SBI Report on Income inequality in India

Source-This post is based on the article “Income inequality shrinks, Mobility on the Rise : SBI Research Report” published in “PIB” on 8th January 2024.

Why in the News?

According to SBI Research latest report, there has been a reduction in income inequality in India, signaling a favorable shift towards upward mobility and the expansion of the middle class.

What are the findings of the report?

1) Increasing tax base- The report, citing CBDT data, notes a continuous expansion in the Income Tax base. The number of tax filers increased to 74 million in AY 2022-23 from 70 million in AY 2021-22.

2) Decline in Gini Coefficient- Gini Coefficient(a measure of income inequality) has declined from 0.472 during Assessment Year 2014-15 to 0.402 for AY 2022-23.

3) Share of Top earners declined – The share of top earners with incomes exceeding Rs 10 crores and Rs 100 crores has decreased from 2013-14 to 2020-21.

4) Improving upward mobility – The drop in income inequality stems from significant upward mobility.  More than 36% of individuals originally in the lowest income bracket in FY14 have transitioned to higher income levels. It led to a notable 21% increase in their earnings from FY14 to FY21.

5) The report indicates rising female labour force participation.

6) Evident shifts in income levels for MSMEs and evolving consumption patterns in the aftermath of the Covid-19 pandemic debunk the myth of K-shaped growth.

What is Gini coefficient?

1) The Gini coefficient, derived from the Lorenz curve, serves as an indicator of income or wealth inequality.

2) The coefficient ranges from 0 (0%) to 1 (100%), 0 representing perfect equality (where every resident in a country has the same income) and 1 representing perfect inequality (one resident earned all income and the rest earned nothing). Higher the value of Gini coefficient, higher the inequality.

UPSC Syllabus- Indian Economy