INCOME INEQUALITY IN INDIA

MADHURA SWAMINATHAN AND VIKAS RAWAL

• There is an impression – both within India and outside – that India is a country of relatively low income inequality.

• India’s Gini index more favourable that those of comparable countries like South Africa, Brazil … China, and even the USA, which are otherwise ranked very high in human development.

• India 36.8 • South Africa 57.8• Brazil 55• China 41.5• USA 40.8

Source: HDR 2010 cited in Economic Survey 2010-2011

• Income versus expenditure inequality

• Comparing non-comparables, like tea and rice

• Inequality in expenditure less than inequality in incomes

• Savings of rich households

• Expenditure of poor households (dis-saving)

• Levels versus trends

INCOME DATA FROM NCAER

• National Council for Applied Economic Research (NCAER)

• 1993: covered 16 States and 35,130 households

• 2005: covered all States and 26,734 rural households and 14,820 urban households

• Estimates of income inaccurate

• Aggregated (recall problems)

• Non-standardised questions

• Consistency across households

• Gini for rural incomes was 0.46 in 1993-94 and 0.50 in 2004-05 (Azam and Shariff 2009)

• Gini for rural incomes was 0.54 in 2004-05 (Vanneman and Dubey 2010)

VILLAGES SURVEYED IN 2006 AND 2007

Table 1 Location of survey villages

VILLAGE DISTRICT STATE AGROECOLOGICAL TYPE

ANANTHAVARAM

GUNTUR ANDHRA PRADESH

PADDY DOMINATED AREA

BUKKACHERLA ANANTAPUR ANDHRA PRADESH

DRY AND DROUGHT PRONE, GROUNDNUT AREA

KOTHAPALLE KARIMNAGAR ANDHRA PRADESH

GROUND WATER IRRIGATED, MULTI-CROP

HAREVLI BIJNOR UTTAR PRADESH

100% CANAL IRRIGATED, WITH GROUND WATER,

WHEAT-SUGARCANE

MAHATWAR BALLIA UTTAR PRADESH

GROUND WATER IRRIGATED, WHEAT PADDY ROTATION

WARWAT KHANDERAO

BULDHANA MAHARASHTRA

UN-IRRIGATED, COTTON REGION

NIMSHIRGAON KOLHAPUR MAHARASHTRA

IRRIGATED SUGARCANE AND MULTI-CROP SYSTEM

25F GULABEWALA

SRIGANGANAGAR

RAJASTHAN CANAL AND GROUNDWATER IRRIGATION, WITH COTTON,

WHEAT AND MUSTARD

Methodology• Income includes all cash and kind incomes.

• All incomes are net of costs incurred by the households in the process of production and income generation.

• The surveys used a comprehensive definition of incomes, and included detailed modules on incomes from crop cultivation, from animal husbandry and from wage labour, as well as from salaried employment, non-agricultural self-employment, rent and other transfers.

• A total of 20 sources of income were used to construct the final income variable.

• Survey years: 2005-06 (5 villages) and 2006-07 (3 villages)

• All incomes at 2005-06 prices

Table 2 Mean and median annual household incomes (in Rs)

VILLAGE STATE YEAR MEANMEDIA

N

ANANTHAVARAMANDHRA PRADESH

2006 59,173 25,629

BUKKACHERLAANDHRA PRADESH

2006 36,572 19,517

KOTHAPALLEANDHRA PRADESH

2006 33,987 22,309

HAREVLI UTTAR PRADESH 2006 70,477 26,575

MAHATWAR UTTAR PRADESH 2006 31,237 19,895

WARWAT KHANDERAO

MAHARASHTRA 2007 58,115 31,488

NIMSHIRGAON MAHARASHTRA 2007 69,074 40,293

25f GULABEWALA RAJASTHAN 2007149,77

438,430

Table 3 Mean per capita income, study villages in Rs per annum at 2005-06 prices

Village (State)Year of survey All

Ananthavaram (AP) 2005-06 16,676

Bukkacherla (AP) 2005-06 9,536

Kothapalle (AP) 2005-06 9,438

Harevli (UP) 2005-06 11,657

Mahatwar (UP) 2005-06 4,487

Warwat Khanderao (MAH) 2006-07 11,108

Nimshirgaon (MAH) 2006-07 13,819

25 F Gulabewala (RAJ) 2006-07 26,991

Table 4 Gini coefficients of per capita income, by village (in per cent)Village Persons

Ananthavaram 60.2

Bukkacherla 53.9

Kothapalle 56.5

Harevli 59.8

Mahatwar 51.6

Warwat Khanderao 53.1

Nimshirgaon 49.1

25 F Gulabewala 68.6

Note. These are adjusted Gini coefficients, following Chen, Tsaur and Rhai (1982).

There were substantial variations across villages, although the common feature of the three villages with higher than average inequality was that they were canal-irrigated villages.

Table 5 Gini coefficients of per capita income, selected countries

Country/Region

Gini coefficient of per capita income

(%)

Slovak Republic 19.5

Paraguay 62.3

Latin America 56.0

Europe 36.0

Japan 27.1

Former Soviet Union countries

34.4

China* 36.0

India* 30.0

Palma (2006) and *from ESCAP Yearbook 2009.

Table 6 Distribution of per capita income by decile, study villages in per cent

DecileAnanthava

ramBukkache

rla

Warwat Khander

aoNimshirgao

n

25 F Gulabew

ala

1 0.43 -0.37 1.12 1.80 0.64

2 1.64 2.03 2.41 2.65 1.06

3 2.60 2.95 3.25 3.47 1.41

4 3.42 4.15 3.99 4.41 1.88

5 4.39 5.91 5.11 5.36 2.49

6 5.94 6.89 6.65 6.77 3.66

7 7.68 9.16 8.58 8.95 6.06

8 9.92 11.93 11.61 12.55 10.52

9 14.28 17.56 16.29 16.54 18.36

10 49.70 39.78 40.99 37.50 53.92

All 100.00 100.00 100.00 100.00 100.00

D10/D9 3.48 2.27 2.52 2.27 2.94

Figure 1. Kernel density plots of per capita incomes for persons belonging to Dalit and Other households, Ananthavaram, Andhra Pradesh

Figure 2. Kernel density plots of per capita incomes for persons belonging to Dalit and Other households, Bukkacherla, Andhra Pradesh

Figure 3. Kernel density plots of per capita incomes for persons belonging to Dalit and Other households, 25 F Gulabewala, Rajasthan