GS Paper III

News excerpt:

A recent report from the SBI, suggested that income inequality in India has decreased over the last decade, but a closer look reveals some complexities.

SBI Report on inequality:

• A recent report from the SBI, examining taxpayer data, claims that the Gini coefficient — a standard measure of inequality that ranges from 0, indicating perfect equality, to 1, indicating perfect inequality — has fallen from 0.472 in 2014-15 to 0.402 in 2022-23.
• The fall in the Gini coefficient is more or less empirically established by the SBI report, but this has been accompanied by polarisation in incomes.

Periodic Labour Force Survey (PLFS) data from 2017-18 and 2022-23 shows several trends in income inequality:

• Income distribution below taxable threshold: According to data from the 2022-23 PLFS, nearly 80% of income-earners earn less than ₹2.5 lakh per annum — the minimum taxable amount.
• Gini Coefficient and polarisation: There has been a polarisation in incomes. Incomes of the top 10% have grown faster than the bottom 30%, with polarisation largely seen amongst self-employed workers.
• Rise in women’s low-paid, part-time self-employed work is proposed as a factor contributing to income polarisation. This increase in low-paid self-employed work has led to an increase in the gap between the top and bottom of self-employed incomes.
• Gini Coefficient changes by employment type: The Gini for the self-employed workers rises from 0.37 to 0.3765, an increase of 1.5%. For regular and casual wage workers, the Gini coefficient registers falls of 1.7% and 4.8%, respectively.
• Discrepancy in inequality trends: Inequality has fallen, but inequality among the top income earners seems to have fallen far more than when we consider the population as a whole.
• Widening Income gap - 90/10 ratio: The 90/10 ratio, which measures the income gap between the top 10% and bottom 10%, has increased from 6.7 in 2017-18 to 6.9 in 2022-23. This ratio indicates a widening gap between the highest and lowest income earners.

Conclusion:

The increase in low-paid, part-time self-employed work, particularly among women has contributed to the income gap in India. Hence, even though overall inequality seems to be decreasing, there's a hidden story of growing disparities in income that needs attention.

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