THE CONTEXT: India’s post-1991 growth narrative has been accompanied by two seemingly contradictory trends: a sharp fall in extreme poverty and a simultaneous rise in income and wealth concentration. The debate was reignited when the World Bank Poverty and Equity Brief celebrated a nationwide consumption-based Gini coefficient of 0.255 for 2022-23, placing India as the world’s fourth “most equal” country on that metric. Government hailed this as proof of inclusive growth, yet academic work using tax, survey and billionaire-rich-list data paints a far starker picture.
CONCEPTUAL FOUNDATIONS:
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- Consumption inequality compares spending levels; it is always lower than income or wealth inequality because richer households save a larger share of their earnings.
- Income inequality captures the flow of earnings before or after tax.
- Wealth inequality measures the stock of accumulated assets.
- Key metrics: Gini coefficient, Palma ratio (top 10 % share ÷ bottom 40 % share), and top-1-percent share; each highlights a different slice of the distribution.
DATA SOURCES AND MEASUREMENT CHALLENGES:
| SOURCE (LATEST) | STRENGTH | LIMITATION |
|---|---|---|
| Household Consumption Expenditure Survey (HCES) 2022-23 | Granular rural–urban spending patterns | Methodological redesign makes inter-temporal comparison with 2011-12 difficult, under-samples rich households. |
| Periodic Labour Force Survey (PLFS) 2023-24 | Continuous wage & employment series | Captures only cash earnings; informal bonuses and capital income excluded. |
| Income-tax micro-files & Goods and Services Tax (GST) database | High-end coverage | Opaque public access; litigation over privacy limits research. |
| Reserve Bank of India All-India Debt & Investment Survey 2022 | Household balance-sheet view | Asset valuation self-reported; luxury real estate undervalued. |
| World Inequality Database (WID) synthetic series | Combines surveys, tax data, billionaire lists | Requires modelling assumptions about evasion and valuation. |
The under-representation of top earners in sample surveys systematically compresses inequality estimates downward, explaining why consumption-based numbers look benign while tax-based numbers do not.
CURRENT EMPIRICAL PICTURE:
Consumption inequality
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- National Gini down from 288 (2011-12) to 0.255 (2022-23); rural Gini fell to 0.237, urban to 0.284 in 2023-24.
- Decline largely driven by food-in-kind transfers (Pradhan Mantri Garib Kalyan Ann Yojana) and better rural connectivity, not by wage convergence.
Income inequality
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- Pre-tax income Gini rose from 0.47 (2000) to 0.61 (2023).
- Median earnings of the top 10 % are 13 times those of the bottom 10 % (PLFS-linked World Bank estimate).
Wealth inequality
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- Wealth-Gini stands at 75, with the top 1 % owning 40.1 % of net household wealth in 2023—the highest in Indian history.
- Dollar-denominated billionaire count jumped from 102 (2014) to 271 (2024).
DRIVERS AND STRUCTURAL CAUSES:
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- Capital-biased technological change that favours high-skill, asset-owning groups.
- Falling labour share of GDP: from 37 % (2000) to 31 % (2023).
- Regressive indirect taxation: GST’s share in tax kitty rose from 24 % to 31 % while the share of direct taxes plateaued.
- Low inter-generational mobility reinforced by unequal schooling quality and digital divides.
- Financial deepening without adequate consumer protection, leading to indebtedness traps for small borrowers.
SPATIAL, SOCIAL AND SECTORAL DIMENSIONS:
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- Rural–urban gap: Urban per-capita income is 2.8 × rural average.
- Inter-state divergence: Top quintile of districts (largely in the west and south) accounts for 52 % of national tax collections.
- Caste and gender: Scheduled Tribe female workers earn just 62 % of the wages of upper-caste males in comparable jobs (PLFS micro-tabulations).
- Sectoral tilt: Financial services and digital platforms capture 46 % of corporate profits but employ < 2 % of the workforce.
THE ISSUES:
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- Statistical opacity: Delay in releasing tax-microdata impedes evidence-based policy.
- Elite capture in policymaking: Lobbying for tax exemptions (e.g., Long-Term Capital Gains concessions).
- Fiscal space constraints: Combined Centre–state deficit already at 7.9 % of GDP (2024-25 BE).
- Fragmented social registry: Overlapping beneficiary lists raise exclusion and inclusion errors.
- Informality trap: 88 % of workers lack written contracts, limiting the efficacy of minimum-wage laws.
THE WAY FORWARD:
National Statistical Audit Commission to vet survey redesigns and publish anonymised tax micro-files within one year of assessment, restoring trust in official data.
Graduated wealth-surcharge of 2 % on net assets above ₹50 crore, ring-fenced to a Social Mobility Fund financing secondary schooling and skill vouchers.
Floor-indexed minimum wage tied to state-level median consumption (HCES) and updated biennially, enforced through GST-linked e-invoicing trails.
Universal Basic Services pilot in 20 aspirational districts—free primary healthcare, public transport credits and digital connectivity financed via GST compensation cess extension.
Mandate gender-disaggregated hiring disclosures for companies above ₹250 crore turnover; link partial corporate-tax rebates to narrowing wage gaps.
Launch “Skill-for-Equity Marketplaces” on the ONDC (Open Network for Digital Commerce) platform, connecting gig-workers to formal apprenticeships with social-security top-ups.
Property-tax reform with GIS-based valuation, allowing urban local bodies to capture land value appreciation and finance affordable rental housing.
Cooperative-federalism incentive grants rewarding states that reduce multidimensional poverty faster than the national average, measured by NITI Aayog MPI dashboards.
Citizens’ Inequality Dashboard integrating tax, survey and satellite-based wealth proxies, overseen by an independent Economic Data Ombudsman to foster informed public debate.
THE CONCLUSION:
India’s simultaneous fall in consumption inequality and rise in income–wealth concentration epitomises an inequality paradox. Bridging this divide demands not only higher growth but deliberate redistribution of opportunity, assets and voice. Transparent data systems, progressive yet investment-friendly taxation, and universal basic services can together convert headline growth into genuine, capability-enhancing prosperity.
UPSC PAST YEAR QUESTION:
Q. Capitalism has guided the world economy to unprecedented prosperity. However, it often encourages shortsightedness and contributes to wide disparities between the rich and the poor. In this light, would it be correct to believe and adopt capitalism driving inclusive growth in India? Discuss. 2014
MAINS PRACTICE QUESTION:
Q. Despite impressive poverty reduction, India continues to witness rising income and wealth concentration. Analyse the structural drivers of this trend and propose interventions that are both growth-friendly and redistributive.
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