 53.9% of schools across India. This contributes to the digital divide because only students from a certain socio-economic background, who have access to schools with functional computers and the Internet, will be adept in the use of technology and computers, a critical skill in today's times. Access to quality higher education and even basic entry-level jobs are difficult for students left behind. They are then pushed into employment that requires lower skills. This digital divide will continue to perpetuate the cycle of inequality at the household level. Other forms of digital technology also contribute towards fuelling educational inequality. For instance, combined access to broadband within households, encompassing both urban and rural areas, stands at 41.8%. This deepens educational inequality because when education becomes virtual, which is a routine occurrence in New Delhi when schools are closed during November and December because of severe air pollution, only those students in households with access to a broadband system and digital technology can continue with their education. Inequality across realms Inequality in one realm often permeates into other realms. For instance, digital inequality severely affects the lower income demography. However, overall, digital inequality affects women more than men. For example, only 25% of women in rural India have access to the Internet, compared to 49% of men in rural India. The Internet is a fundamental medium in accessing opportunities and technology such as Internet banking. It guarantees financial freedom and job postings. Lack of access to the Internet disables women from accessing these opportunities that are readily available to male adults, further exacerbating digital and gender inequality. While we have reasons to pat ourselves on our backs for achieving some amount of equality in the last few years, the methodology to adjudge the ranking by Gini Index, seen along with actual and lived realities, makes one wonder as to how we achieved this ranking. It is only when a large part of the population has access to equal opportunities can we truly be among the world's most equal societies. Until then, as a society and a country, we have a lot of groundwork to cover in bridging all forms of divide. Prachi Dutta, Lawyer qualified to practice law in New York and India. She advises start ups, funds and companies on corporate, investment and regulatory related matters. She is based in New Delhi
Time of India
17-07-2025
- 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.
Indian Express
10-07-2025
- Business
- Indian Express
Daily subject-wise quiz : Economy MCQs on coking coal, Gini coefficient and more (Week 118)
UPSC Essentials brings to you its initiative of subject-wise quizzes. These quizzes are designed to help you revise some of the most important topics from the static part of the syllabus. Attempt today's subject quiz on Economy to check your progress. 🚨 Click Here to read the UPSC Essentials magazine for June 2025. Share your views and suggestions in the comment box or at With reference to the Gini Index or Gini coefficient, consider the following statements: 1. It is a way to understand how equally income, wealth or consumption is distributed across households or individuals in a country. 2. According to the World Bank, India's Gini Index stands at 25.5, making it the fourth most equal country in the world. 3. India's consumption-based Gini index declined from 2011-12 to 2022-23. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Explanation — 'India is not only the world's fourth largest economy, it is also one of the most equal societies today' . According to the World Bank's Poverty and Equity Brief, India has a Gini Index of 25.5, ranking it as the world's fourth most equal country after the Slovak Republic, Slovenia, and Belarus. This indicates that the benefits of economic progress are being distributed more evenly across the population. — According to the World Bank, India's Gini Index is 25.5, ranking it fourth most equal in the world. Hence, statement 2 is correct. — The Gini Index is a simple yet effective approach to understand how income, wealth, and consumption are divided evenly across households or individuals in a society. Hence, statement 1 is correct. — The Gini Index, often known as the Gini coefficient, was named after the early twentieth-century Italian statistician Corrado Gini and has long been the most widely used measure of inequality. It assesses inequality on a scale of 0 to 1 (or 0% to 100%), with higher scores indicating greater disparity. — 'India's consumption-based Gini index improved from 28.8 in 2011-12 to 25.5 in 2022-23, but inequality may be underestimated due to data limitations…' According to the World Inequality Database, income inequality has increased from 52 Gini in 2004 to 62 in 2023. The wage gap remains substantial, with the top 10% 's median earnings 13 times higher than the bottom 10% in 2023-24.' Hence, statement 3 is not correct. Therefore, option (b) is the correct answer. (Other Source: Consider the following statements: 1. The Corporate Average Fuel Efficiency (CAFE) covers a broader range of emissions, including particulate matter and NOx. 2. The BS VI focuses on fuel efficiency and CO2 emissions. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Explanation — The Worldwide Harmonised Light Vehicles Test Procedure (WLTP), which the European Union adopted in 2018, ensures that emissions of carbon dioxide, nitrogen oxides (NOx), and particulate matter from vehicles on the road more closely reflect results recorded in laboratory conditions. — The carmaker also advised that the government wait until the next Corporate Average Fuel Efficiency (CAFE) phase 3 regulations, which are presently being discussed, to clarify their position on adopting WLTP. — While both CAFE and BS VI regulations currently use the Modified Indian Driving Cycle (MIDC) for testing, they serve different purposes: CAFE focusses on fuel efficiency and CO2 emissions, whereas BS VI covers a broader range of emissions, including particulate matter and NOx, which are important pollutants. Although CAFE 3 standards have not yet been announced, the Bureau of Energy Efficiency (BEE), the organisation in charge of developing them, recommended in June 2024 a transition from MIDC to WLTP beginning March 31, 2027. Hence, statements 1 and 2 are not correct. Therefore, option (d) is the correct answer. Consider the following statements: 1. Cambodia is among the earliest and most active supporters of China's global infrastructure plan, the Belt and Road Initiative (BRI). 2. China is the largest financier of Cambodia's infrastructure — including roads, bridges, dams, railways, and special economic zones (SEZs). Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Explanation — Six of the 14 countries announced were ASEAN members, with Laos and Myanmar facing the highest levies of 40%. Thailand and Cambodia, which have received significant Chinese investment and expanded economic cooperation with China over the last decade, were slapped with 36% US tariffs. Meanwhile, Indonesia, which imports about one-third of its exports from China, was subject to a 32% reciprocal duty. — China is the main financier of Cambodian infrastructure, which includes roads, bridges, dams, trains, and special economic zones (SEZs). Cambodia was also one of the first and most ardent sponsors of China's Belt and Road Initiative (BRI), a global infrastructure project. Hence, statements 1 and 2 are correct. — Notably, following the first trade war, China boosted its engagement with ASEAN countries through investment and industrial integration, which helped to enhance regional manufacturing. In May, China and ASEAN concluded negotiations to expand their free trade area, extending cooperation into the digital and green sectors, as well as other growing industries. Therefore, option (c) is the correct answer. Consider the following statements about coking coal: 1. The import of coking coal has consistently increased from 2020-21 to 2023-24. 2. India included coking coal in the list of critical minerals in 2022. 3. It is mainly imported by the refining industry. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Explanation — The government must include coking coal in the list of critical minerals and provide special dispensation to enhance the domestic production of the key raw material for steel production, according to a Niti Aayog report. Hence, statement 2 is not correct. — The report 'Enhancing Domestic Coking Coal Availability to Reduce the import of Coking Coal', said considering India's commitments to Net Zero by 2070, the country's interests would be better served by fully utilising the proved reserves of medium coking coal (16.5 billion tonne) in India for metallurgical purposes. — The European Union has declared the ingredient as a critical raw material along with 29 other raw materials which include 'green energy' minerals like lithium, cobalt, and rare earths. (*Import (in million tonnes) up to April-Sept, 2024 (Source:-CCO)) — Coking coal is imported by the steel industry primarily to bridge the gap between demand and indigenous availability and to improve quality. Other sectors, such as the power sector, cement, and coal traders, import non-coking coal. Hence, statement 3 is not correct. — The import of coking coal has not increased consistently from 2020-21 to 2023-24. Hence, statement 1 is not correct. Therefore, option (d) is the correct answer. (Other Source: With reference to the deposit insurance, consider the following statements: 1. The insurance cover of Rs 2 lakh per depositor is for all accounts held by the depositor in all branches of the insured bank. 2. The DICGC insures only commercial banks including branches of foreign banks functioning in India and does not insure regional rural banks. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Explanation — The government is mulling raising the insurance protection for bank accounts above the present maximum of Rs 5 lakh, according to Financial Services Secretary M Nagaraju. — Deposit insurance is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a specialised branch of the Reserve Bank of India. About DICGC — The DICGC aims to safeguard 'small depositors' from the risk of losing their savings in the event of a bank failure. — The insurance cover of Rs 5 lakh per depositor applies to all accounts held by the depositor at all branches of the insured bank. Hence, statement 1 is not correct. — The DICGC insures all commercial banks, including foreign bank branches in India, local area banks, regional rural banks, and cooperative banks. However, the DICGC does not cover primary cooperative societies. Hence, statement 2 is not correct. — Savings, fixed, current, and recurring deposits are all protected. The DICGC does not insure deposits made by foreign, central, or state governments, as well as interbank deposits. Therefore, option (d) is the correct answer. Daily Subject-wise quiz — History, Culture, and Social Issues (Week 116) Daily subject-wise quiz — Polity and Governance (Week 118) Daily subject-wise quiz — Science and Technology (Week 118) Daily subject-wise quiz — Economy (Week 117) Daily subject-wise quiz — Environment and Geography (Week 117) Daily subject-wise quiz – International Relations (Week 117) Subscribe to our UPSC newsletter and stay updated with the news cues from the past week. Stay updated with the latest UPSC articles by joining our Telegram channel – IndianExpress UPSC Hub, and follow us on Instagram and X.
