1

Caste, Occupational Status and Wealth Inequality in India*

Vamsi Vakulabharanam

Queen’s College, City University of New York

Ajit Zacharias

Levy Economics Institute of Bard College

*PRELIMINARY DRAFT: PLEASE DO NOT QUOTE OR CITE WITHOUT PERMISSION Paper prepared for the Second ECINEQ Meeting, July 12-14, 2007 Berlin, Germany. Contact Information: Vamsi Vakulabharanam: vamsi.vakul@gmail.com Ajit Zacharias: zacharia@levy.org

2

Abstract

Using two rounds of nationally representative surveys on household wealth

conducted in India during 1991-1992 and 2002-2003, we analyze the relationship

between overall wealth inequality and caste divisions in India. The average minority (SC

or ST) person in India had a substantial disadvantage in wealth relative to the average

non-minority person. In the non-minority group, the forward caste Hindus was the clear

leaders in both the rural and the urban areas. The Other Backward Classes (OBC) and

Non-Hindus occupied positions that placed them noticeably above the minorities, but,

significantly below the forward caste Hindus. Using the ANOGi decomposition

technique, we estimate that between-caste inequality accounts for as much as 13 percent

of overall wealth inequality. The stratification parameters resulting from the procedure

indicate that the forward caste Hindus had a wealth distribution that had a fairly low

degree of overlap with the other caste groups, while the other caste groups had

significantly higher degrees of overlap with each other and the overall population.

3

I. Introduction

It is widely acknowledged among social scientists that caste is a persistent

determinant of power, economic inequality and poverty in contemporary India. Yet,

economics literature on caste relations in India is at best sparse, while non-economists

(mainly anthropologists and sociologists) have made substantial contributions to the

overall literature on caste (e.g. Beteille (2007), Gupta (2000) and Srinivas (2000)). This

gap has been acknowledged recently, and a call for greater attention to this axis of

differentiation has been made (Deshpande, 2000). This has given rise to an acceleration

in the production of quantitative studies on caste (e.g. Barooah (2005), Deshpande

(2001), Kojima (2006), Munshi and Rosenzweig (2006) and Sundaram (2006)).

The quantitative studies on caste can be divided into two broad categories. First,

there are studies that have used either large surveys (mainly National Sample Survey

(NSS) consumption and National Family Health Surveys (NFHS)) or fieldwork based

small sample surveys to show the evidence of caste differentials in consumption, income,

education, occupations, and development indices (e.g. see Deshpande (2001), Hasan and

Mehta (2006), Mehrotra (2006), Mohanty (2006), Srinivasan and Mohanty (2004), and

Sundaram (2006)). The near consensus in these studies is that the less privileged caste

groups tend to be worse off than the others on the measured indicators across the country,

although there are some regional differences. Second, using large survey data, other

studies have employed the Blinder-Oaxaca decomposition (or modifications of this) to

separate the structural differences (e.g. geographical, discrimination-based) among

households from the differences in endowments (physical and human) in the market place

4

(e.g. see Barooah (2005) and Kojima (2006)) that create caste disparities. Barooah, for

instance, using the NCAER survey showed that about a third of the income differentials

in India could be attributed to discrimination in the market place. Using the NSS

consumption surveys, Kojima showed that both the lower endowments of physical and

human capital possessed by disadvantaged groups as well as different structures of

income generation contribute equally to the disparities among caste groups. What is

remarkable across these studies is the persistence of systematic disparities among

households across different caste groups over long periods of time.

Our paper contributes to this literature by analyzing the relationship between

overall wealth inequality and caste divisions in India. There have been no studies on the

wealth disparities (as opposed to consumption or income disparities) within and among

caste groups on indicators, and how these disparities contribute to the overall inequality

in India. Wealth inequality is an integral aspect of economic inequality among persons at

a given point in time as well as across generations. Disparities in wealth can also translate

into disparities in economic security. For a substantial portion of the Indian population

that is dependent on agriculture, land is the major source of livelihood. Inequalities in the

quantity and fertility of land owned are a significant determinant of economic inequality

among households. Quality and quantity of schooling accessible to the children in urban

and semi-urban areas can vary positively with household wealth.

Caste is not the only determinant of social and economic status in India.1 It is

therefore important to compare the schisms generated by different social relations to

1 The 1911 Census of India contained a far more detailed breakdown of caste groups than available in post-Independence data. Tabulations based on the 1911 census for Uttar Pradesh (the largest Indian state, then known as United Provinces) showed that among the 42 castes considered in the census “each caste

5

understand within-group heterogeneity. Therefore, we also analyze the relationship

between overall wealth inequality and occupational status distinctions, a topic on which

no work based on nationally representative microdata exists to the best of our knowledge.

We construct a caste-occupation matrix to study the nature of the contemporary relation

between caste and occupational status. This allows us to examine caste disparities within

status groups and status disparities within castes.

The relationship between overall wealth inequality and social divisions (caste and

occupational status) is analyzed in this study using the Yitzhaki decomposition or

ANOGi (Yitzhaki, 1994; Frick et al. 2004). This allows us to separate the overall

inequality into within-group and intra-group components, rather than obtaining

conditional average effects of social divisions via regression-based decomposition

methods such as the Oaxaca-Blinder method. Furthermore, the overlapping parameters

estimated using our chosen method permits the distinction between caste-stratification

and caste-inequality. This is especially important in the context of ongoing debates in

Indian political economy about the questions of affirmative action and the so-called

“creamy layer.”2

The remainder of the paper is organized as follows. Section II describes the data

used and some of its problems. We also outline the definitions of the caste groups and

status groups used in the study. In the next section, we describe the patterns of wealth

disparities among castes and status groups. Our description is deliberately somewhat

detailed, as the data in question has not been explored from the angle of caste and status

contained landless labourers, cultivators as well as landlords.” (Chaudhury, 2004:1990). Economic differentiation within castes is the rule rather than the exception, then and now. 2 The “creamy layer’ refers to the emergence of an economically well-off group within castes whose average member is worse off relative to the rest of the population.

6

divisions before. The subsequent section (Section IV) presents the decomposition results.

Section VI contains our concluding observations.

II. Data and Concepts

The data used in this paper are from the two rounds of the All India Debt and

Investment Survey (AIDIS) conducted in 1991-92 and 2002-03. Wealth is computed as

the total household assets net of the indebtedness. Household assets are defined as

“physical assets like land, buildings, livestock, agricultural machinery and implements,

non-farm business equipment, all transport equipment, durable household goods and

financial assets like dues receivable on loans advanced in cash or in kind, shares in

companies and cooperative societies, banks, etc., national saving certificates and the like,

deposits in companies, banks, post offices and with individuals” (NSS 2005, p. 5). Debt

is defined as cash loans payable. In the absence of a better deflator, the Consumer Price

Index for agricultural workers is used to make the 1991 and 2002 rural wealth values

comparable across time. Similarly, the Consumer Price Index for industrial workers is

used to make urban wealth values comparable across time.

The unit of analysis for the whole paper is the household adjusted for its size.

That is, the household weight is multiplied by the household size to obtain a distribution

among persons. We use per capita wealth, household wealth divided by household size,

as the measure of wealth. The implicit equivalence scale assumed here is that there are no

“economies of scale” associated with wealth. (For the relative advantages and

disadvantages of this method, see Jayadev, Motiram and Vakulabharanam (2007)).

The definitions of caste groups are completely dictated by the data and do not

adequately reflect the complex and layered reality of caste in India. Both the AIDIS

7

rounds allow for the classification of the entire population into three groups, viz., the

Scheduled Castes or the Dalits (SC), Scheduled Tribes or the Adivasis (ST) and everyone

else whom we call Other Communities (OC). We term this classification Scheme I. The

2002-03 survey introduced the additional category of Other Backward Classes (OBC). 3

In addition, the category of religion was also enumerated. Cross-tabulating caste and

religion allows for the separation of OC into three distinct groups: OBC; Hindus who are

not SC, ST or OBC whom we call Hindu forward castes (FC); and Non-Hindus (NH)

who are not SC, ST or OBC. The 2002-03 survey, therefore, allows for the classification

of the population into five caste groups. We term this classification Scheme II. It should

be noted that the SC and ST individuals might belong to any religion.

A brief note is in order regarding the category of caste. Caste in India is defined

differently along the “Varna” and the “Jati” schemes. Varna scheme has four broad

groups - Brahmins, Kshatriyas, Vis, Sudras - and those people outside the Varna scheme,

ranked in a descending order of ritual status. Brahmins were traditionally associated with

the priestly and scholarly community. Kshatriyas were the ruling groups. Vis were

associated with those groups associated with trading, moneylending and retailing. Sudras

were the peasants and artisans. Among those outside the Varna scheme, the so-called

untouchables (the present day Dalits) were mostly associated with the rural landless

laboring community and the tribal groups (the present day Adivasis) were associated with

those living on the fringes of or outside the settled agricultural society. It is generally

agreed upon that this is a textual scheme defined by the Brahmins.

