Income Disparity Reduced in FY23 in India and Global Comparison

The top 1% of the population controls a massive share of wealth, estimated to be around 22% of the national income. Check here Income Inequality in India and Global Comparison.

Table of Contents

Context: A working paper by the People Research on India’s Consumer Economy (PRICE) indicates that income inequality in India decreased in 2022-23. PRICE is an Not for profit think tank based in Delhi.

Key Findings of the PRICE Working Paper

Post-Pandemic Recovery

Income inequality in India reduced in 2022-23, indicating effective recovery measures following the Covid-19 pandemic.
Despite this improvement, there remains a significant concentration of wealth among the top-income earners.

Income Share Distribution (2022-23)

Bottom 50%: Share increased to 82% (from 15.84% in 2020-21). Includes groups like labourers, traders, small business owners and farmers.
Middle 40%: Share rose to 6% in 2022-23 (from 43.9% in 2020-21).
Top 10%: Share dropped to 6% in 2022-23 (from a peak of 38.6% in 2020-21).
Top 1%: Income share declined slightly to 3% in 2022-23 (from 9.0% in 2020-21).

Gini Index

It is a Key Metric for Income Inequality. It measures the deviation of income distribution from perfect equality.
- Index of 0: Perfect equality
- Index of 100: Perfect inequality
Gini Coefficient: It is a statistical measure of how unequal income is distributed in a population.
- Gini coefficient is a value between 0 and 1, where 0 means there is no income inequality and 1 means income distribution is completely unequal.
- Gini index is the Gini coefficient multiplied by 100, which converts the coefficient into a percentage.
A higher Gini coefficient means that the rich are benefiting more from government policies than the poor.
Lorenz curve: It is a graph that shows the distribution of income or wealth in a population.
- The closer the curve is to the line of perfect equality, the more equal the distribution is.

Income Inequality in India

The top 10% of Indians saw their income share rise from 36.7% in 1951 to 57.7% in 2022.
Conversely, the bottom 50% of Indians saw their income share decrease from 20.6% in 1951 to just 15% in 2022.
The middle 40% of Indians experienced a decrease in income share from 8% to 27.3% over the same period.
The income gap in India has widened significantly over the last two decades, with the 1% richest Indians surpassing the income concentration levels of their counterparts in developed countries such as the USA and the UK.
Approximately one crore adults belonged to the top 1%, with the top 10% comprising ten crore adults.
The middle 40% included 36 crore individuals, and the bottom 50% consisted of 46 crore individuals.
The top 0.001% of India’s population, comprising about 10,000 individuals, earned 1% of the national income. The top 0.01% and 0.1% earned 4.3% and 9.6%, respectively.

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Income Disparity Trends Over Time

The income disparity accelerated post-liberalization in the 1990s, with the share of the top 10% climbing sharply and the other groups’ shares declining.
In 2022-23, the average income of the top 1% was ₹53 lakh per annum, which was 23 times the average income of ₹2.3 lakh for the average Indian.
The bottom 50% had an average income of ₹71,000, and the middle 40% had an average of ₹1.65 lakh.
After independence, the income share of the top 1% decreased, hitting around 6% in the 1980s, but post-liberalization, it surged to around 22.5%.

Global Comparison with India’s Income Levels

India’s top 1% held a greater share of national income in 2022-23 compared to the top 1% in the U.S., China, France, the U.K., and Brazil.
While India’s income levels have not increased as rapidly as some other economies, such as China and Vietnam, the income share of the top 1% in India has grown remarkably.