India Today
10-07-2025
- Business
- India Today
What India's Gini score says about economic welfarism and its success
India's poverty rates have declined. According to NITI Aayog, poverty rates fell from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23. This means, about 25 crore people escaped multidimensional poverty during this period. In a recent report, the World Bank too spoke at length about how the Narendra Modi government reduced extreme poverty from 16.2 per cent to just 2.3 per cent, with about 17 crore Indians moving out of extreme poverty in the last 11 World Bank further added how a Gini Index score of 25.5 makes India the fourth-most equal country in the world, after the Slovak Republic, Slovenia, and Belarus. The Gini Index ranges in value from 0 to 100. A score of 0 means perfect equality. A score of 100 means perfect inequality. The higher the Gini Index, the more unequal the Gini score is much lower than China's 35.7 and far lower than the United States, which stands at 41.8. India, in fact, is more equal than every G7 and G20 country. Countries like the Slovak Republic, with a score of 24.1, Slovenia at 24.3, and Belarus at 24.4, are the only three countries that are more equal than India. Apart from these three, India has a better score than all the other 167 countries for which the World Bank has released data. This is a remarkable achievement for Modi's poverty alleviation to the World Bank, India's progress towards greater income equality is backed by a series of government initiatives that support underrepresented groups. For example, because of the Jan Dhan Yojana, over 55.69 crore people hold Jan Dhan accounts, giving them direct access to formal banking Aadhaar has enabled the creation of a unique digital identity for residents across the country, with more than 142 crore Aadhaar cards having been issued. Direct benefit transfer has reduced leakages and delays, leading to cumulative savings in excess of Rs 3.48 lakh World Bank also acknowledged access to quality healthcare under the Ayushman Bharat Yojana, which provides health coverage of up to Rs 5 lakh per family per year. As of July 3 this year, over 41.34 crore Ayushman Cards had been issued. The scheme is supported by more than 32,000 empanelled hospitals across the Modi government also launched the Ayushman Vay Vandana scheme to extend this coverage to all citizens aged 70 and above, regardless of income. The Ayushman Bharat Digital Mission has further strengthened this effort, with over 79 crore health accounts created, to link individuals to digital health low Gini score, making it the fourth-most equal country globally, also has much to do with inclusive entrepreneurship, via the Stand-Up India scheme that provides loans between Rs 10 lakh and Rs 1 crore to Scheduled Caste, Scheduled Tribe, women entrepreneurs to set up greenfield of July 3, more than 2.75 lakh applications have been sanctioned, with a total funding of Rs 62,807.46 crore. This initiative empowers individuals from disadvantaged communities to participate in economic growth on their own discussion on equality can be complete without mentioning the Pradhan Mantri Garib Kalyan Anna Yojana, a pillar of food security. Launched during the Covid-19 pandemic, the scheme has continued to serve the most vulnerable sections of society. As of December 2024, it has reached 80.67 crore beneficiaries every month, offering free food grains and ensuring that no one is left reducing disparities is not merely about providing food, clothing or shelter, but also about providing gainful employment. To that effect, Modi's landmark scheme, the Vishwakarma Yojana, supports artisans and craftsmen with collateral-free loans, toolkits, and marketing support. Over 29.95 lakh individuals have registered under the scheme, helping preserve livelihoods and promoting inclusivity across rural and semi-urban path to income equality has been steady. A Gini Index of 25.5 is not just a number. It reflects real change in people's lives. More families now have access to food, banking, healthcare and jobs. What sets India apart is its ability to balance economic reforms with strong social poverty in rural areas has decreased from 18.4 to 2.8 per cent in the last eleven years. Urban poverty has also seen a substantial fall, from 10.7 to 1.1 per cent in the same period. The gap between rural and urban poverty has shrunk from 7.7 percentage points to 1.7, demonstrating how Modinomics combines growth and financial access, with fairness and social low Gini score shows it is a far more equal and inclusive economy compared to the UK, France, and Italy. Clearly, the Modi government's socially democratic policies, economic welfarism, grassroots' delivery, and sound intent have all come together to catapult India into becoming the world's fourth most equal nation, a commendable feat by any yardstick.(Sanju Verma is an economist, national spokesperson for the BJP, and bestselling author of The Modi Gambit)- Ends(Views expressed in this opinion piece are those of the author) advertisement
Indian Express
10-07-2025
- Business
- Indian Express
Measuring inequality
