{"id":63697,"date":"2026-01-08T17:48:50","date_gmt":"2026-01-08T12:18:50","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=63697"},"modified":"2026-01-08T18:14:31","modified_gmt":"2026-01-08T12:44:31","slug":"economic-inequality-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/08-01-2026\/economic-inequality-india","title":{"rendered":"Worrying Trends in Economic Inequality in India"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Economic inequality has sharply increased across the world, both between and within countries.\u00a0<\/li>\n\n\n\n<li>In the <strong>Global South<\/strong>, as in the <strong>Global North<\/strong>, growth and inequality now seem to move together, as economic expansion often benefits higher-income groups more.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About Economic Inequality<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It refers to the <strong>unequal distribution of income, wealth, and opportunities<\/strong> among individuals or groups within and between societies.\n<ul class=\"wp-block-list\">\n<li>It manifests in differences in wages, access to resources, education, healthcare, and living standards.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Some degree of inequality is inevitable in any economy, but excessive inequality can threaten <strong>social cohesion, political stability, and sustainable growth<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Types of Economic Inequality<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Income Inequality: <\/strong>It occurs when earnings from wages, investments, and transfers are distributed unevenly among individuals or households.\n<ul class=\"wp-block-list\">\n<li>The <strong>Gini coefficient<\/strong> is the most widely used measure, where <strong>0 represents perfect equality<\/strong> and <strong>1 (or 100%) represents extreme inequality<\/strong>.<\/li>\n\n\n\n<li>For example, countries like <strong>Denmark (Gini \u2248 0.25)<\/strong> show low inequality, while <strong>South Africa (Gini \u2248 0.63)<\/strong> faces severe inequality.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Wealth Inequality: <\/strong>It deals with disparities in the ownership of assets \u2014 such as land, property, stocks, and savings.\n<ul class=\"wp-block-list\">\n<li>It is <strong>more extreme<\/strong> than income inequality because wealth accumulates over generations.<\/li>\n\n\n\n<li>According to the <a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/11-12-2025\/world-inequality-report\"><strong>World Inequality Report (2026)<\/strong><\/a><strong>, <\/strong>the <strong>top 10% globally own three-quarters of all wealth<\/strong>, and <strong>bottom 50% hold just 2%<\/strong>; and <strong>top 1% <\/strong>control <strong>37% of global wealth<\/strong>, <strong>18 times more than the bottom half<\/strong> of the world combined.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Opportunity Inequality: <\/strong>It reflects unequal <strong>access to education, healthcare, employment, and social mobility<\/strong>, and can <strong>reproduce inequality across generations<\/strong> even if income equality is achieved temporarily.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Measuring Income Inequality<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A <strong>common way <\/strong>to assess inequality is through the <strong>income ratio<\/strong> between the top 10% and bottom 50%.\n<ul class=\"wp-block-list\">\n<li><strong>In India,<\/strong> the<strong> income ratio<\/strong> stands at <strong>3.87<\/strong>, meaning the top decile earns nearly <strong>four times<\/strong> what the bottom half earns.<\/li>\n\n\n\n<li><strong>In India,<\/strong> the <strong>top 10%<\/strong> of earners hold a disproportionately large share of both income and wealth, and the <strong>bottom 50%<\/strong> hold only about <strong>6% of total wealth<\/strong>.<\/li>\n\n\n\n<li>It is <strong>higher than in China or Russia<\/strong>, but <strong>lower than in Brazil and South Africa<\/strong>, where inequality is extreme.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"e7eaec\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"535\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-36.png\" alt=\"measuring income inequality\" class=\"not-transparent wp-image-63698\" style=\"--dominant-color: #e7eaec; width:441px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-36.png 770w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-36-300x208.png 300w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-36-768x534.png 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n<\/div>\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"cee0e8\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"755\" height=\"568\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-37.png\" alt=\"\" class=\"not-transparent wp-image-63699\" style=\"--dominant-color: #cee0e8; aspect-ratio:1.3292619185166845;width:509px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-37.png 755w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/image-37-300x226.png 300w\" sizes=\"auto, (max-width: 755px) 100vw, 755px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>Gini Coefficient: Diverging Trends<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Income vs. Consumption Gini: <\/strong>India\u2019s <strong>consumption Gini coefficient<\/strong> (a measure of inequality based on household spending) fell to <strong>0.255 in 2022\u201323<\/strong>, suggesting relatively equal consumption patterns.\n<ul class=\"wp-block-list\">\n<li>However, it <strong>understates true inequality<\/strong>, as it excludes income saved or invested and overlooks the wealth of the very rich.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Income and Wealth Gini: <\/strong>According to the <strong>World Inequality Database<\/strong>, India\u2019s <strong>income Gini<\/strong> rose sharply from <strong>0.47 in 2000<\/strong> to <strong>0.61 in 2023<\/strong>, signaling deepening inequality.\n<ul class=\"wp-block-list\">\n<li>The <strong>top 1%<\/strong> of earners now capture a much larger share of national income and own around <strong>40% of the nation\u2019s total wealth<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons of Inequality<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Declining Social Spending<\/strong>: The <strong>public spending on social sectors<\/strong> has not kept pace despite clear evidence of rising inequality.