3 The determination of disadvantaged groups (OBCs) was made according to the 1931 Census. Many changes have occurred since in the socio-economic status of these groups, but this category does not reflect these changes, in part because subsequent censuses have not collected information on caste. The need for a new caste-based census is the subject of a heated debate in contemporary politics and the public sphere.

8

The Jati scheme is very different. There are thousands of Jati groups that vary

spatially and temporally in terms of their ritual rankings, socio-economic status and

occupations. It is also important to recognize that the caste system functions on the

ground along different Jati orderings thus creating a bewildering variety of them, as well

as a system that cannot be neatly captured by structural and closed systems that can be

deployed across space and time (For important renditions of the caste system, for e.g. see

Dumont (1970), Chatterjee (1993) and Gupta (2000)). Similarly, while certain

occupations are traditionally associated with certain caste groups (especially Jati groups),

this relation too is problematic given the significant flux in this relationship over time.

However, it has generally been the case that those outside the Varna scheme have tended

to be concentrated in the menial occupations, and this relationship too needs careful

examination in our times to see if independent India has been able to shake off some of

the entrenched caste based hierarchies. We therefore use the categories (Varna-based)

that are available in the surveys to make broad decomposition analyses of the overall

inequality in India.

We derive the variable Status in the following way. We use the NCO

classification of 1968 (available for both 1991 and 2002), landholdings and the household

type (whether self-employed or working for others) in dividing the households into six

categories viz. Urban elites, Urban middle groups, Urban manual workers, Rural Elites,

Rural middle groups and Rural workers. The NCO category for each household is the

principal occupation of the household based on the occupation of the primary earning

member of the household. All three urban categories are derived from the NCO

classification. Those people who are occupied in professional, managerial, technical and

9

administrative occupations in urban areas are classified as elites (NCO categories, first

digit: 0-2). Those occupied in sales and clerical occupations are classified as middle

(NCO categories, first digit: 3-4). Those working in low level service occupations (e.g.

hotels and households), urban agriculture, factories, construction and other manual

occupations are the urban manual workers (NCO categories, first digit: 5-9). The rural

areas are subdivided into agricultural and non-agricultural occupations. The agricultural

occupation is further classified according to the landholdings they possess. The

conversion factor between wet and dry land is 1.98 based on ICRISAT studies. Those

farmers who possess more than 10 acres of land are classified within rural elites. Those

between 2 and 10 acres of land are classified as rural middle. Those with less than 2 acres

of land are combined with the landless workers and classified as rural working people. Of

the non-agricultural population, those that are self-employed are part of the rural elites.

Those that are working on public works are part of the rural working people. Of the

residual population, the NCO classification that is used for urban elites is applied and

where a match occurs these are placed under the rural elites. The justification for this is

that some people are working for the government and other established occupations that

are not readily classified in the above mentioned agricultural and non-agricultural

populations. This scheme to devise the status variable in rural areas accounted for all the

households in the sample.

We further separate the rural areas from the urban as we believe that the wealth

accumulation and income generation dynamics vary significantly across this sectoral

division. Thus, all the caste and status groups used in our analysis are differentiated by

their rural/urban status.

10

The problems associated with the wealth data in the surveys are identified in the

literature (e.g. see Subramaniam and Jayaraj (2006) and Jayadev, Motiram and

Vakulabharanam (2007)). They deserve a brief recapitulation. There are basically four

kinds of problems with these data. First, wealth distributions tend to be concentrated at

the very top end. Unless special effort is made to over-sample the very wealthy, the

concentration of wealth tends to be under-represented. This will artificially reduce the

overall inequality. Second, there is a tendency among people of all wealth groups to

under-report their wealth holdings. This tendency to under-report is exacerbated as

wealth holdings rise. This will widen the gap between those with close to no wealth and

those that have some wealth. Third, the reported assets may not be correctly valued. It has

been found in India that the reported values of even recent transactions tend to be lower

than the market values. Given the lack of proper wealth based deflators, the wealth values

that are analyzed can be somewhat off the mark. Fourth, there is a tendency to hide

illegitimate wealth that will lead to under-counting of the assets owned by the wealthy.

Finally, there is a strong tendency to under-report the liability or debt. These problems

add up to a state where in populations belonging to the wealthier groups (more prevalent

among the non-SC/ST population) appear to hold lower wealth than they actually have

and the less wealthy groups (especially the SC/ST groups) report higher wealth than they

have. This will certainly reduce the overall inequality but it will also reduce the between-

caste inequality figures. These problems might be reflected in our findings.

III. Disparities in Wealth and Wealth Distributions

III.1. Disparities among Caste Groups

Most studies of economic inequality in India have used consumption expenditures

as the indicator of economic status. Our choice of wealth as the indicator of economic

11

status would be superfluous if consumption expenditures and wealth are distributed

similarly across individuals. While the two are correlated, the ranks of individuals in the

two distributions can be quite different (Table 1). If all individuals in a given quintile of

one distribution also belonged to the same quintile of the other distribution, then every

number on the principal diagonal of the matrix shown in Table 1 will be equal to 20 and

every off-diagonal numbers will be equal to zero. Inspection of the table shows that the

largest number occurs at the intersection of the top quintiles of the two distributions. This

number indicates that only about half (10.4/20 = 52%) of those in the top quintile of

wealth distribution were also in the top quintile of consumption expenditures. In other

quintiles, at least two-thirds of individuals in a given quintile of wealth distribution were

located in a different consumption quintile, with the third quintile showing the weakest

correlation in rankings.4

Let us now turn to examine disparities in wealth and wealth distributions among

caste groups. Since comparisons between the two years are possible only with the six-

group schema (ST, SC and OC), differentiated by their rural versus urban location), we

begin with a consideration of the estimates shown in the upper panel of Table 2. Between

1991 and 2002, the minority groups (SC and ST) have experienced rates of growth in

mean per capita wealth that were better than the majority group in both the urban and

rural areas. However, the medians tell a different story, especially for the ST. The wealth

of the average person in that group rose only 7 percent in the urban areas (as compared to

42 percent for the urban OC) and 21 percent in the rural areas (versus 25 percent increase

4 Indeed, the picture can be more complicated than suggested by the table since we expect rankings of individuals within quintiles also to be different, depending on whether wealth or consumption is used as the ranking variable.

12

for the rural OC). In contrast, the average SC person experienced a robust increase in

wealth of approximately 40 percent over the same period in both the urban and rural

areas.

In spite of the increases that did occur between the two years, the average

minority person still had a considerable wealth disadvantage in 2002 (see Figure 1).

Compared to the most numerous group, rural OC, the median wealth of rural ST and SC

were, respectively, only 49 and 46 percent; the relative position of the urban ST and SC

were somewhat better at 53 and 58 percent. In contrast, the urban OC had a median

wealth that was 21 percent higher than their rural counterpart. Comparison to the 1991

median values showed that the relative positions of the rural and urban SC were, in fact,

higher then than in 2002 while the relative positions of the rural and urban ST were

somewhat lower. The urban OC group also experienced a strong growth in their relative

position. If we were to compare the relative positions using mean, rather than median,

values then too we would obtain a similar picture of disadvantage for the minority

groups, with the exception of the urban ST whose mean wealth was 86 percent of the

mean wealth of the rural OC (as compared to only 58 percent, in terms of median

wealth).

As noted earlier, we are forced to treat the OC as a single category for comparing

the two years because the 1991 data does not allow further breakdowns of this group

along caste/religion lines. However, such a breakdown is possible in 2002 and the

structure of disparities among caste groups can be better seen in terms of what was

referred to earlier as Scheme II (Panel B, Table 1 and Figure 2). Irrespective of their

urban or rural location, the average OBC person had an amount of wealth that was a little

13

less than 90 percent of the average rural OC person. The average person in the group

labeled “Non-Hindu Others” and living in an urban area had as much wealth as the

average OBC; but those in the rural areas had significantly less, though more than that of

the average SC or ST person. The most advantaged subgroup in the OC group was the

Hindu forward castes (FC): the median wealth in the urban segment of this group was

twice as much as rural OC while its rural segment had a median that was 54 percent

higher than rural OC.

The ranking of the ten groups (in Scheme II) in terms of median wealth follow a

pattern that one might expect a priori: the Hindu forward castes are at the top (urban,

followed by rural). Immediately below them are the OBC groups and urban non-Hindu

others who have quite similar levels of median wealth. At the bottom, we have the

minorities (urban, followed by rural). The rural non-Hindu others occupied a place

immediately above the minorities and below everyone else.

If we were to use the mean values to rank the groups, the pattern shifts somewhat

(Figure 2). The top group—urban, Hindu FC—still maintained their lead and the rural

minorities held their status as the worst-off. Rural Hindu FC slipped to the third place,

with the second place taken by the urban, non-Hindu others. Rural non-Hindu others

occupied the fourth place, followed by the urban OBC, urban ST, rural OBC and then

urban SC. The re-ranking of the groups is an indication of the extent to which within-

group inequalities differ, a subject to which we shall return later.

