Source: The post India’s Inequality Data Sparks Confusion and Misinterpretation has been created, based on the article “Two unequal” published in “Indian Express” on 15th July 2025
UPSC Syllabus Topic: GS Paper 1- society-poverty and developmental issues
Context: A debate erupted over claims that India is among the most equal societies globally. Triggered by government endorsements and media reports citing low consumption inequality, the discussion has become entangled in misinterpretations and misuse of data sources. India’s Inequality Data Sparks Confusion and Misinterpretation
Misinterpretation of India’s Global Rank
- False Claims about India’s Economic Standing: An essay published by ORF inaccurately stated that India is the world’s fourth-largest economy and fourth most equal society. In reality, India may reach the fourth-largest economy status only by 2027.
- Incorrect Statement on Equality: The government and BJP echoed these claims, suggesting India ranked fourth in social equality. However, India was most equal only in terms of consumption inequality, not income.
- Criticism and Counter-Errors: Critics rightly challenged the false comparisons but also committed errors. For example, Surbhi Kesar warned against comparing consumption Gini with income Gini—yet later used WID’s synthetic income data instead of actual consumption or income surveys.
Understanding the Measurement Challenges
- Consumption vs. Income Distribution: Inequality is generally measured by either consumption or income distribution. India has no official income distribution survey, making any claim on income inequality speculative.
- Limits of Household Surveys: Surveys are universally acknowledged as the best instruments for inequality measurement, despite their imperfections. Official data remains the most credible.
- Role of the World Bank’s PIP: The Poverty Inequality Platform (PIP) by the World Bank compiles survey-based income and consumption data from 167 countries. It only includes data provided officially by governments.
Data Limitations and Anomalies
- India’s Unique Data Profile: India lacks official income data, hence PIP shows only consumption inequality. Still, the World Bank’s April 2025 brief oddly cites WID’s synthetic income data exclusively for India.
- China’s Partial Compliance: While most countries submit unit-level data to the World Bank, China only provides 5-percentile summaries. This exception is unique and suggests a need for more transparency from global powers like China.
- Contradictory Results on Inequality: PIP data shows India had the lowest consumption inequality (Gini of 25.5 in 2022), while WID reports India’s income Gini at 62 in 2023. Such a large gap (36.5 points) is statistically improbable and undermines the credibility of the sources.
Credibility of Data Sources in Question
- World Bank’s Dual Messaging: Despite its history of reliable survey-based data collection, the World Bank simultaneously promotes two contradictory figures—one from PIP and another from WID—without explaining the inconsistency.
- Reliability of WID Estimates: WID uses synthetic estimates based on assumptions. These have been questioned in American economic journals for being unrealistic, especially for countries like the US and now India.
- Call for Accountability: This contradiction—lowest consumption inequality and highest income inequality for the same country—has never been recorded before. The inconsistency calls for clarification from both the World Bank and WID.
Conclusion
India’s inequality debate reveals deep flaws in data interpretation and source usage. Miscommunication by both government and critics, and paradoxical data endorsements by the World Bank, raise serious questions about the credibility of inequality metrics and the organisations presenting them.
Question for practice:
Examine how the misinterpretation and misuse of inequality data have affected the credibility of official and synthetic data sources in India.
