Rising Gap in Incomes

General Studies Paper -3

Context: According to a recent report by the State Bank of India (SBI), India has witnessed a significant fall in inequality over the last decade.

Key Findings

• The report claims that the Gini coefficient has fallen from 472 in 2014-15 to 0.402 in 2022-23.
• The Gini coefficient falls for regular wage and casual wage workers, but rises for the self-employed. However, the changes are largely minimal.

The polarization of incomes

• The fall in the Gini coefficient is accompanied by a polarization in incomes. Incomes of the top 10% have grown faster than the bottom 30%, with polarization largely seen amongst self-employed workers.
• The category of the self-employed includes own-account workers, such as individual farmers, roadside hawkers, etc. and those who are self-employed but also employ other workers.

Gini Coefficient for different segments

• The Gini for the self-employed workers rises from 37 to 0.3765,an increase of 1.5%. 
• For regular and casual wage workers, the coefficient register falls of7% and 4.8%, respectively.
• Though the Inequality has fallen, inequality among the top income earners seems to have fallen far more.

Concern

• The analysis is conducted on taxpayer data, and a majority of income-earners fall outside the tax net.
• According to data from the 2022-23 Periodic Labour Force Survey (PLFS), nearly 80% of income-earners earn less than ₹2.5 lakh per annum — the minimum taxable amount.
• Only those individuals who earn income from work are considered in the report. It excludes those who work as unpaid family helpers, a large proportion of whom are women.