Comparison of within-group distributions reveals that caste divisions and the

urban-rural divide act as distinct, yet interrelated influences on the overall wealth

distribution (see Table 3). The differences between the distributions of the individual

14

groups is plotted on the vertical axis in Figure 3 as ( ij ip p− ), which expresses the

deviation between the percentile cutoff of the jth group ( ijp ) from the overall percentile

cutoff ( ip ) at the ith percentile. Strikingly, only the Hindu FC stayed in the positive

territory throughout the distribution while the SC and ST groups stayed in the negative

territory throughout the distribution. The cutoff values for the former became

increasingly higher than the overall values (most markedly for the urban, forward caste

Hindus), while for the latter they became increasingly lower, as we move to higher

echelons of the wealth distribution. The other two groups, OBC and non-Hindu other,

displayed more complex patterns. Lower portions of the urban OBC and non-Hindu other

distributions had cutoff values that were below the cutoff values for the overall

distribution, but the higher portions had values that were higher, especially for the non-

Hindu others. The rural segments of these communities diverge from one another

markedly. While the bottom 60 percent of rural OBC enjoy higher than overall cutoff

values, the top of 40 percent in their distribution have cutoff values that are increasingly

lower. The opposite pattern can be observed for the rural non-Hindu others.

The direction and amount of the urban-rural disparity within caste groups varies

across the distribution. This can be illustrated by defining the following statistic for group

j at percentile i :

,u rij ij

ij rij

p pg

p−

= (1)

where the urban-rural gap in wealth is expressed as a percentage of the percentile

cutoffs ( p ) in the rural area for each caste group (The superscripts and u r , represent,

respectively, the urban and rural areas).

15

Estimates of the urban-rural gaps are shown in Figure 4 for selected percentiles,

with the bold horizontal reference line representing a situation of zero urban-rural

disparity. The wealth gap was in favor of rural individuals at the bottom of the

distributions of all castes. This is a reflection of the incidence of land ownership

(however meager the farm size might be) in the rural areas among the poor, in contrast to

the greater presence of property-less individuals among the urban poor, irrespective of

their caste identity. Notable differences existed among the castes in the percentile point at

which their respective curves crossed above the zero line. At one extreme was the non-

Hindu others for whom the switch favoring the urban areas occurred at the 20th

percentile; and, at the other extreme, the switch occurred only at the 50th percentile for

the OBC. The variation in the amount of urban-rural disparity among the castes appeared

to be much smaller at any given percentile point below the zero-line, i.e. when the

disparity was in favor of the rural individuals. Above the zero-line, when the disparity

turns in favor of the urban persons, the amount of disparity (at any given percentile point)

among the castes appeared to vary much more. Clearly, the evidence suggests that the

wealth advantage enjoyed by the urban individuals within every caste becomes higher at

the higher percentiles, with the non-Hindu others standing out as a clear exception to this

rule because the disparity in favor of the urban individuals in this group declined after the

70th percentile. The urban advantage skyrockets within the ST group in the top portions

of the distributions, a result consistent with the well-known fact that the rural tribal areas

fall among the most economically backward areas in India.

We now revert to Scheme I in order to examine whether any significant

differences could be found among the groups in terms of the changes in wealth that

16

occurred between 1991 and 2002 across the entire distributions (Figure 5). Urban ST was

the only group in which some of the percentile cutoffs in 2002 were roughly the same as,

or lower than their 1991 levels. In contrast, the bottom half of the urban SC group

generally saw a much higher boost in their wealth levels than their counterparts in the

other groups. For the upper-middle portion (roughly from the 50th to 80th percentile), the

urban OC group experienced much faster growth than their counterparts in other groups.

The sharpest increases in wealth between 1991 and 2002 among the top 20 percent in all

groups occurred for the urban minority groups. A negative correlation between the initial

amount of wealth and the subsequent gain could be found in the bottom half of the urban

SC and OC groups as well as the rural ST and SC groups. In fact, the schedule for the

rural SC group slopes downward to the right almost throughout the distribution. Finally,

the rural OC group displayed the most stable pattern: their schedule remained largely flat

for most of the distribution. The overall picture of changes across the distributions

suggests a pattern of wealth accumulation that is not heavily biased in favor of those at

the top within each caste group, with the exception of the urban ST.

III.2. Caste and Occupation

Heterogeneity within caste groups is well known to social scientists of modern

India. A perennial question has been whether class disparities, understood in terms of

occupation and ownership, “trump” caste disparities. As shown in Table 4, people of

every caste can be found in all status groups. However, the distribution of members over

status groups differed markedly among castes. Within rural areas, the Hindu FC seem to

have roughly the same proportion of their members in all status groups; the same pattern

also holds, albeit in a weaker form, in urban areas. For the other communities, the

17

distribution of persons is much more polarized with the Urban Manual (low-grade service

occupations, nonskilled factory workers etc) and Rural Working (consisting mainly of

landless agricultural workers and, small and marginal farmers) making up the majority in,

respectively, the urban and rural areas. However, the combined share of these two groups

was considerably higher for the SC at 76 percent in 2002, while the other three castes—

ST, OBC and Non-Hindu Others—had around 60 percent and the Hindu FC had only 39

percent.

Urban middle class membership (mainly sales and clerical workers etc.) was

higher, in percentage terms, among the Hindu FC and non-Hindu Others (10 to 12

percent in 2002). Among the other groups, it was under 6 percent. The OBC and Hindu

FC had about the same proportion of their population in the Rural Middle group (20

percent in 2002), which was lower than that of the ST (26 percent), but higher than that

of the SC and Non-Hindu Others (10 and 13 percent respectively). The SC, ST and OBC

communities had only less than 4 percent of their members in the urban elite (consisting

mainly of those living in households where the principal earner is a professional or

managerial employee) while the forward caste Hindus had 10 percent and non-Hindu

Others had 7.1 percent in 2002. A notable change in the status structure in India between

1991 and 2002 was the shrinking of the Rural Middle and Rural Elite groups and the

growth of the Rural Working in all three groups between 1991 and 2001, suggesting

greater of proletarianization in the countryside and greater migration to the urban areas.

We next turn to our estimates of mean values of wealth for the status groups

cross-tabulated with caste (Table 5, panel A). Looking first at within-caste disparities in

status, it is clear that the Rural Working group ranks at the bottom and the Urban Elite at

18

the top of the status ladder in all castes, with the exception of Non-Hindu Others in 2002.

The Urban Elite also experienced the fastest growth in wealth in the ST and SC between

1991 and 2002, but, surprisingly, the lowest growth in the OC. The wealth gap between

status groups can be expressed in terms of the ratio of the average wealth of each group

to the wealth of Rural Working (Table 5, panel B).

Expressed in these terms, the rankings of the different status groups based on

mean values followed a clear pattern of wealth hierarchy in all castes. In the urban areas,

the professional and managerial employees are at the top of the wealth hierarchy,

followed by semi-skilled white-collar workers in the middle and unskilled workers at the

bottom. Big landlords along with the professional class have the highest average wealth

in the rural areas, followed by farmers with medium-sized landholdings and semi-skilled

workers in the middle, and landless agricultural workers and other unskilled workers at

the bottom.

If we consider the urban and rural groups together within each caste, rankings

based on mean values do not follow the “neat” pattern that can be observed for the OC

group as a whole: Elites at the top, middle-status groups in the middle, and the mass of

unskilled workers and poor peasants at the bottom, with the urban residents within each

group possessing greater wealth than their rural counterparts. In the SC and OBC groups,

the Urban Middle has less wealth than the Rural Middle; and, in the ST group, the Rural

Middle had only about the same wealth as the Urban Manual; and, for Non-Hindu Others

the Rural Elite had about 11 percent more wealth than the Urban Elite. We speculate that

in the first and third cases the presence of a relatively prosperous middle- or upper class

19

peasantry could explain the apparent anomaly, while the “ST anomaly” requires further

investigation.

Our discussion above has focused on status disparities that exist within castes.

But, there are also considerable caste disparities within status groups. These disparities

can be expressed in terms of the ratio of mean wealth of each caste to the OC group and

the resulting estimates are presented in Table 5, panel C. Inspection of the numbers

shown in the ST and SC columns, shows that the OC had substantially more average

wealth than the SC and ST in every status group. For the ST group, the extent of wealth

disparity was much lower for the Urban Elite in 2002 as compared to 1991 (0.62 versus

0.45), while it was much higher for the Urban Middle (0.60 versus 0.74). The standing of

other status groups in the ST improved relative to their counterparts in the OC. The

Urban and the Rural Elites in the SC group saw a divergence in their fortunes relative to

their OC counterparts as the ratio of mean wealth values rose from 0.36 to 0.45 for the

first group while it declined from 0.46 to 0.41 for the second. Unlike the Urban Middle in

the ST, the Urban Middle in the SC improved relative to the OC Urban Middle between

1991 and 2002. Apart from the top two urban status groups, every other status group in

the SC community either stagnated or declined relative to their OC counterparts.

