Rich-poor gap widens in India

Overall poverty down but inequality measure up in both rural and urban areas, shows consumption data for FY12

Despite the proportion of the poor declining between 2004-05 and 2011-12, their gap with the rich has risen for the first time in rural areas in about 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, is measured by the Gini coefficient, a measure of statistical dispersion. 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. The coefficient ranges from zero to one, with zero representing perfect equality and one showing perfect inequality. Hence, the more the coefficient, the more the inequality.

The rise in the gap between rich and poor in rural areas has surprised many economists, as the government has expanded welfare programmes in villages. "This trend in rural areas is surprising," said Amitabh Kundu of the Centre for the Study of Regional Development at Jawaharlal Nehru University here. "This shows there are jobs being created outside the agriculture sector, too, in the rural areas."

Inequality within rural areas has risen for the first time since 1977-78, when there was a rise in the coefficient from 0.27 in 1973-74 to 0.34 in 1977-78. The previous occasion when it touched 0.28 in rural parts was 1993-94. "The consumption pattern of agricultural workers is stagnant, it seems, and this growth in consumption expenditure witnessed is unequally distributed and that benefit reached only the better-offs," said Kundu.

Experts say inequality has been on the rise since the 1990s, with job creation and income distribution being unequal.

"Curbing inequality is essential, as we have observed that there is a sharper decline witnessed in the 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 Planning Commission data, the proportion of people below the poverty line in villages declined from 42 per cent in 2004-05 to 25.7 per cent in 2011-12 and from 25.5 per cent to 13.7 per cent in urban areas.

However, inequality in India is not as much as in other emerging economies. Among the BRICS (Brazil, Russia, India, China and South Africa) nations, the Gini coefficient in South Africa was the highest at 0.67 in 2008. 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 on consumption expenditure. The national figure for the Gini coefficient is being worked out for 2011-12, an official said.