Why in news?
The World Bank’s Spring 2025 Poverty and Equity Brief placed India in the “moderately low inequality” category with a Gini coefficient of 25.5, ranking it among the world’s more equal large economies. This sparked discussion on the effectiveness of India’s welfare programmes and economic reforms.
Understanding the Gini coefficient
- The Gini coefficient measures income or consumption inequality on a scale of 0 (perfect equality) to 100 (perfect inequality). Developed countries like Sweden tend to have Gini values around 25–30, while some Latin American nations exceed 50.
- India’s 25.5 score implies that consumption is distributed relatively evenly compared to many countries. In 2011 the figure was around 28, suggesting a gradual decline in inequality over the last decade.
Factors behind improved equality
- Inclusive welfare schemes: Government programmes such as the Pradhan Mantri Jan Dhan Yojana (financial inclusion), Ayushman Bharat (health insurance), PM-KISAN (income support for farmers) and the Public Distribution System have targeted the poor more effectively.
- Rural development: Investments in rural roads, electricity, housing and sanitation have improved living standards in villages and narrowed the rural–urban gap.
- Direct benefit transfers: Digitised payment systems have reduced leakage and ensured that subsidies reach beneficiaries directly.
- Labor migration: Migration from rural areas to cities and overseas has diversified income sources and remittances.
Areas of concern
- Job creation: While consumption inequality has declined, unemployment and underemployment remain high. Millions of youth are neither employed nor engaged in education or training.
- Wealth inequality: The Gini index measures consumption; wealth and asset distribution may still be highly unequal, with a concentration of land and financial assets.
- Regional disparities: States such as Bihar and Uttar Pradesh remain poorer than southern and western states. Economic growth has been uneven.
- Gender gaps: Women’s labor force participation is low, and wage gaps persist across sectors.
Way forward
- Strengthen labour‑intensive manufacturing and services to generate quality jobs.
- Improve education and skill training to enhance workforce productivity and employability.
- Address wealth concentration through progressive taxation, land reforms and transparent asset disclosures.
- Expand social safety nets to include informal workers and gig workers.