Disaggregating the OC in 2002 revealed that the OBC in every status group also

suffered from a wealth disadvantage relative to the OC group as a whole although to a

much lesser extent than the SC and ST. Hindu FC emerge as the leader in terms of

average wealth in every urban status group, while in the Rural Elite and Middle groups,

the Non-Hindu Others dominated. Closer examination showed that the Sikhs (primarily

in Punjab), Jains (primarily in Karnataka and Maharashtra), and Christians (primarily in

20

Kerala and the northeastern states) are substantially ahead of Hindu FC in terms of wealth

in both the groups.

Since the salience of occupational status as an axis of wealth disparities emerges

clearly from the above discussion, it is useful to examine the disparities among the

occupational status groups for the nation as a whole, leaving aside the caste divisions

(Table 6). It is at once evident that the “neat” pattern of wealth stratification that was

noted earlier for the OC group as a whole earlier holds nationally too, if we use the mean

values to rank the groups. The same pattern did not hold strictly in terms of the median

values, because the Rural Middle has a somewhat higher (13 percent) median wealth than

the Urban Middle. Status disparities in wealth encompass a much larger range than caste

disparities in wealth (in terms of mean or median values). This should not be surprising

given the wealth disparities within castes along the status dimension that was discussed

earlier.

IV. Decomposition of Wealth Inequality

IV.1. The Yitzhaki Decomposition

The picture of caste and status disparities in India sketched out so far can be made

richer by relating them to an analysis of overall wealth inequality. Using the tools of

decomposition analysis allows us to examine, for a given level of overall inequality,

whether the groups formed on the basis of caste are more equal in terms of their average

wealth than the groups formed on the basis of occupation. It would also allow us to

develop summary measures that would express how demarcated in terms of its wealth

holdings a particular caste or status group is from another group or from the total

population. Further, wealth inequality exists within every group irrespective of whether

the “grouping” is done in terms of caste or occupational status and it would be useful to

21

have comparisons of the degree of inequality among groups. The method of Gini

decomposition developed originally by Shlomo Yitzhaki offers a unified framework for

addressing these issues.

Let G be the Gini coefficient of wealth. The Yitzhaki decomposition allows us to

separate G into inter-group inequality ( bI ) and a remainder ( rI ) that can be interpreted

as intra-group inequality (Yitzhaki, 1994):

b rG I I= + (2)

The amount of inter-group inequality is:

2cov( , ( )) ,i oib

F yI μμ

= (3)

where y is wealth, μ is mean wealth for all persons, iμ is mean wealth for group

i , and ( )oiF y is the mean rank of group i , i.e., the average position of the members of a

group in the overall wealth distribution.5 Thus, the amount of inter-group inequality is

twice the covariance between the mean amounts of wealth and mean ranks of groups

divided by the mean wealth for all individuals.6

The remainder term is calculated as:

,r i i ii

I s G O=∑ (4)

5 For example, if the mean rank is 0.25 for SC then the average SC person’s position in the wealth distribution for all persons will be at the 25th percentile. 6 In contrast, in the standard decomposition the between-group component would be equal to twice the covariance between the wealth of each group and the rank of each group’s mean wealth divided by overall mean wealth. The Yitzhaki decomposition takes into account the ranking of each individual within each group in the overall distribution.

22

where is is the share of group i in aggregate wealth, iG is the Gini coefficient of the

wealth distribution within group i , and iO is the overlapping index for group i . The

Yitzhaki decomposition provides group-specific measures of overlapping unlike the

standard decomposition of the Gini where only a summary measure of overlapping by all

groups can be obtained. The index of overlapping proposed by Yitzhaki is a measure of

the degree to which the range of wealth in each group overlaps with the range of wealth

for all persons. Overlapping can thus be seen as the opposite of stratification: the higher

the amount of overlap between a group and the population, the less stratified they are as a

group in terms of wealth (Yitzhaki, 1994, pp.148–149). This feature of the decomposition

is crucial for us since our objective is to ascertain the extent to which castes occupy or do

not occupy different segments of the wealth distribution.

The amount to which group i overlaps with the overall distribution is defined as:

cov ( , ( )) ,cov ( , ( ))

i oii

i i

y F yOy F y

= (5)

where ( )oiF y is the function that assigns to the members of group i their ranks in the

overall distribution, iF is the function that assigns to the members of group i their ranks

in the wealth distribution within that group, and covi indicates that the covariance is

according to the distribution within group i .7 The minimum value of iO is given by the

share of group i in the population and its maximum value is equal to 2. When the index

equals the minimum possible value, it suggests that the group in question is a perfect

stratum, i.e., it occupies an exclusive segment of the overall wealth distribution. If a

7 In theory, the functions are actually cumulative distribution functions. However, when working with actual samples, the cumulative distribution function is estimated by the rank of the observation and hence our description of the functions as rank-assigning functions (Yitzhaki 1994, p.149, n.1).

23

particular group has a range of wealth that coincides with the range of wealth of all

persons then the index will be equal to 1. Finally, if the index is greater than 1, the

distribution of wealth within the group is much more polarized than in the overall

distribution. This can happen if the members of the group constitute two strata, one that

has higher and the other that has lower wealth than μ , the average wealth of all

individuals in all groups (Yitzhaki and Milanovic, 2002, pp.162–163).

The index of overlapping defined in equation (4) is constructed from indexes that

indicate the amount by which a group overlaps with each of the other groups:

i i j jij i

O p p O≠

= +∑ (6)

where ip is the share of group i in the total population and jiO is the index of

overlapping of group j by group i . Since the overlapping of a group by itself is equal to

1 by definition, its contribution to iO is equal to its relative size. The index of

overlapping of the overall distribution by a group is the weighted sum of overlapping of

each of the other groups by that group, with the relative size of each group serving as the

weights.

In turn, the group-by-group overlapping indexes are calculated as:

cov ( , ( ))

,cov ( , ( ))

i jiji

i i

y F yO

y F y= (7)

where jiF is the function that assigns members of group i their ranks in the

wealth distribution of group j . The index jiO indicates the extent to which the wealth of

individuals in group j falls in the range of wealth of individuals in group i ; the higher

the fraction of group j that falls in the range of group i , the higher will be the value of

24

jiO ; and, for a given fraction of group j that falls in the range of group i , the closer the

wealth of the individuals in that fraction are to the mean wealth of group i , the higher

will be the value of jiO . The index can take values between 0 (no overlap) and 2. Perfect

overlap occurs when the index equals 1, indicating that the rankings of members of group

i produced by iF and jiF are identical (Yitzhaki, 1994, pp.150–152).

IV.2. Within-Group vs. Between-Group Inequality

We now turn to the results of the Yitzhaki decomposition for our data.8 It is useful

to begin with the estimates of within-group and between-group inequality under the

alternative “grouping” variables—caste and occupational status (Table 7). Overall wealth

inequality showed very little change between 1991 and 2002. The share of within-group

and between-group inequality in overall inequality also remained roughly the same

between the two years. With either caste or status as the grouping variable, within-group

inequality (the rI term in equation (2)) accounted for the bulk of overall inequality in

both years. Yet, the share of between-group inequality in overall inequality was at least

twice as high (around 25 percent) when individuals were differentiated according to

occupational status rather than caste. Interpreted in light of equation (3), it appears that

taken as groups, caste groups are more equal than status groups, i.e., the covariance

between the average amounts of wealth and average ranks are twice as high for status

than caste.

The dominating effect of within-group inequality on overall inequality is

consistent with our earlier discussion of the extent of status disparities within each caste

8 Decomposition of the Gini by groups was performed using the ANOGI module for STATA (Version 9).

25

and the caste disparities within each status group. Of course, in addition to status and

caste, there are other wide variations in the characteristics of household members that are

also expected to contribute to wealth differentials within castes—age, education, industry

of employment, and number of earners in the household, to mention a few. Additionally,

we would also expect product mix and fertility, among other things, also to have effects

on the wealth of farmer households. In 2002, we found the share of within-group

inequality to be somewhat lower (87 percent) under the more elaborate Scheme II (10

groups as compared to 6 in Scheme I). Since the subgroups included in the OC group are

themselves quite different from each another in terms of their average wealth and

distributions, the modest increase in the share of between-group inequality under Scheme

II was not out of line with our expectations.

IV.3. Within-Caste Inequality and Overlapping

The results from decomposing the remainder term along caste lines are shown in

Table 8. Looking first at the column of overlapping indexes for caste groups under

Scheme I reveals that the Urban ST and SC groups are hardly homogenous groups. Both

have values exceeding 1 for their overlapping indexes, indicating that there might be two

distinct strata, one quite rich and the other extremely poor, within each of these groups.

