Income Inequality in India - Daily Current Affairs for UPSC

A recent research of SBI highlights suggests a significant decline in income inequality in India over the last decade.

• Gini Coefficient Decline:

The Gini coefficient, a measure of inequality, has fallen from 0.472 in 2014-15 to 0.402 in 2022-23, indicating a nearly 15% reduction.

• Taxpayer Data Analysis:

The analysis is based on taxpayer data, raising concerns about the exclusion of a significant portion of income-earners who fall below the taxable threshold.
Approximately 80% of income-earners, earning less than ₹2.5 lakh per annum, are not considered in the taxpayer data.

It derived from the Lorenz Curve, serves as an indicator of economic development in a country.
It quantifies the level of income equality within a population.
The Gini Coefficient’s scale ranges from 0 (perfect equality) to 1 (perfect inequality).

• Income Polarization:

Despite the overall decline in the Gini coefficient, there is evidence of income polarization, particularly among self-employed workers.
Incomes of the top 10% have grown faster than the bottom 30%, with the self-employed category showing notable polarization.

• Aggregate Inequality Analysis:

The Gini coefficient has fallen from 0.4297 in 2017-18 to 0.4197 in 2022-23, but there is a slight rise in inequality for the self-employed.

• Changes in Polarization:

The study introduces the concept of polarization in incomes, showing a divergence in fortunes between the top and bottom income scales.
The 90/10 ratio, indicating the income gap between the top 10% and bottom 10%, has increased from 6.7 in 2017-18 to 6.9 in 2022-23.

• Polarization Amongst Different Forms of Work:

The 90/10 ratio has fallen for wage earners, especially for regular wage workers, while significantly increasing for the self-employed.
The income gap between the top and bottom 10% of self-employed individuals has notably widened.

Land ownership and agricultural income: Unequal land distribution and challenges in agriculture, including low productivity and market fluctuations, contribute to income disparities, especially for small and marginal farmers.
Access to education and healthcare: Limited access to quality education and healthcare, concentrated in urban areas and among wealthier populations, restricts social mobility and reinforces income inequality.
Social inequalities: Caste, gender, and religious discrimination impact education, employment opportunities, and resource access, affecting earning potential and widening income gaps.
Taxation structure: The reliance on indirect taxes like GST, coupled with tax evasion by wealthier individuals, distorts income distribution and contributes to financial inequality.
Unemployment and underemployment: High unemployment rates, inflation, and underemployment create economic disparities, widening the gap between employed and unemployed individuals.
Informal labor market: The significant informal sector, characterized by limited job security and benefits, contributes to income disparities among workers.
Black money and corruption: The presence of black money and corruption in the economy undermines the taxation system, leading to unequal income distribution.

• Constitutional Provisions:

Article 38: Guarantees the right to an adequate means of livelihood and advocates for the equal distribution of resources.
Article 39(b): Mandates the state to ensure that the ownership and control of material resources are not concentrated in the hands of a few.
Article 46: Promotes the development of weaker sections of society, scheduled tribes, and scheduled castes.

• Legal efforts:

Minimum Wages Act, 1948: Sets minimum wage standards for various industries and occupations to ensure basic living standards.
Right to Education Act, 2009: Guarantees free and compulsory education to children aged 6-14, improving access to education for all.
MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), 2005: Provides guaranteed 100 days of employment in a financial year for rural households, enhancing income security and rural development.

• Major Schemes:

National Education Policy 2020: Focuses on equitable access to quality education, potentially reducing skill gaps and income inequality.
Pradhan Mantri Awas Yojana (PMAY): Provides housing assistance to low-income families in urban and rural areas, improving living conditions and reducing poverty.
Swachh Bharat Mission: Aims to improve sanitation and hygiene in rural areas, contributing to better health and well-being, especially for vulnerable communities.
Pradhan Mantri Kisan Sampanna Yojana (PM-KISAN): Provides income support to small and marginal farmers, enhancing agricultural income and rural livelihoods.
Skill India Mission: Focuses on skilling and upskilling the workforce, equipping individuals with skills relevant to the job market and improving employability.
Pradhan Mantri Jan Dhan Yojana (PMJDY), 2014: Promotes financial inclusion by providing bank accounts and access to financial services for unbanked individuals.

The success of these measures hinges on their efficient execution, precise targeting of beneficiaries, and a sustained process of evaluation.
Additionally, addressing systemic challenges such as social discrimination and disparate access to resources remains pivotal for advancing substantial progress toward greater income equality in India.
Achieving this goal requires collaborative endeavors involving the government, civil society, and the private sector to foster a more inclusive and equitable society for all.