Poverty declines, but rich gets richer

In rural areas, rising gap between rich & poor has surprised many economists, as the government has increased welfare programmes as well in villages

Despite proportion of the poor declining between 2004-05 and 2011-12, a gap between the rich and the poor increased for the first time in rural areas in almost 35 years and to an all-time high in urban areas.

Inequality – computed from the National Sample Survey on Household Consumption Expenditure for 2011-12--was based on gini coefficient.  

In rural areas, the coefficient rose to 0.28 in 2011-12 from 0.26 in 2004-05 and to an all-time high of 0.37 from 0.35 in urban areas, the figures showed. Gini coefficient ranges from 0 to one, with zero representing perfect equality and 1 showing perfect inequality. Hence, more the coefficient is, more will be the inequality.  

Generally, disparity in urban areas is understandable, given creation of wealth in some sectors. However, in rural areas rising gap between the rich and the poor has surprised many economists, as the government has increased welfare programmes as well in villages.

"Urban inequality is usually on the rise, but this trend in rural areas is surprising”, said Amitabh Kundu of Centre for the Study of Regional Development, Jawaharlal Nehru University

Increase in inequality in villages could be because of generation of jobs outside farm sector, economists said.

“This shows that there are jobs which are being created outside agriculture sector too in the rural areas," Kundu explained.

In fact, inequality within rural areas rose for the first time since 1977-78 when there was a rise in gini coefficient from 0.27 in 1973-74 to 0.34 in 1977-78. Last time, the  coefficient touched 0.28 in rural parts was in 1993-94. "The consumption pattern of agricultural worker is stagnant it seems and this growth in consumption expenditure witnessed is inequally distributed and that benefit reached only to the better offs", said Kundu.

Experts added that the inequality has been on the rise since the 1990s due to the advent of globalisation which is creating job unequally as income is distributed in the hands of only a few in urban areas.

"Curbing inequality is essential as we have observed that there is a sharper decline witnessed in poverty rate in rural areas as compared to the urban ones mainly because inequality over there is low as compared to urban counterparts where it is usually high", an official said.

According to latest data released by the Planning Commission, proportion of the people below the povety line in villages declined by 16.30 percentage points from 42% in 2004-05 to 25.70% in 2011-12 and by 11.80 percentage points from 25.5% to 13.70% in urban areas.

However, inequality in India is not as alarming as other emerging economies. Among the BRICS ( Brazil, Russia, India, China and South Africa) nations, the gini coefficient for inequality in South Africa was the highest at 0.67 in 2008. This was  the widest gap between the rich and the poor not only among these countries but also one of the widest globally. This is followed by Brazil (0.51 in 2012), China (0.47 in 2012) and Russia (0.41 in 2011), according to the latest data.

In India, inequality in not measured on the basis of income, but consumption expenditure. The national level figure of gini coefficient is being worked out for 2011-12, an official said.