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Issue of Income Inequality in India

Updated October 4, 2021
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Issue of Income Inequality in India essay

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Today, India has one of the largest economies of any developing country. In 2018, its GDP was a whopping $2.719 trillion, growing at a rate of 6.8% per year. (GDP (current US$)—India | Data, n.d.) However, the country also has a third of the world’s malnourished children and ranks 129th out of 189 countries on the Human Development Index. (Varadharajan, et al., 2013) While there are many reasons for India’s apparent contradiction between health and wealth, income and gender inequality are at the heart of the problem.

Although India has a high GDP, a closer look reveals the benefits aren’t equally shared. Understanding why inequality exists requires understanding how GDP is calculated. GDP, or gross domestic product, is calculated by dividing the total value of goods and services produced in a country by the total population. Because it is an average, GDP can be skewed by outliers. This means that if a majority of the population is poor while a select few are wealthy, the GDP can still be high. The Gini coefficient attempts to measure income inequality in a country.

It is a statistical measure of wealth distribution in a country and ranges from 0 to 100, 0 being perfectly equal and 100 perfectly unequal. According to World Bank data, India’s Gini coefficient has been rising over time, from 31.70 in 1993 to 35.70 in 2011. (GDP (current US$)—India | Data, n.d.) More recent data compiled from individual states suggests India’s Gini coefficient today is much higher, estimated at 50 in 2019. (Darvas, 2019) This suggests that the gap between the rich and the poor is widening over time.

While popular, the Gini coefficient has its flaws. It does not explain how inequalities affect different income levels within low and high socioeconomic statuses, which means a policy change could leave the poor better and the middle class worse, with no change in the Gini coefficient. Another issue with the measure is its inability to account for higher incomes as people get older. The Gini coefficient would claim inequality rose when older people earned more when in fact that is the expected outcome in any society. For these reasons, economists prefer to use the Concentration Index, or CI, to describe income inequality. CI is a more complex measure that accounts for changes in population, health, and living standards, and is the measure used by present literature.

According to a survey by Oxfam International, the top 1% owned 77% of India’s wealth in 2017. (Oxfam International, 2017) The rising Gini coefficient suggests the wealth distribution will only become more unequal without any action. Healthcare costs continue to rise, making it harder for the poor to escape poverty or acquire appropriate treatment. As a result, malnutrition in the form of stunting, wasting, and underweight remains high despite a decreasing trend. The National Family Health Survey (NFHS) found that between 1993 and 2006, stunting decreased from 47% to 38%, underweight decreased from 52% to 46%, and wasting remained the same at 19%. Not all states experienced these statistics in the same way. For example, Kerala had the lowest prevalence of stunting (25%) and little difference between the concentration indices of stunting in urban and rural areas.

In contrast, states like Uttar Pradesh (57%), Bihar (56%), and Gujarat (52%) had more than half of children under 5 years stunted, and significantly high differences in concentration of stunting between urban and rural areas. This suggests that income inequality and malnutrition are closely correlated, and solving one problem will fix the other.

Issue of Income Inequality in India essay

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Issue of Income Inequality in India. (2021, Oct 04). Retrieved from https://samploon.com/issue-of-income-inequality-in-india/

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