Recent studies indicate notable shifts in income inequality in India, especially in the wake of the Covid-19 pandemic.

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Recent studies indicate notable shifts in income inequality in India, especially in the wake of the Covid-19 pandemic. According to a working paper from People Research on India’s Consumer Economy (PRICE), there has been a modest recovery in income distribution, but wealth remains heavily concentrated among the highest earners. This calls for continued, inclusive economic policies to foster more balanced growth across all segments of society.

Understanding Gini Index

The Gini index is a key metric used to measure income inequality. The scale ranges from 0 to 100, where 0 represents complete equality, and 100 indicates extreme inequality. In India, the Gini index improved from 0.506 in 2020-21 to 0.410 in 2022-23, signaling a positive trend in income distribution. However, this figure still exceeds the 0.367 recorded in 2015-16, suggesting that significant disparities remain.

Income Distribution After Pandemic

For the lower-income group, the share of income held by the bottom 50% of earners increased from 15.84% in 2020-21 to 22.82% in 2022-23. This group includes workers from informal sectors such as laborers, small traders, and marginal farmers. However, their share still lags behind the 24.07% recorded in 2015-16.

The middle 40% also saw some improvement in their share of income, which rose from 43.9% to 46.6% over the same period.

Influence Of High-Income Earners

The top 10% of income earners saw a significant increase in their share of national income during the pandemic, reaching 38.6% in 2020-21. This surge was largely driven by the digital transformation of the economy and growth in technology sectors. While their share decreased to 30.6% in 2022-23, it still represents a substantial portion of the country's income. The top 1% of earners saw their income share peak at 9.0% in 2020-21, but it fell to 7.3% in 2022-23.

Role Of Social Welfare Initiatives

Social welfare programs have played an essential role in improving income distribution. Schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and Direct Benefit Transfer (DBT) have helped raise the income levels of lower-income groups. These programs aim to provide financial support to marginalized communities and enhance their economic resilience.

Recommendations For Inclusive Growth

To further reduce income inequality, the paper recommends increased investment in education, healthcare, and infrastructure, particularly in rural areas. Implementing progressive taxation and strengthening social safety nets are also crucial for ensuring that the benefits of economic growth are distributed equitably. Policymakers must remain proactive and adaptable to sustain these improvements and address inequalities across various sections of society.

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