Has Indian Inequality Come Down?

A recent World Bank (WB) report has claimed that between 2011-12 and 2022-23, India significantly reduced consumption inequality.

- RAM SINGH

India's Gini coefficient (a measure of inequality) is ranked as the fourth-lowest in the world. The WB's estimates of Indian inequality are based on the official Household Consumption Expenditure Survey (HCES) 2022-23 data, after accounting for some but not all government-provided free goods, and excluding consumer durables.

Many who are accustomed to media reports claiming high inequality in the country have responded to the WB's claims with skepticism or outright dismissal. The critics argue that, as HCES data does not capture consumption by the elite, the WB has underestimated consumption inequality. Furthermore, they cite World Inequality Lab (WIL) studies to argue that India has a very high level of income inequality. For an informed debate, we must encounter the devil in the details.

All survey data across countries fail to capture the elite consumption and income. The problem is universal. India is not an exception. The HCES 2022-23 uses the Modified Mixed Recall Period (MMRP) method in line with international best practices, making the Indian data suitable for international comparisons.

While one can quibble over the precise decline in India's consumption inequality—whether the Gini decreased precisely from 28.8 in 2011-12 to 25.5 in 2022-23 or by less—the decrease is substantial and indisputable. Similarly, a significant improvement in India's international ranking is factual.

Regarding income inequality, the media and commentators are particularly fixated on the national income shares of the top 1 percent, as estimated by the WIL, often unaware of the critical limitations of these estimates.