\n<ul class=\"wp-block-list\">\n<li>The <strong>social-sector spending<\/strong> has <strong>stagnated or declined<\/strong>, falling to <strong>17% in 2024\u201325<\/strong> and projected to reach <strong>only 19% in 2025\u201326<\/strong>.<\/li>\n\n\n\n<li><strong>Social-sector spending <\/strong>includes health and education allocations, public health expenditure, and education spending.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Uneven growth<\/strong> favoring high-skill and urban sectors.<\/li>\n\n\n\n<li><strong>Jobless growth<\/strong> and rise of the <strong>gig economy<\/strong>, leading to precarious employment.<\/li>\n\n\n\n<li><strong>Persistent inequality in access<\/strong> to education, healthcare, and credit.<\/li>\n\n\n\n<li><strong>Wealth-income feedback<\/strong>, where high-income households accumulate more assets, further amplifying inequality.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Recent Policy Loophole<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Viksit Bharat \u2013 Guarantee for Rozgar and Ajeevika Mission (VB-GRAM) (Gramin): <\/strong>It replaces the <strong>MGNREGS<\/strong>, a demand-driven program providing guaranteed rural employment.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>VB-GRAM <\/strong>is <strong>supply-driven<\/strong> and depends heavily on <strong>state government funding<\/strong>, despite their limited fiscal capacity, unlike MGNREGS.<\/li>\n\n\n\n<li>The shift from <strong>MGNREGS to VB-GRAM<\/strong> risks worsening inequality by reducing income security for the rural poor.<\/li>\n\n\n\n<li>Reinstating a <strong>demand-based employment guarantee<\/strong> would be an essential first step in restoring economic balance.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Policy Responses and Fiscal Priorities<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Economic Survey (2024-25):<\/strong> It shows that India\u2019s fiscal and structural policies have helped <strong><em>Gini coefficient decline<\/em><\/strong><strong> in both rural and urban areas<\/strong>, indicating reduced inequality over recent years.<\/li>\n\n\n\n<li><strong>Social Sector Spending: <\/strong>Government budgets have progressively increased social sector expenditure.\n<ul class=\"wp-block-list\">\n<li><strong>Health: <\/strong>Government health expenditure increased from 29% to 48% of total health spending (reducing out-of-pocket burdens).<\/li>\n\n\n\n<li><strong>Poverty &amp; Healthcare: <\/strong>AB-PMJAY significantly reduced out-of-pocket healthcare expenditure for many households.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Financial Inclusion &amp; Welfare Transfers: <\/strong>Government programs explicitly designed to bring economically disadvantaged populations into <em>formal financial and welfare networks<\/em>:\n<ul class=\"wp-block-list\">\n<li><strong>Pradhan Mantri Jan Dhan Yojana (PMJDY):<\/strong> Created bank accounts for millions, giving access to formal financial services and welfare benefits.<\/li>\n\n\n\n<li><strong>Direct Benefit Transfer (DBT):<\/strong> Improved targeting and reduced \u2018leakage\u2019 in welfare delivery.<\/li>\n\n\n\n<li><strong>Stand-Up India and PM Vishwakarma:<\/strong> Provide credit and support to Scheduled Castes \/ Scheduled Tribes \/ women entrepreneurs, enabling <em>inclusive entrepreneurship<\/em>.<\/li>\n\n\n\n<li><strong>PM Garib Kalyan Anna Yojana (PMGKAY):<\/strong> Food security support to vulnerable households remains a key redistributive instrument.<\/li>\n\n\n\n<li><strong>PM-KISAN:<\/strong> Income support to small and marginal farmers.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Access &amp; Digital Inclusion: <\/strong>India\u2019s fiscal policy places priority on <strong>digital infrastructure and identity systems<\/strong>, e.g., Aadhaar linking for welfare delivery and market access.<\/li>\n\n\n\n<li><strong>Linking to SDGs: <\/strong>India tracks representation and access metrics including gender and caste representation in governance under <strong>SDG 10 (\u2018Reduce inequality within and among countries\u2019).<\/strong><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Forward: Towards Inclusive Growth<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India\u2019s <strong>low household purchasing power<\/strong> constrains domestic demand and limits job creation. To achieve <strong>inclusive and sustainable growth<\/strong>, policies need to:\n<ul class=\"wp-block-list\">\n<li>Strengthen <strong>public employment programs<\/strong>.<\/li>\n\n\n\n<li>Expand <strong>social protection and welfare schemes<\/strong>.<\/li>\n\n\n\n<li>Increase <strong>wages<\/strong> and <strong>support to labor-intensive industries<\/strong>.<\/li>\n\n\n\n<li>Prioritize <strong>education, health, and rural infrastructure<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>A demand-driven approach that <strong>raises incomes of the bottom and middle classes<\/strong> is vital to sustain economic growth and reduce inequality.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#ebecf0\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> Examine the recent trends in economic inequality in India. What are the key drivers behind this inequality, and how effective have government policies been in addressing it?<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.thehindubusinessline.com\/opinion\/worrying-trends-in-economic-inequality-in-india\/article70477499.ece\" target=\"_blank\" rel=\"noopener\">Source: BL<\/a><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2026\/01\/Daily-Editorial-Analysis-08-01-2026-1.pdf\"><strong>Download PDF<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Published on:<\/strong> 08 January, 2026<\/p>\n<p>Economic inequality has sharply increased across the world, both between and within countries.\u00a0<\/p>\n","protected":false},"author":4,"featured_media":63702,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-63697","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/Editorial-Analysis-900-600-5.webp","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/63697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=63697"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/63697\/revisions"}],"predecessor-version":[{"id":63706,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/63697\/revisions\/63706"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/63702"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=63697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=63697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=63697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}