India Rises as One of the World’s Most Income-Equal Nations: Progress, Perspectives, and Challenges

India has made remarkable strides in reducing income inequality, securing the position as the fourth most income-equal country globally according to the latest World Bank report covering 2011–12 to 2022–23. This achievement reflects a significant behavioral and structural shift in the nation’s socio-economic landscape, highlighting both the successes of targeted policies and the complex challenges that remain.

India is much better placed than countries like China, the USA and the United Kingdom. (Representational) | NDTV

A Decade of Declining Inequality

The World Bank’s data reveals a notable decline in India’s Gini coefficient, a key indicator of income distribution inequality. The Gini index, where 0 represents perfect equality and 100 denotes extreme inequality, fell from 28.8 in 2011–12 to 25.5 in 2022–23. This shift places India just behind countries such as the Slovak Republic, Slovenia, and Belarus, and ahead of major economies including the United States and China.

This steady decline in inequality suggests that the benefits of economic growth have become more widely shared across India’s diverse population. Importantly, India now belongs to the “moderately low” inequality bracket, alongside nations like Iceland, Norway, Finland, and Belgium, marking a significant milestone for a large and populous emerging economy.

Significant Reduction in Poverty Levels

The decrease in income inequality goes hand in hand with a dramatic reduction in poverty rates across the country. The World Bank report highlights that between 2011 and 2023, approximately 171 million Indians escaped extreme poverty, defined as living on less than $2.15 per day. During this period, the poverty rate fell sharply from 16.2% to just 2.3%. Even when using a higher poverty threshold of $3 per day, the poverty rate remains low at about 5.3%, signaling vast improvements in living standards.

These gains are observed in both rural and urban areas, with urban poverty rates dropping from 10.7% to 1.1% and rural poverty from 18.4% to 2.8%. Such narrowing of the gap indicates that growth and welfare measures are impacting multiple segments of society, fostering a more balanced economic environment.

Role of Government Initiatives in Driving Equity

The Indian government’s ambitious social welfare programs and digital infrastructure initiatives have played a pivotal role in fostering this improved economic equality. One of the landmark programs, the Pradhan Mantri Jan Dhan Yojana, has successfully brought over 550 million people into the formal banking system, enabling financial inclusion on an unprecedented scale.

The Aadhaar system, with its 1.42 billion enrolled users, has revolutionized direct benefit transfers by ensuring subsidies and welfare payments reach the intended beneficiaries without leakages. This digital infrastructure has reportedly saved the government billions of dollars in unnecessary expenditures.

Health coverage initiatives like Ayushman Bharat have extended insurance coverage to over 410 million citizens, offering crucial financial protection against medical emergencies. Complementary programs such as Stand-Up India and PM Vishwakarma Yojana have supported entrepreneurs and artisans, while the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) has ensured food security for nearly 800 million individuals through subsidies and direct aid.

Together, these schemes have not only lifted millions out of poverty but also reinforced the foundations of equitable growth.

Nuances in Interpreting Inequality Data

While the consumption-based Gini coefficient portrays India as a relatively equal society, experts caution against over-simplification. The income inequality measured by other means paints a different picture. Using income data, India’s Gini index is significantly higher—close to 61—indicating a wider gap between the richest and poorest segments.

Data from the World Inequality Database suggests the top 10% earners make thirteen times more than the bottom 10%, underscoring persistent disparities. Moreover, consumption data may underestimate true inequality because it often fails to capture wealth concentration, informal income, and underreported earnings.

Changes in survey methodologies and data collection techniques over the years also influence comparability, adding complexity to interpreting trends.

Ongoing Challenges and Future Outlook

Despite notable progress, India continues to face structural challenges that may hamper further equalization. Formal employment opportunities remain limited, with only about 23% of non-farm jobs in the formal sector. Unemployment and underemployment issues, especially among the youth, persist, while gender disparities in labor force participation and wages remain significant.

Wealth distribution remains highly skewed, with the top 1% owning over 40% of the country's wealth. Bridging this divide will require policies targeting wealth taxes, improving access to quality education and healthcare, and fostering inclusive economic opportunities.

Continued focus on strengthening digital infrastructure, improving social safety nets, and encouraging entrepreneurship will be vital in sustaining and deepening India’s gains in income equality.

Conclusion

India’s rise to become one of the world’s most income-equal countries is a testament to the country’s transformative socio-economic policies and rapid poverty reduction efforts over the past decade. While consumption inequality has declined substantially and millions have been lifted out of poverty, income and wealth inequalities remain a challenge. The road ahead will demand nuanced policies that address these structural disparities to ensure inclusive and sustainable development for all sections of society.

(Sources: NDTV, Times of India, Moneycontrol)