A government release over the weekend claimed that 'India is not only the world's fourth largest economy, it is also one of the most equal societies today'. Using data from the World Bank's latest Poverty and Equity Brief, it said India's Gini Index was at 25.5, which made it the world's 'fourth most equal country…after the Slovak Republic, Slovenia and Belarus', reflecting how fruits of economic progress were being shared 'more evenly across its population'. The Gini Index or Gini coefficient, named after the early 20th century Italian statistician Corrado Gini, has historically been the most commonly used measure of inequality. It measures inequality on a scale from 0 to 1 (or 0% to 100%), with higher values indicating higher inequality. The government's claim has been contested both by academics who study inequality, as well as observers who see India as a country with high and rising inequality. An incomplete picture The paragraph in the World Bank's Poverty and Equity Brief referenced by the government includes important qualifiers that the release did not mention: 'India's consumption-based Gini index improved from 28.8 in 2011-12 to 25.5 in 2022-23, though inequality may be underestimated due to data limitations… The World Inequality Database shows income inequality rising from a Gini of 52 in 2004 to 62 in 2023. Wage disparity remains high, with the median earnings of the top 10 percent being 13 times higher than the bottom 10 percent in 2023-24.' The government release does not mention the 'data limitations' that the World Bank itself has flagged, and does not take into account the Gini Index value calculated by the World Inequality Database, which shows a rise in the Gini Index from 2004 to 2023. Consumption-based Gini To map income inequality, countries often conduct surveys on income data. India, however, collects data on consumption, not income. When it comes to inequality, this makes a big difference because variation in income is far more than variation in consumption. As people earn more, the bulk of their additional income is turned into savings. As such, a Gini Index of inequality using consumption data underestimates the level of inequality in a society. Also, economists such as Anmol Somanchi, who works at the World Inequality Lab (run by the Paris School of Economics and University of Berkeley, California), have pointed out that it is misleading to compare India's consumption-based Gini Index value with that of other countries, which use an income-based Gini. In short, the use of consumption-based Gini underestimates inequality and undermines comparability with other countries. Limitations of survey data It is widely acknowledged that the gap between the bottom 10% and top 10% of the population is widening, even if it is assumed that everyone in the country is becoming better off. However, the calculation of inequality is unlikely to capture the widening gap. This is because surveys, whether they are about consumption or income, typically falter in capturing the data of the richest. This is for two broad reasons. One, the rich exhibit what is technically called a 'differential non-response', Somanchi said. In other words, the rich tend to decline to participate in surveys much more than the poor do. Two, the way the sampling of these surveys works, the chances of the richest persons in the country being drawn in a random sample are pretty low. This becomes a big reason for underestimation of inequality if just a handful of the extremely rich are driving up inequality. Thus, if 90% of the population is not 'unequal' while most of the inequality is being driven by the top 1%, any survey that fails to sample the top 1% will fail to capture the real picture on inequality. Researchers have flagged this underestimation in several other countries such as the US, the UK, and many other European countries as well. A way to correct for this lapse in sampling is to use the survey data in conjunction with income tax data, which is uniquely accurate in capturing the incomes of the top earners in a country. Studies that did this in the UK, the US, and elsewhere found that relying solely on survey data underestimated inequality. The World Inequality Lab Gini Index, which shows that inequality in India has increased, uses income tax data to correct for this gap. Problems with Gini Index The Gini Index too does not capture all aspects of the inequality picture. This is because it is not 'sensitive' to changes at the extremes of a population, but is overly sensitive to changes in the middle. This has to do with the way the Gini Index is calculated — and experts have been urging for close to 50 years now that other measures should be considered. One option is the Palma Ratio, named after a Chilean economist who suggested looking at the shares of income (or wealth) at the extremes — the bottom 50% and the top 10%, for instance. When such comparisons are calculated with the use of income tax data (apart from survey data), the emerging picture is grim: it shows income inequality is now worse than in the colonial period, and the top 1% earn far more than the bottom 50%. Bigger picture on inequality The point of studying inequality is to allow governments to tailor appropriate policies to alleviate excessive inequality. However, an inaccurate reading of inequality can lead to policies that actually exacerbate existing inequalities. If high inequality is not contained, it can create social unrest and eventually militate against sustained economic growth. Relying solely on the Gini Index, that too with severe data limitations, can obscure the reality. As explained above, a given version of the Gini Index could be falling even when inequality between the two extremes of the population may be rising. Udit Misra is Deputy Associate Editor. Follow him on Twitter @ieuditmisra ... Read More
