Economy News

Consumption inequality in India falls, shows survey

The Gini coefficient figures (mentioned above) shows the level of consumption inequality is way higher in urban households as compared to rural households.

Inequality in India in terms of consumption across households has declined in the past decade, reveals the Household Consumption Expenditure Survey (HCES) 2022-23. As per the report, released by the statistics ministry on Friday, the Gini coefficient – an index to measure inequality – fell in both rural and urban households in 2022-23 from its level in 2011-12.

As per the survey, the Gini coefficient fell to 0.266 in 2022-23 from 0.283 in 2011-12, for rural households; and for urban ones, it fell to 0.314 from 0.363. The index is one of the most widely used measures of income inequality across the world. The Gini coefficient score lies between 0 and 1, where complete equality would result in a score of zero and complete inequality would result in 1.

The figure stated above for households, however, depicts the state of consumption inequality, and not income inequality. Therefore, to say that the fall in Gini coefficient in HCES 2022-23, also means a fall in income inequality across households may not be correct, say economists.

“Income and consumption could be the same for the lowest strata of the society. The low wage earners, on a monthly basis, usually use their entire income for consumption, but that’s not the case for high wage earners,” said NR Bhanumurthy, vice chancellor, Bengaluru’s BASE University.

The factsheet of the HCES survey, released three months earlier, had shown that rural average monthly consumption spending per person had increased to Rs 3,773 per month in 2022-23 from Rs 1,430 per person in 2011-12; and urban average monthly consumption expenditure per person had risen to Rs 6,459 in 2022-23 from Rs 2,630 per person in 2011-12.
The Gini coefficient figures (mentioned above) shows the level of consumption inequality is way higher in urban households as compared to rural households. In fact, between 2011-12 and 2022-23, the inequality in rural households has not fallen sharply, but in urban households, it has.

The HCES 2022-23 revealed that the consumption share of the total average monthly per capita consumption expenditure for the poorest households in rural areas remained unchanged at 1.8% between 2011-12 and 2022-23. However, in urban areas, it increased from 1.3% to 1.5%.

For the middle 40-70% of households, the share rose by 90 basis points (bps) in rural areas, and by 140 bps in urban areas during this period. However, for the top 10% households, the share in rural areas declined by 190 bps, and in urban areas, it fell by 400 bps.

Across India, the five major states where consumption inequality, in 2022-23, for urban households is the highest are: Haryana, Odisha, Kerala, Maharashtra, and Chhattisgarh. And for rural areas, the states are: Maharashtra, Rajasthan, Kerala, Tamil Nadu, and Andhra Pradesh.

On the contrary, the states with lowest consumption inequality in rural households are: Bihar, Assam, Telangana, Punjab and Karnataka. Whereas, in urban households, the states are: Punjab, Telangana, Bihar, Tamil Nadu, and Andhra Pradesh.
For income inequality, the government doesn’t maintain official data. However, data from the income tax is often used to gauge changing income patterns. A Press Information Bureau (PIB) report in January 2024 quoted a study by SBI Research, which revealed that income inequality has declined in recent years in India, supporting the trend of upward migration through increased income and the ascent of the Indian middle class.

As per the SBI report, income tax returns (ITRs) filed by individual taxpayers earning between Rs 5 lakh and Rs 10 lakh climbed by 295% in the assessment years (AY) 2013–14 and 2021–22. The number of ITRs filed by people earning between Rs 10 lakh and Rs 25 lakh also increased by nearly 3 times (291%) during the same period. Using this measure, SBI Research calculated that the Gini coefficient has declined from 0.472 during AY 2014-15 to 0.402 for AY 2022-23.

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