This is most striking in the case of the Urban ST in 2002. The overlapping index for the

Urban OC in 1991 is almost 1 in 1991 and slightly lower in 2002, indicating the close

similarity between their distribution function and the distribution function for the entire

population. However, when these values are reckoned against their share in population

(the minimum value that can be taken by the overlapping index), they appear far more

modest than the two urban minority groups.

26

The rural groups in Scheme I had lower values for their overlapping indexes than

the urban groups, a result that is not surprising in light of the considerable rural-urban

wealth gaps that were discussed earlier (Figure 4). Once again, when compared relative

to their shares in population, the rural OC group had substantially lower degree of

overlapping than the rural, minority groups. Estimates for the subgroups included in OC

in 2002 (Scheme II) showed that the Hindu FC was the group with the lowest amount of

overlapping among all groups, while the Non-Hindu Other rural and urban groups took,

respectively, the second and third places in terms of overlapping (the Urban ST was first,

as noted above). The higher degree of overlapping by the rural Non-Hindu Others as

compared to their urban counterparts was an exception to the pattern observed for the

other groups, but consistent with our earlier finding of relatively rich Non-Hindu Others

dominating the Rural Elite and Rural Middle status groups.

Within-caste inequality is the highest (above 0.670) among the urban ST, urban

Non-Hindu Others, and rural Non-Hindu Others, which as we noted above were also

characterized by overlapping indexes above 1. Excluding the latter, the other rural groups

all had roughly similar amount of within-caste inequality (0.560 to 0.580). The urban SC,

OBC and FC groups occupied an intermediate position (0.610 to 0.660) in within-caste

inequality. Comparisons against the 1991 values show that the only groups that saw

substantial change in wealth inequality were the ST groups, for whom there was a big

increase in inequality. This is was especially true for the urban ST and is consistent with

our earlier finding about the big increases in the percentile cutoffs in the upper tail of the

ST wealth distribution (Figure 5). Considered in conjunction with the jump in the

overlapping indexes, it appears that there was the emergence of a “nouveau rich” and

27

growing income polarization within the ST groups. We will return to the discussion of

within-group inequality in conjunction with the estimates for the status groups later.

Apart from the index of overlapping for each group with the overall population,

the Yitzhaki decomposition also allows us to estimate pair-wise indexes of overlapping

among the groups (equation (7)). The estimates of the resulting overlapping matrix using

Scheme II for 2002 are shown in Table 9 (Panel A). The reference group (the caste

represented by the subscript i in the overlapping index jiO ) is shown in the rows of the

table; other groups are shown in the columns (the castes represented by the subscript j ).

Urban and Rural FC have the highest degree of overlap with one another and much lower

degree of overlap with all others. Thus, their status as the groups with the lowest degree

of overlapping with the population did not hold for the pair-wise comparison.

Overlapping of each of the other groups by the urban ST, SC, OBC, and the Non-Hindu

Others groups are generally high. In contrast, the overlapping of each of them by the

Hindu FC was much lower.

The reason behind this apparent discrepancy can be understood by considering the

overlapping between the urban ST and urban FC. The overlapping of urban ST by urban

FC is only 0.716. This reflects the fact there were relatively few urban ST individuals in

the urban FC wealth range. Consequently, the ranks of urban FC individuals, when each

of them are placed in the wealth distribution of urban ST, did not differ much from each

other for a large number of them, thus reducing the size of the covariance in the

numerator of equation (7). On the other hand, the overlapping of urban FC by urban ST

was much larger at 1.05, reflecting the fact that there are relatively more urban FC

individuals in the urban ST wealth range

28

The overlapping of rural ST and SC by each of these groups was higher than the

overlapping of their urban counterparts by the same groups. For example, the overlapping

of rural ST by rural SC was 1.02 while the overlapping of urban SC by rural SC was

lower at 0.92. Further, the overlapping of rural OBC, FC, and NH groups by,

respectively, the rural SC and ST were higher than the overlapping of urban OBC, FC,

and NH groups (e.g. the overlapping of rural FC by rural SC was 0.934 as against only

0.739 for urban FC). This suggests that the distributions of rural ST and SC are more

similar to each another than to the members of their own community in the urban areas

and that they have at least some members with amounts of wealth that match the wealth

of wealthier individuals from the rural residents of other communities.

However, the rural-urban patterns of overlapping are quite different for the rural

OBC and FC groups. Their wealth distribution is more similar to the urban residents of

their own communities than to the SC or ST in the rural areas. For example, the

overlapping of rural SC by rural OBC was only 0.831 while the overlapping of urban

OBC by rural OBC was higher at 0.908. Similarly, the overlapping of rural ST by rural

FC was quite low at 0.625 compared to the overlapping of urban FC by rural FC that

stood at 0.903. The overlapping relation between the rural OBC and rural FC as well as

that between the rural NH and rural FC mirror the relationship between urban ST and

urban FC that was discussed above.

The index of overlapping is sensitive to extreme values because it depends on the

ranks and amounts of wealth of individuals in each caste. Hence, an examination of the

ranking of one caste in terms of another is instructive. Such an exercise can answer the

following type of question: at what percentile of the forward caste wealth distribution is

29

an average SC person located? The average rank of each caste in the distribution of other

castes can be displayed in a matrix of ranks. Along the row labeled “Urban ST”, for

example, we can read off the average rank of an individual in that group in the wealth

distribution of each of the other groups. Since the ranks are normalized to lie between 0

and 1, the average rank of a group in its own distribution will be 0.5 (i.e. the 50th

percentile).

The matrix of ranks for caste groups under Scheme II is shown in Table 9 (Panel

B). Forward castes clearly dominate other groups in terms of this indicator too. If we look

at the entries under the column labeled “Urban FC”, it is evident that the average rank of

all groups except their rural counterparts are placed below the 40th percentile of the urban

FC wealth distribution; the rural FC’s average rank was at the 45th percentile. Similarly,

the entries in the “Rural FC” column were also below the 40th percentile for all groups,

except, obviously, their urban counterparts.9 Viewed from another angle, this means that

the average rank of all the other groups were at their lowest levels when they were placed

in the distribution of forward castes. The most numerous of the groups, the rural OBC,

had a mean rank above the 50th percentile in the distributions of all SC and ST groups

and close to the 50th percentile for the Non-Hindu Others and urban OBC distributions.

The average rural ST and SC ranks were below the 40th percentile in the

distributions of all other non-ST/SC groups, except for the Non-Hindu others where their

ranks were at the 41-42nd percentile, and slightly below the middle in the distributions of

their urban counterparts. Even though they had high values for their overlapping index,

the average urban ST and SC ranks were in the bottom half of the distribution of all other

9 The sum of the average rank of group j’s rank in group i's and the average rank of group i's rank in group j’s distribution will be equal to 1.

30

groups, except that of their rural counterparts where they were slightly above the middle.

Their ranking was the lowest (roughly at the 30th percentile) in the FC distributions,

somewhat higher (roughly at the 40th percentile) in the OBC distributions, and the

highest (roughly at the 45th percentile) in the NH distributions.

IV.4. Within-group inequality and status stratification

As we pointed out before, the amount of intra-group inequality was lower when

the decomposition was done using status rather than status groups. Further breakdown of

the portion of overall inequality accounted for by inequality within status groups is

shown in Table 10. It may be recalled that when we used the same number of caste

groups (i.e. six, under Scheme I), the values of the overlapping indexes were all above

0.9 and three of them were equal to, or above 1. In contrast, the overlapping indexes for

status groups exceeded 0.9 in only three cases (namely, for the Urban Manual, Urban

Middle, and Rural Working groups). The first of these groups, with an overlapping index

exceeding 1, appears to have a polarized distribution, similar to what we found for the

Urban SC and ST groups. Relative to their population shares, the Urban Elite and the

Urban Middle displayed comparatively high amounts of overlap, while the rural status

groups, especially the Rural Middle, lower amounts of overlap. This result is similar to

the relatively lower degree of overlapping that we found for the rural caste groups and

serves as a further evidence of the rural-urban divergence in wealth distributions.

Inequality within the Urban Elite and Middle groups were substantially lower in

2002 than in 1991. About 90 percent of the members of these two groups belonged to the

OC group, for whom, as we saw earlier, inequality declined by 1.7 Gini points. While the

share of ST and SC in these groups increased slightly over the period (9.1 to 9.6 percent),

31

and the Gini coefficients for these groups rose, these changes ended up reducing the Gini

coefficients for the Urban Elite and Middle Groups. A partial explanation for the

reduction might lie in the fact that the ST and SC were largely increasing the wealth

shares of the bottom rungs of the wealth distribution in the Urban Elite and Middle

groups. In contrast, the increase of the ST and SC shares in the ranks of the Urban

Manual group was much higher (from 10.8 to 12.3 percent) and the additional ST and SC

individuals were most likely drawn from the bottom portion of the urban ST and SC

distributions. We know (from Table 3) that the percentile cutoffs for the urban ST and SC

groups were much lower than those of the other groups in 2002 and hence will have the

effect of worsening the wealth distribution within the Urban Manual group. Indeed,

factors other than the greater presence of ST and SC in the Urban Manual population

must have exerted upward pressure on the Gini coefficient of the Urban Manual group

(an increase of 2.7 Gini points)—a set of issues that fall outside the scope of our study.

