High equality ranking for India masks deeper gaps, say economists

According to the World Bank, India's Gini Index stands at 25.5, making it the fourth most equal country in the world, after the Slovak Republic, Slovenia and Belarus

A recent World Bank report placing India among the most equal countries globally may present a limited view of inequality, with economists suggesting that broader data sets could tell a different story. 

According to the report, India’s Gini index (or coefficient/ratio), a key measure of inequality, stood at 25.5 in 2022–23, placing the country fourth globally in terms of equality, behind only the Slovak Republic, Slovenia, and Belarus. 

The Gini index ranges from 0 to 100, where zero represents perfect equality and 100 indicates extreme inequality, with one individual possessing all income or wealth, or accounting for all consumption. 

Such measurements, according to economists, are heavily dependent on methodology. Comparing the top 1 per cent with the bottom 50 per cent of the population, they argue, would reveal far more pronounced disparities in India. 

“The Gini coefficient is such that the middle group plays an important role. One needs to clarify that inequality has increased over the years. In the past 30 years, the income of the bottom 50 per cent has doubled, but the income of the top 1 per cent has grown 20 to 30 times,” said N C Saxena, a retired bureaucrat and former secretary of the Planning Commission. Saxena argued that if the top 2 per cent of earners were removed from the sample entirely, inequality would appear negligible. 

 

A key limitation of the report, economists argue, is its reliance on consumption expenditure rather than income data. “Basically, you are sampling the largely poor category, and so you get relatively lower Gini ratios. Village studies conducted in India show that the Gini ratios would be as high as 80 if we account for land ownership, incomes and other assets. These are higher inequalities than those that prevail in Latin America,” said Ram Kumar, professor at the Tata Institute of Social Sciences. 

Kumar pointed out that consumption surveys in India are known to underrepresent upper-middle class or higher-income households. “The NSO (National Statistics Office) itself has acknowledged that the non-responsiveness rate among high-income households in urban India stood at nearly 11 per cent in the latest 2022–23 consumption survey,” he said. 

Economist Pronab Sen echoed the concern, saying India does not adequately capture the incomes of the top 5–10 per cent of earners. “We measure the lower quintile very well, but there is a total lack of response in the upper segment. Therefore, our inequality will be understated,” Sen said.

 

The World Bank, in its Poverty and Equity Brief released in April, however, had noted significant strides in poverty reduction in India. It reported that extreme poverty, defined as living on less than $2.15 per day, fell from 16 per cent in 2011–12 to 2.3 per cent in 2022–23, lifting 171 million people above the threshold. But the report highlighted wage disparities, noting that the median earnings of the top 10 per cent were 13 times those of the bottom 10 per cent in 2023–24.

 

It further stated that while India’s consumption-based Gini index improved from 28.8 in 2011–12 to 25.5 in 2022–23, the actual extent of inequality may be understated due to data limitations.

 

Congress leader Jairam Ramesh, responding to the report, said that using World Bank data to suggest India is among the most equal societies in the world was “an out-of-touch claim”. 

Bridging the gap