Inequality in India H I M A N SH U IN most discussions on global - PDF document

Inequality in India H I M A N SH U IN most discussions on global inequal- comparable measures of consump- ity, India is often referred to as a low tion inequality across countries, India inequality country. 1 This is largely a remains a high inequality country. result of the fact that while inequality For the record, the gini of con- in India is measured on consumption sumption expenditure as measured by expenditure, the comparator for other the National Sample Survey (NSS) countries is income inequality. In gene- consumption expenditures surveys ral, consumption inequality measures report a rise in consumption inequa- are lower than similar measures of lity from 0.32 in 1993-94 to 0.38 in inequality based on income. 2 Further, 2011-12 for urban areas. Correspond- there is also some evidence, although ing estimates of gini of consumption weak, that consumption as measured expenditure in rural areas were 0.26 in 1993-94 to 0.29 in 2011-12. 3 On by the National Sample Survey Office (NSSO) in India tends to underesti- income inequality, the limited informa- mate the consumption of the rich. 2. Li, Squire and Zhou find that consumption Nonetheless, the fact remains that on inequalities are systematically lower com- pared to income inequality. Although they suggest that the gap between income and con- 1. According to the World Poverty and sumption inequality is around 6.6 gini points, Inequality Database of the World Bank, the evidence from India on this count suggests that consumption gini for India was 33.4 for this gap may be anywhere close to 15 points. 2004-05 whereas comparative gini coeffi- See, Hongyi Li, Lyn Squire and Heng-fu Zhou, cients for selected countries was Brazil (56.9), 30 ‘Explaining International and Inter-temporal China (42.5), Mexico (46.05), Malaysia Variation in Income Inequality’, The Eco- (37.9), Russia (40.8), South Africa (67.4 in nomic Journal 108(446), January 1998, 2006), United Kingdom (37.6), United States pp. 26-43. (40.6) and Vietnam (36.8). S E M I N A R 6 7 2 – A u g u s t 2 0 1 5

tion that is available suggests that ity for villages, they are detailed as far veys. It is obvious from the table that inequality in India may be very high. as sources of inequality is concerned. inequality as measured by the gini of The latest data on income inequality, For example, income inequality in consumption expenditure declined which is available from the India Gokilapuram rose from 0.77 in 1977 between 1983 and 1993-94 but has Human Development Survey (IHDS) to 0.81 in 1985 but land inequality seen a rising trend since then. The trend reports, shows income inequality in rose from 0.89 to 0.91 during the same of increasing inequality is also obvious period. 5 On the other hand, estimates India in 2005-06 at 0.532 puts India from other measures of inequality. among the high inequality countries. 4 of inequality in more recent village For example, the ratio of average con- studies by the Foundation of Agrarian sumption expenditure of the urban top W hile nationally representative Studies in several villages between 10% to the rural bottom 10% was sta- 2005-2008 show a much lower inequal- ble between 1983 and 1993-94 but has ity ranging between 0.5 to 0.7. 6 Despite income estimates may not be available increased since then. The same trend from reliable secondary sources, there the large variation in income inequal- is evident from the consumption share is a wealth of information available ity reported by most of the village of various groups, with an increase in from primary surveys, all of which have surveys, there does appear to be some the share of the top 10% and top 20% used some measure of income to esti- consensus that inequality may have risen along with a corresponding fall in the rather than come down over time. 7 mate inequality. While these do suffer share of bottom 20% and bottom 40%. from the limitation of reporting inequal- T he primary source of tracking A part from income/consumption 3. The gini is a simple measure of inequality with a higher values representing higher inequality. The gini lies between 0 and 1 with 1 inequality in India, despite its non- inequalities, although difficult to char- as extreme inequality and 0 as perfect equality. comparability with other countries, is acterize and quantify, inequalities 4. The India Human Development Survey is the consumption expenditure surveys exist in various dimensions and con- a privately collected household survey by of the National Sample Survey Office texts. A simple characterization would National Council for Applied Economic (NSSO). These are available for a long be inequalities that exist in ownership Research and University of Maryland. The next round of IHDS survey reports for 2011- period of time starting from the 1950s of assets, most important of these 12 are yet to be released, but informal com- and provide estimate of consumption being land in a primarily rural economy munication with IHDS team suggest that the expenditures disaggregated by various such as India; inequalities of opportu- income inequality may have increased margin- ally from the estimate provided above. See, categories. Table 1 provides broad nities such as access to education and Sonalde Desai, Amaresh Dubey, Brijlal Joshi, estimates of some measures of inequa- nutrition; and finally inequalities of Mitali Sen, Abusaleh Shariff and Reeve lity from the NSSO consumption sur- social status which cover a large range Vanneman, Human Development in India: Challenges for a Society in Transition . Oxford University Press, New Delhi, 2010. TABLE 1 5. Madhura Swaminathan, ‘Growth and Estimates of Income Inequality from NSSO Consumption Surveys Polarisation: Changes in Wealth Inequality in 1983 1993-94 2004-05 2009-10 2011-12 a Tamilnadu Village’, Economic and Political Share of various groups in total national consumption expenditure Weekly , 28 October 1988. Bottom 20% 9.00 9.20 8.50 8.20 8.10 6. Vikas Rawal and Madhura Swaminathan, ‘Income Inequality and Caste in Village India’, Bottom 40% 22.20 22.30 20.30 19.90 19.60 Review of Agrarian Studies 1(2), July-Decem- Top 20% 39.10 39.70 43.90 44.80 44.70 ber 2011. Top 10% 24.70 25.40 29.20 30.10 29.90 7. However, these village surveys, despite the wealth of information available across states Ratio of average consumption of various groups and over time remain unutilized as measures Urban top 10%/Rural bottom 10% 9.53 9.43 12.74 13.86 13.98 of inequality because the inherent difficulty Urban top 10%/Urban bottom 10% 6.96 7.14 9.14 10.11 10.06 in comparability across village surveys. The Urban top 10%/Rural bottom 40% 6.47 6.84 9.40 10.11 10.16 variation is partly due to the difference in time period covered and the local context but also Gini of consumption expenditure methodological with each survey having its Rural Gini 27.10 25.80 28.10 28.40 28.70 own methodology of estimation of incomes. Urban Gini 31.40 31.90 36.40 38.10 37.70 This is further compounded by the fact that most of the village surveys are still largely All India Gini 29.80 30.00 34.70 35.80 35.90 31 based on agricultural incomes. On the other Source : Computed by the author from NSSO unit level data. hand, very few have non-agricultural incomes Note : All estimates are based on Mixed Recall Period (MRP) estimates of consumption included to the same extent as is suggested by expenditure. the secondary sources. S E M I N A R 6 7 2 – A u g u s t 2 0 1 5