Income inequality
Also called: Income disparity · Topic: Poverty and Inequality: Measurement and Policy · NCERT: Class 11, Ch 2 "Indian Economy 1950-1990"; Class 11, Ch 3 "Liberalisation, Privatisation and Globalisation: An Appraisal"; Class 11, Ch 4 "Human Capital Formation in India"; Class 11, Ch 1 "Introduction (Statistics for Economics)"
Meaning
Income inequality is the unequal distribution of income among individuals or households. It is measured by the Gini coefficient (0 = perfect equality, 1 = perfect inequality), the Palma ratio and income shares, such as the share of the top 1%. Indian planning aimed to reduce it. Critics argue that market-led globalisation widened it. It matters because averages can hide how income is actually spread.
Example
Class 10 NCERT compares two countries that both have an average monthly income of ₹10,000:
- In country A, the five citizens earn between ₹9,500 and ₹10,500.
- In country B, four citizens earn ₹500 each and one earns ₹48,000. The bottom 80% get only 4% of income.
In India, the World Inequality Lab found that the top 1% held about 22.6% of income in 2022-23, the highest share since 1922.
Don't confuse with
- Consumption inequality: usually lower than income inequality, because people smooth spending over time and the rich save more. India's HCES (Household Consumption Expenditure Survey) Gini is a consumption Gini. It fell to 0.237 rural and 0.284 urban in 2023-24.