The increase in Gini coefficients between 1991 and 2002 for all the rural status

groups appears to be unrelated to any change in the SC and ST shares in their respective

populations since these shares actually declined or remained stable over the period. But,

the distribution of caste groups across the status groups did seem to affect the inequality

trends. The evidence presented in Table 8 showed that the rural OC group did experience

a modest increase of 1.4 points in their Gini coefficient, while that of the rural ST shot up

by 4.2 points. These two groups make up roughly 88 percent of the population in both the

Rural Elite and Rural Middle. Therefore, the increase in the Gini coefficients of the latter

groups appears to be a function of changing distribution within the status groups rather

than due to changes in their caste mix. It appears that the decline in the Gini coefficient

32

for the rural SC by 1.4 points might have had a moderating effect on the Gini coefficient

for the Rural Working group since the share of the rural SC is the highest (28 percent) in

this group (and that of the other two caste groups, ST and OC, the lowest) among all the

rural status groups.

The overlapping matrix for status groups in 2002 is shown in Table 11 (panel A).

Compared to the matrix for caste groups, the entries here are generally smaller, indicating

the lower degree of overlap among status groups relative to caste groups. The largest

single group, Rural Working, had fairly low values along its row, excepting the Rural

Middle, with which it had an overlapping index of 1. However, the overlapping of Rural

Working by Rural Middle is the lowest entry in the matrix, 0.440. The overlapping of

Rural Working by other groups is also fairly low with Urban Manual as the sole

exception (0.985). Rural Middle, the second largest status group in our scheme, also

displayed comparatively low values and, unlike other groups, it has no entry greater than

1 along its row. The overlapping of the rural and urban elites by each other were quite

high, but their overlapping of Urban Manual and Rural Working considerably low. With

the largest number of entries greater than 1 and the corresponding Oij's much smaller, the

Urban Middle and Urban Manual groups appear to have polarized distributions in the

sense of containing a number of distinct strata within them.

Our estimate of the matrix of ranks for the status groups in 2002 is shown in

Table 11 (panel B). Once again, some really small values (compared to what we found

for caste groups) can be observed along the rows of Rural Working and Urban Manual

groups (excluding their mutual intersections). The average rank of the Rural Working in

the wealth distribution of the Urban Elite was only at the 20th percentile while that of the

33

Urban Manual in the same distribution was somewhat higher at the 28th percentile. Ranks

of these two groups in the Rural Elite distribution were very similar to their ranks in the

Urban Elite distribution. The Urban and Rural Elites had ranks quite close to the middle

in each other’s distribution similar to what we observed for the urban and rural forward

caste Hindus.

V. Conclusion

The average minority (SC or ST) person in India had a substantial disadvantage in

wealth relative to the average non-minority person in 2002. In the non-minority group,

the forward caste Hindus was the clear leaders in median wealth in both the rural and the

urban areas. The Other Backward Classes (OBC) and Non-Hindus (NH) occupied

positions that placed them noticeably above the minorities, but, significantly below the

FC in terms of median wealth values. In a worrisome trend, the relative median wealth of

the rural and urban ST was in fact lower in 2002 than in 1991. A similar picture of

minority disadvantage and forward caste advantage was evident throughout the

distributions in terms of gaps in percentile cutoffs. Estimates of the matrix of ranks for

caste groups also confirmed the existence of sizeable wealth gaps between the forward

castes and everyone else. Considered in conjunction with the findings documented in

other studies regarding the considerable shortfalls of the average minority person in

consumption, education, and development indices, the picture that emerges is one of

comprehensive and persistent minority disadvantage in contemporary India.

Our decomposition analysis showed that inequality between castes (between-

group inequality) accounted for as much as 13 percent of overall wealth inequality in

2002. The less elaborate caste schema (3 instead of 5) that we were forced to use in 1991

34

due to data limitations resulted in a lower share of between-group inequality (8 percent).

The major determinant of between-group inequality was the large gaps between

minorities (especially rural) and the forward castes (especially urban) in average wealth.

It would be interesting to compare this result to the results that would from using other

variables to classify the population (e.g. age or education). However, it is reasonable to

expect that irrespective of the “grouping variable” used, the share of within-group

inequality is likely to be the dominant factor in overall inequality. There are, inevitably,

other wide variations in the characteristics of households that, when taken together, are

likely to contribute more than the classifying variable itself to wealth differentials within

any group.

Results from our decomposition analysis also indicated that the forward caste

Hindus had fairly low degree of overlapping with the overall population and, especially,

with the minorities, i.e. they are more stratified in terms of their wealth distribution. The

other groups show fairly high degree of overlapping with the overall population as well

as with each other. Evidence of a polarized distribution could be detected for four

groups—Urban ST, Urban NH, Rural NH, and Urban SC (overlapping index greater than

1). The first three of these groups had within-group inequality that was much higher than

the overall inequality while the Gini coefficient for the last group was lower than the

overall Gini coefficient.

With the exception of the Rural SC, the other three minority caste groups, Urban

ST, Rural ST and Urban SC witnessed increases in within-group inequality between 1991

and 2002. This was especially striking for the ST. Given its occurrence along with the

deterioration in the median wealth of the group compared to the rest of the population, we

35

might be witnessing the emergence of a “nouveau rich” and growing income polarization

within the ST groups.

36

References

Barooah, Vani, K. 2005. “Caste, Inequality and Poverty in India,” Review of

Development Economics, 9(3), pp. 399-414.

Beteille, Andre. 2007. “Classes and Communities,” Economic and Political

Weekly Vol. 42(11), pp. 945-950.

Chatterjee, Partha. 1993. The Nation and its Fragments: Colonial and

Postcolonial Histories. Princeton: Princeton University Press.

Chaudhury, Pradipta. 2004. “The ‘Creamy Layer’: Political Economy of

Reservations,” Economic and Political Weekly May 15, pp. 1989-1991.

Deshpande, Ashwini. 2000. “Recasting Economic Inequality,” Review of Social

Economy, Vol. LVIII (3), pp. 382-399.

Deshpande, Ashwini. 2001. “Caste at Birth? Redefining Disparity in India,”

Review of Development Economics, 5(1), pp.130-144.

Dumont, Louis. 1970. Homo Hierarchicus: The Caste System and Its Implications

(Nature of Human Society) George Weidenfeld and Nicholson Ltd. and University of

Chicago.

Frick, Joachim R., Jan Goebel, Edna Schechtman, Gert G. Wagner and Shlomo

Yitzhaki. 2004. “Using Analysis of Gini (ANoGi) for Detecting Whether Two Sub-

Samples Represent the Same Universe: The SOEP Experience.” Discussion Paper No.

1049, The Institute for the Study of Labor (IZA), Bonn.

Gupta, Dipankar. 2000. Interrogating Caste: Understanding Hierarchy and

Difference in Indian Society, Penguin Books, New Delhi.

37

Hasan, Rana and Mehta, Aashish, 2006. “Under-representation of Disadvantaged

Classes in India,” Economic and Political Weekly, 41(35), pp. 3791-3796.

Jayadev, Arjun, Motiram, Sripad, Vakulabharanam, Vamsi. 2007. “Patterns of

Wealth Disparities in India During Liberalization,” Mimeo. Dalhousie University,

Canada.

Kojima, Yoko. 2006. “Caste and Tribe Inequality: Evidence from India, 1983-

1999,” Economic Development and Cultural Change, 54(2), pp. 369-404.

Mehrotra, Santosh. 2006. “Well-Being and Caste in Uttar Pradesh,” Economic

and Political Weekly, 41(40), pp. 4261-4271.

Milanovic, Branko and Shlomo Yitzhaki. 2002. “Decomposing World Income

Distribution: Does the World Have a Middle Class?” Review of Income and Wealth,

Series 48, No.2, pp.155-178.

Mohanty, Mritiunjoy, 2006. “Social Inequality, Labour Market Dynamics and

Reservation,” Economic and Political Weekly, 41(46), pp. 3777-3789.

Munshi, Kaivan, and Rosenzweig, Mark. 2006. "Traditional Institutions Meet the

Modern World: Caste, Gender, and Schooling Choice in a Globalizing Economy,"

American Economic Review, American Economic Association, 96(4), pages 1225-1252.

National Sample Survey 2005. “Household Assets and Liabilities in India (as on

30.06.2002),” Report, November 2005.

