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Income Inequality

Facts for Prelims (FFP)

 

Source: PIB

 Context: According to a recent SBI Research report, income inequality in India has decreased, indicating a positive trend of upward mobility and the growth of the middle class.

 

What does the report say:

  • The decrease in Gini Coefficient (a measure of income inequality) has decreased from 0.472 in AY 2014-15 to 0.402 in AY 2022-23.
  • Increasing tax base: The study, referencing CBDT data, reveals a widening Income Tax base, with the number of individuals filing Income Tax Returns increasing from 70 million in AY 2021-22 to 74 million in AY 2022-23.
  • Improving upward mobility: The report attributes the decline in income inequality to significant upward mobility, with over 36% of individuals in the lowest income bracket in FY14 moving to higher income levels, resulting in over 21% increase in their income during FY14-FY21.
  • Rising female labour force participation
  • Micro Firms moving towards becoming bigger firms: There is a positive trend in MSME income, and changing consumption patterns post-COVID, challenging the notion of ‘K’ shaped growth.
  • Share of Top earners’ declined: The share of top earners with income over Rs 10 crores and Rs 100 crores has declined from 2013-14 to 2020-21.

 

About the Gini Coefficient:

The Gini coefficient is a statistical measure of the economic inequality across the population in a country or between countries. It measures the dispersion of income or wealth distribution among the members of a population.

The Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality). Theoretically, values over 1 are possible due to negative income or wealth. A Gini coefficient larger than 0.40 is considered high inequality.

 

About K-Shaped Recovery:

Post-COVID, India is witnessing a ‘K-shaped’ recovery, signifying disparate economic rebounds for different segments. Experts note that the affluent are thriving, while the less privileged encounter challenges, exemplifying a divided recovery pattern.