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India’s Inequality Debate: 10 Critical Analytical Insights

Inequality and the Gini Debate

  • In July 2025, the Government of India cited a World Bank brief ranking India as the 4th most equal country globally, based on the consumption-based Gini index (Gini: 0.29).
  • However, this ranking masks the ground reality, as income and wealth inequalities in India are among the highest globally, as per the World Inequality Database.
  • As of 2023:
    • Top 1% earned 22.6% of national income and held 40.1% of total wealth.
    • Bottom 50% earned 14.6% of income and held only 6.4% of wealth.
  • The Gini index based on consumption does not capture asset inequality, capital income, or structural disadvantages — leading to misleading claims of equality.
  • This raises critical questions about the validity of India’s equality claims, the limitations of survey-based data, and the need for multidimensional inequality metrics.

Relevance : GS 3(Indian Economy ,Inequality , Gini Co-efficient)

Claim vs Reality: Gini Index Interpretation

  • World Bank’s Brief (2024) ranked India as the 4th most equal country based on consumption-based Gini index.
    • India’s Gini index (consumption) was estimated at 0.29, implying low inequality.
    • Issue: This metric ignores income and wealth inequality, which are significantly higher.

Income Inequality is Rising Sharply

  • As of 2023:
    • Top 1% income share: 22.6%
    • Top 10% income share: 57.7%
    • Bottom 50% share: just 14.6%
    • Reflects a threefold gap between top 1% and bottom 50% in income control.
    • Source: World Inequality Database

Wealth Inequality is Even More Stark

  • In 2023:
    • Top 1% own 40.1% of total personal wealth.
    • Top 10%: 65%
    • Bottom 50%: only 6.4%
    • Indicates extreme concentration of wealth.
    • Historical trend: Wealth inequality has been consistently rising since the 1990s.

Limitations of Consumption-Based Gini

  • It underestimates inequality because:
    • Consumption is smoother across households (poor borrow; rich save).
    • Surveys underreport elite consumption.
    • Rural-urban price differences and housing costs are not well-adjusted.
    • Gini fails to capture wealth hoarding, capital gains, inheritance effects.

Survey Quality Issues Distort Findings

  • NSSO and NSO surveys suffer from:
    • Non-response bias
    • Under-sampling of top-income households
    • Outdated consumption baskets
    • This results in misleading aggregate equality metrics.

India’s Claim Omits Income/Wealth Data

  • World Bank brief did not include income or wealth Gini (India does not officially publish them).
    • Other global rankings using income or wealth inequality place India far lower in equality metrics.

Taxation System Does Not Correct Inequality

  • Pre- and post-tax income share of top 10% shows little difference.
    • Indicates that India’s taxation is not redistributive enough.
    • Direct taxes and wealth taxes are limited; subsidies don’t offset wealth concentration.

Bigger Picture Missed: Structural Inequality

  • Gini does not account for:Caste-based or gender inequalityEducational or health access gapsIntergenerational mobility blockages
    • These structural issues exacerbate long-term inequality, especially among marginalised communities.

Global Comparisons are Misleading

  • Nordic countries (e.g., Denmark) rank equal on both consumption and income metrics.
    • India’s claim of equality collapses when judged on income, asset ownership, or human capital indicators.
    • Suggests cherry-picking one metric to portray a broad narrative.

Policy Implications

  • Need for triangulation: Combine consumption, income, and wealth data to assess inequality holistically.
  • Revise tax structures to be more progressive.
  • Improve data transparency: India must release periodic income and wealth Gini estimates.
  • Strengthen social safety netsasset redistribution schemes, and education/health access to reduce long-term disparities.

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