Srinivas, M.N. 2000. Social Change in Modern India, Orient Longman, India.

Srinivasan, K. and Mohanty, S.K. “Deprivation of Basic Amenities by Caste and

Religion,” Economic and Political Weekly, 39(07), pp. 728-735.

38

Subramanian, S., and Jayaraj D. 2006. “The Distribution of Household Wealth in

India,” paper prepared for UNU-WIDER project meeting, 4-6 May, WIDER: Helsinki.

Sundaram, K. 2006. “On Backwardness and Fair Access to Higher Education in

India: Results from NSS 55th Round Surveys, 1999-2000,” Economic and Political

Weekly, 41(50), pp. 5173-5182.

Yitzhaki, Shlomo. 1994. “Economic Distance and Overlapping Distributions,”

Journal of Econometrics, 61, pp. 147-159.

39

Table 1 Joint Distribution of Wealth and Consumption, 2002

Consumption Wealth 1991 q1 q2 q3 q4 q5

q1 7.2 4.8 3.4 2.4 2.2q2 5.5 5.2 4.2 3.0 1.9q3 3.8 4.7 4.7 4.0 2.8q4 2.6 3.6 4.7 5.1 4.0q5 0.9 1.7 3.0 5.4 9.1

Total 20.0 20.0 20.0 20.0 20.0 2002

q1 7.3 4.8 3.7 2.4 1.4q2 5.8 5.1 4.2 3.0 1.5q3 3.9 4.6 4.7 4.2 2.5q4 2.3 3.7 4.6 5.3 4.2q5 0.7 1.8 2.8 5.1 10.4

Total 20.0 20.0 20.0 20.0 20.0 Note: Consumption is measured as per capita consumption expenditures (MPCE),

i.e., total household consumption expenditures divided by the number of persons in the household.

40

Table 2 Wealth by Caste Groups (in thousands of 2006 Rupees)

A. Scheme I 1991 2002 Percent change

Mean MedianShare in

Population Mean MedianShare in

Population Mean MedianUrban ST 38.5 19.5 0.7 67.1 20.8 0.7 74% 6%Urban SC 31.1 16.1 3.1 46.0 22.6 3.8 48% 40%Urban OC 88.4 33.1 20.6 123.4 47.1 20.9 40% 42%Rural ST 24.6 15.8 8.0 34.1 19.0 7.3 39% 21%Rural SC 23.3 13.0 15.3 30.9 18.0 15.9 33% 39%Rural OC 58.8 31.1 52.2 77.6 38.9 51.4 32% 25%All 55.7 24.9 100.0 75.3 32.0 100.0 35% 28% B. Scheme II (2002 only)

Mean MedianShare in

Population Urban ST 67.1 20.8 0.7 Urban SC 46.0 22.6 3.8 Urban OC 123.4 47.1 20.9

OBC 85.5 34.8 9.0 Hindu Others (FC) 169.3 77.7 8.4 Non-Hindu Others 109.5 34.5 3.4

Rural ST 34.1 19.0 7.3 Rural SC 30.9 18.0 15.9 Rural OC 77.6 38.9 51.4

OBC 62.0 34.2 31.3 Hindu Others (FC) 105.4 60.1 14.1 Non-Hindu Others 93.9 25.9 6.0

41

Table 3 Percentile Cutoffs for Scheme II, 2002 (in thousands of 2006 Rs)

Percentile Urban ST Urban SC Urban OBC Urban FC

Urban NH Rural ST Rural SC

Rural OBC Rural FC Rural NH All

5 0.8 0.7 1.1 2.5 1.0 2.7 2.1 3.4 6.1 2.4 2.410 1.8 2.0 3.1 6.0 2.1 4.8 4.0 6.6 12.0 4.5 5.115 3.3 3.7 5.8 11.0 4.7 6.3 5.5 9.5 18.1 5.9 7.620 5.2 5.6 8.8 17.3 8.3 7.7 7.0 12.3 22.8 7.3 10.225 7.0 7.9 12.3 24.5 11.2 9.3 8.6 15.2 27.7 9.5 12.930 9.8 10.6 16.1 33.1 14.5 11.0 10.1 18.3 33.0 11.8 16.035 12.0 13.4 20.1 42.2 18.0 12.6 11.9 21.6 39.2 14.8 19.340 14.7 16.3 24.2 52.8 22.8 14.7 13.6 25.6 45.5 17.9 23.045 18.2 19.4 29.0 64.6 27.9 16.6 15.8 29.7 52.5 21.4 27.350 20.8 22.6 34.8 77.7 34.5 19.0 18.0 34.2 60.1 25.9 32.055 23.6 27.2 41.4 93.1 42.0 21.6 20.3 39.1 68.9 31.0 37.660 28.9 31.0 49.0 111.7 52.1 24.7 23.3 45.0 78.9 38.1 44.465 38.0 35.1 58.4 131.7 65.3 28.5 26.6 51.3 89.9 46.8 52.370 49.0 41.1 70.5 155.5 84.5 32.0 31.0 60.1 104.2 59.0 62.875 61.4 50.4 83.9 191.8 107.7 37.3 36.2 70.8 122.4 76.7 76.380 77.3 63.6 106.9 235.0 139.1 43.8 43.2 83.9 145.3 104.1 94.585 102.9 81.8 143.2 290.9 189.9 52.8 52.2 102.8 181.2 145.1 122.290 144.9 109.8 192.3 379.3 273.9 71.6 66.5 136.1 230.5 220.8 170.195 220.6 168.8 313.1 562.9 429.0 110.4 98.3 205.9 331.0 402.3 272.3

42

Table 4 Caste and Occupational Status (percentage distribution across status) 1991 2002 OC Subgroups

ST SC OC ST SC OC

OBC Hindu FC Non-Hindu

Others Urban Elite 0.7 1.9 5.8 1.2 1.9 6.0 3.6 10.0 7.1Urban Middle 1.5 3.1 7.9 1.9 3.5 8.0 5.4 11.9 9.8Urban Manual 6.0 11.9 14.7 5.8 14.2 14.9 13.4 15.7 19.4Rural Elite 13.5 8.7 17.5 10.3 8.6 15.7 14.3 19.9 11.9Rural Middle 29.4 13.8 21.9 25.9 10.3 18.9 19.7 19.8 13.1Rural Working 48.8 60.7 32.3 55.0 61.6 36.6 43.7 22.9 38.8All 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

43

Table 5 Caste, Occupational Status and Wealth A. Mean Values in Thousands of 2006 Rs.

1991 2002 OC Subgroups

ST SC OC ST SC OC

OBC Hindu FC Non-Hindu

Others Urban Elite 82.1 64.7 180.6 144.0 104.3 231.6 178.9 270.9 211.7Urban Middle 64.7 39.3 87.4 69.6 57.7 116.3 81.9 144.4 115.7Urban Manual 30.8 23.4 52.7 50.4 35.5 83.4 62.1 123.4 69.0Rural Elite 49.4 52.2 112.6 72.9 62.3 151.5 122.4 167.9 235.1Rural Middle 31.1 43.8 67.1 50.1 65.2 99.4 85.5 111.3 145.4Rural Working 13.7 14.4 24.2 19.3 20.8 34.6 31.7 45.9 33.2

B. Status Disparity in Wealth by Caste (Ratio to Rural Working) 1991 2002 OC Subgroups

ST SC OC ST SC OC

OBC Hindu FC Non-Hindu

Others Urban Elite 5.99 4.48 7.47 7.45 5.02 6.68 5.65 5.91 6.38Urban Middle 4.72 2.72 3.62 3.60 2.77 3.36 2.59 3.15 3.48Urban Manual 2.25 1.62 2.18 2.61 1.71 2.41 1.96 2.69 2.08Rural Elite 3.60 3.62 4.66 3.77 3.00 4.37 3.86 3.66 7.08Rural Middle 2.27 3.03 2.77 2.59 3.14 2.87 2.70 2.43 4.38Rural Working 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

C. Caste Disparity in Wealth by Status (Ratio to OC)

1991 2002 OC Subgroups

ST SC OC ST SC OC

OBC Hindu FC Non-Hindu

Others Urban Elite 0.45 0.36 1.00 0.62 0.45 1.00 0.77 1.17 0.91Urban Middle 0.74 0.45 1.00 0.60 0.50 1.00 0.70 1.24 0.99Urban Manual 0.59 0.44 1.00 0.60 0.43 1.00 0.74 1.48 0.83Rural Elite 0.44 0.46 1.00 0.48 0.41 1.00 0.81 1.11 1.55Rural Middle 0.46 0.65 1.00 0.50 0.66 1.00 0.86 1.12 1.46Rural Working 0.57 0.60 1.00 0.56 0.60 1.00 0.91 1.32 0.96

44

Table 6 Occupational Status and Wealth A. Mean Values in Thousands of 2006 Rs.

