A tale of two Indias: Inequality alleviation remains a challenge

Seven decades of widening and shrinking disparities offer clues to the policies we must pursue for a more equitable future

- RAJESH SHUKLA

Over the past seven decades, India's income inequality has transformed significantly, with stark divergences between rural and urban areas. These changes highlight contrasting socio-economic trajectories and reflect the successes and shortcomings of policy efforts to address disparities.

Drawing on scientific household income surveys (1953-2023), a recent PRICE working paper provides valuable insights into India's uneven growth story and the challenges of inclusive development.

The rural landscape: In rural India, income inequality has fluctuated due to agricultural developments, economic reforms, and targeted interventions. The Gini ratio—a measure of inequality—offers insights into these changes. Between 1955 and 1975, the rural income Gini ratio rose modestly from 0.341 to 0.388 (indicating more inequality), driven by unequal land ownership and the limited reach of government programmes.

The Green Revolution modernized agriculture, but disproportionately benefited wealthier farmers with access to irrigation and advanced inputs, leaving marginalized groups behind.

From 1975 to 1995, the income Gini ratio declined slightly to 0.376, reflecting poverty alleviation schemes like the Integrated Rural Development Programme (IRDP) and land reforms. Policies such as the Minimum Support Price (MSP) mechanism offered small farmers stability. Despite uneven implementation, these measures curbed inequality modestly.

Economic liberalization from 1995 to 2005 reversed this trend, with the Gini ratio climbing sharply to 0.438. Reforms opened new markets but primarily benefited wealthier households that were able to access credit, technology, and infrastructure. Small and marginal farmers faced declining subsidies and limited institutional support, widening the gap.