REPORT ON INCOME INEQUALITY (Syllabus: GS Paper 2 – Social Justice)

Context: India’s richest people now have a larger share of national income than in more than a century. The top 1 per cent of Indians earns 22.6 per cent of the national income compared to 15 per cent earned by the bottom 50 per cent of the population, according to a study by the World Inequality Lab.

Highlights of the Report

• Growth in average incomes: Between 1960 and 2022, India's average income grew at an annual rate of 2.6% in real terms, with significant disparity between the periods before and after 1990.
• The years 2005-2010 and 2010-2015 experienced the fastest growth in average incomes, reaching rates of 4.3% and 4.9% per year respectively.
• Emergence of Very High Net Worth Individuals: From 1990 to 2022, there was a notable increase in national wealth alongside the emergence of individuals with net wealth exceeding $1 billion.
• Rise in the Percentage of Income Tax Payers: Economic reforms in 1991 led to a significant rise in the share of adult population filing income tax returns, surpassing 5% by 2011 and reaching approximately 9% during 2017-2020.
• Extreme Levels of Inequality in India: In 2022-23, 22.6% of India's national income was accrued by the top 1%, marking the highest level of income inequality since 1922.
• The wealth share of the top 1% reached 40.1% in 2022-23, surpassing even the levels observed during the colonial period, highlighting the severity of contemporary inequality.
• Extreme Wealth Concentration at the Very Top: Wealth accumulation in India is characterized by extreme concentration at the highest echelons, with the top 1% wealth share tripling between 1961 and 2023.

Income Inequality

• About: Income inequality encompasses the non-uniform distribution of income within a population, indicating a variance in earnings among individuals or groups.
• Relation to Wealth Inequality: Income inequality frequently coexists with wealth inequality, representing the uneven dispersion of assets and resources among individuals or segments of society.
• Analytical Frameworks: Various methodologies, including the Gini Index, are employed to assess and quantify the extent of income inequality within a given populace.
• Diverse Dimensions: Income inequality can be dissected along multiple axes such as gender or race, shedding light on distinct facets of economic disparity within societies.