Mean Median Percent Change Proportion 1991 2002 1991 2002 Mean Median 1991 2002 Urban Elite 170.8 220.2 64.3 104.5 28.9 62.4 4.6 4.8Urban Middle 82.4 109.1 38.3 53.1 32.5 38.5 6.4 6.6Urban Manual 47.0 72.8 19.9 27.1 54.7 36.2 13.4 14.0Rural Elite 101.5 136.0 56.6 71.7 33.9 26.7 15.5 13.9Rural Middle 59.8 89.7 41.1 60.2 50.0 46.5 21.0 17.7Rural Working 20.3 29.2 12.4 17.6 44.0 41.6 39.0 43.0All 55.7 75.3 24.9 32.0 35.1 28.4 100.0 100.0

B. Status Disparities in Wealth (Ratio to Rural Working)

Mean Median 1991 2002 1991 2002Urban Elite 8.43 7.55 5.19 5.95Urban Middle 4.07 3.74 3.09 3.02Urban Manual 2.32 2.49 1.60 1.54Rural Elite 5.01 4.66 4.56 4.08Rural Middle 2.95 3.08 3.32 3.43Rural Working 1.00 1.00 1.00 1.00

45

Table 7 Within and Between Group Inequality by Caste and Status

A. Caste Gini points Percentage shares 2002 2002 1991 Scheme I Scheme II 1991 Scheme I Scheme II Overall Gini 0.648 0.655 0.655 100.0 100.0 100.0 Within group 0.595 0.599 0.572 91.9 91.4 87.4 Between group 0.053 0.056 0.083 8.1 8.6 12.6 B. Status Gini points Percentage shares 1991 2002 1991 2002 Overall Gini 0.648 0.655 100.0 100.0 Within group 0.480 0.490 74.1 74.9 Between group 0.168 0.164 25.9 25.1

46

Table 8 Within Group Inequality and Overlapping by Caste

1991 2002

Population

share Wealth share Gini Overlap

Population share

Wealth share Gini Overlap

Urban ST 0.007 0.005 0.628 1.049 0.007 0.006 0.725 1.137Urban SC 0.031 0.017 0.627 1.056 0.038 0.023 0.632 1.051Urban OC 0.206 0.327 0.700 0.993 0.209 0.342 0.683 0.966

Urban OBC 0.090 0.102 0.677 1.016Urban FC 0.085 0.190 0.648 0.840Urban NH 0.034 0.050 0.713 1.054

Rural ST 0.080 0.035 0.526 0.913 0.073 0.033 0.568 0.969Rural SC 0.153 0.064 0.573 0.973 0.159 0.065 0.557 0.947Rural OC 0.522 0.551 0.595 0.918 0.514 0.530 0.609 0.929

Rural OBC 0.313 0.258 0.580 0.932Rural FC 0.141 0.197 0.563 0.791Rural NH 0.060 0.075 0.734 1.095

All 1 1 0.648 1 1 1 0.655 1

47

Table 9 Matrices of Overlapping and Ranks for Caste Groups, 2002

A. Overlapping

Urban ST

Urban SC

Urban OBC

Urban FC

Urban NH

Rural ST

Rural SC

Rural OBC

Rural FC

Rural NH

Urban ST 1 1.045 1.107 1.131 1.052 1.065 1.042 1.193 1.266 1.051Urban SC 0.938 1 1.009 0.928 0.933 1.051 1.032 1.119 1.111 0.963Urban OBC 0.881 0.916 1 1.062 0.951 0.905 0.885 1.068 1.179 0.928Urban FC 0.716 0.722 0.842 1 0.827 0.681 0.662 0.866 1.037 0.776Urban NH 0.915 0.944 1.041 1.133 1 0.928 0.906 1.100 1.230 0.970Rural ST 0.855 0.925 0.918 0.809 0.842 1 0.977 1.040 1.000 0.879Rural SC 0.852 0.924 0.889 0.739 0.812 1.021 1 1.017 0.934 0.868Rural OBC 0.794 0.849 0.908 0.903 0.838 0.851 0.831 1 1.070 0.826Rural FC 0.654 0.678 0.792 0.903 0.750 0.625 0.608 0.836 1 0.697Rural NH 0.937 0.973 1.075 1.163 1.029 0.971 0.945 1.148 1.277 1

B. Ranks

Urban ST

Urban SC

Urban OBC

Urban FC

Urban NH

Rural ST

Rural SC

Rural OBC

Rural FC

Rural NH

Urban ST 0.5 0.502 0.419 0.298 0.417 0.522 0.536 0.410 0.301 0.448Urban SC 0.498 0.5 0.410 0.282 0.409 0.526 0.541 0.402 0.283 0.445Urban OBC 0.581 0.590 0.5 0.362 0.492 0.622 0.634 0.502 0.381 0.531Urban FC 0.701 0.718 0.638 0.5 0.619 0.748 0.758 0.653 0.544 0.656Urban NH 0.582 0.590 0.508 0.381 0.5 0.616 0.628 0.509 0.400 0.534Rural ST 0.478 0.473 0.378 0.251 0.383 0.5 0.517 0.361 0.237 0.423Rural SC 0.463 0.459 0.366 0.242 0.371 0.483 0.5 0.348 0.227 0.409Rural OBC 0.590 0.598 0.497 0.347 0.491 0.639 0.652 0.5 0.363 0.538Rural FC 0.699 0.717 0.618 0.456 0.600 0.763 0.773 0.637 0.5 0.650Rural NH 0.551 0.555 0.469 0.344 0.466 0.576 0.591 0.461 0.350 0.5

48

Table 10 Within Group Inequality and Overlapping by Status

1991 2002

Populationshare

Wealth share Gini Overlap

Populationshare

Wealth share Gini Overlap

Urban Elite 0.046 0.142 0.694 0.763 0.048 0.141 0.640 0.728Urban Middle 0.064 0.095 0.640 0.948 0.066 0.096 0.620 0.921Urban Manual 0.134 0.113 0.674 1.089 0.140 0.135 0.701 1.083Rural Elite 0.155 0.283 0.578 0.764 0.139 0.250 0.599 0.798Rural Middle 0.210 0.226 0.453 0.679 0.177 0.211 0.464 0.642Rural Working 0.390 0.142 0.542 0.917 0.430 0.166 0.547 0.930All 1 1 0.648 1 1 1 0.655 1

49

Table 11 Matrices of Overlapping and Ranks for Status Groups, 2002

A. Overlapping

Urban Elite

Urban Middle

Urban Manual

Rural Elite

Rural Middle

Rural Working

Urban Elite 1 0.880 0.688 1.021 0.971 0.527Urban Middle 1.026 1 0.856 1.126 1.210 0.749Urban Manual 1.029 1.075 1 1.152 1.308 0.985Rural Elite 0.925 0.855 0.681 1 1.027 0.522Rural Middle 0.758 0.730 0.604 0.865 1 0.440Rural Working 0.654 0.796 0.843 0.773 1.009 1

B. Ranks

Urban Elite

Urban Middle

Urban Manual

Rural Elite

Rural Middle

Rural Working

Urban Elite 0.5 0.605 0.714 0.533 0.599 0.803Urban Middle 0.395 0.5 0.623 0.415 0.466 0.719Urban Manual 0.286 0.377 0.5 0.289 0.315 0.588Rural Elite 0.467 0.584 0.711 0.5 0.573 0.817Rural Middle 0.401 0.534 0.685 0.427 0.5 0.829Rural Working 0.197 0.281 0.412 0.183 0.171 0.5

50

Figure 1 Disparity in Wealth by Caste, 1991 and 2002 (Ratio to Mean or Median Values of Rural OC)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Mean Median Mean Median

1991 2002

Rat

io

Urban STUrban SCUrban OCRural STRural SC

51

Figure 2 Disparity in Wealth by among OC groups, 2002 (Ratio to Mean or Median Values of Rural OC)

0.00

0.50

1.00

1.50

2.00

2.50

OBC HinduOthers

Non-HinduOthers

OBC HinduOthers

Non-HinduOthers

Rat

io Mean

Median

Urban Rural

52

Figure 3 Deviation from Overall Percentile Cutoffs by Caste at Selected Percentiles, 2002 (in thousands of 2006 Rs.)

-200-175-150-125-100

-75-50-25

0255075

100125150175200225250275300325

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Percentiles

Thou

sand

s of

Rs

Urban STUrban SCUrban OBCUrban FCUrban NHRural STRural SCRural OBCRural FCRural NH

53

Figure 4 Urban-Rural Wealth Gap (as a Percent of Rural Wealth) by Caste at Selected Percentiles

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Percentile

Urb

an-R

ural

Gap ST

SCOBCFCNH

54

Figure 5 Percent Change in Wealth at Selected Percentiles by Caste Group, 1991 to 2002

-40%

-20%

0%

20%

40%

60%

80%

100%

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Percentiles

Perc

ent

Urban ST

Urban SC

Urban OC

Rural ST

Rural SC

Rural OC