Income Inequalities

Post-independence, India followed a socialist model with high taxation and redistribution. Post-1991 economic liberalization enabled higher growth (~6% annually) that lifted ~400 million out of poverty.

Poverty Trends

  • Using World Bank poverty line ($2.15/day at 2017 PPP):
    • Poverty declined from 40% in 2000 to 13% in 2021.
    • Latest estimates (2022-23): Urban poverty is 10%, Rural poverty is 5%.
    • Multidimensional Poverty fell significantly (sanitation, electricity access improved for 135 million during 2015–2020).

Consumption Trends & K-shaped Recovery Myth

  • The article challenges the narrative of a K-shaped recovery (where the rich get richer, and the poor get poorer), often cited to justify rising income inequality.
  • Actual market data from the FMCG sector suggests consumption patterns are broad-based, not elite-focused.

Emerging Middle Class

  • People earning ₹5–31 lakh/year rose from:
    • 14% (2005) → 31% (2021) (≈432 million people).
    • Projected to become 61% by FY30.
    • Affluent class (>₹31 lakh/year) to double from 10% to 19%.
Income Inequalities

Mobility Over Stagnation

  • 450 million moved above the $2/day line (2000–2012).
  • Worker Population Ratio increased from 7% (FY18) → 43.7% (FY24).
  • Shift to better-quality jobs aided by high growth (8.8% annually during 2021–24).
  • Average per capita income (FY24): ~₹2 lakh.

Wealth Generation Trends

  • India has 85 million dollar millionaires (0.6% of global total), while holding 17.2% of global population.
  • Wealth creation is inclusive:
    • Start-ups, IPOs, MSME credit, democratization of profit-sharing have increased.

Equity in Opportunity

  • Credit to MSMEs has grown. New $1B+ listed firms have increased 20x since 2000.
  • India's entrepreneurial base is widening, indicating upward mobility

Better Focus Areas

  • Research and policy must focus on:
    • Earnings mobility, not just static inequality.
    • Skill development, better jobs, and public service delivery (health, housing, education).
    • Strengthening third-tier governance for effective implementation at the grassroots level

Welfare with Minimal Leakages

  • FY23: $45 billion (1.2% of GDP) went to targeted groups via direct benefit transfers (DBTs).
  • Free cereals under PDS supplemented incomes.

Way Forward

  • Sustainable growth requires inclusive consumption and upward mobility. Policy must not stunt growth in the name of equity. Key objective is to Empower citizens across income groups to participate in and benefit from growth.