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SBI Report on Income Inequality in India

By Amigos IAS

Why is it in the news?

  • The latest report from SBI Research indicates a noteworthy reduction in income inequality in India, suggesting positive trends towards upward mobility and the expansion of the middle class.
  • The findings shed light on various economic indicators that contribute to a more balanced income distribution.

Key Findings of the Report

  • The report, drawing on Central Board of Direct Taxes (CBDT) data, highlights a continuous expansion in the Income Tax base.
  • In the Assessment Year 2022-23, the number of tax filers increased to 74 million, up from 70 million in the previous year.
  • The Gini Coefficient, a crucial measure of income inequality, has witnessed a decline. From 0.472 during the Assessment Year 2014-15, it has reduced to 0.402 for the Assessment Year 2022-23.
About Gini Coefficient

·       The Gini Coefficient, derived from the Lorenz curve, serves as an indicator of income or wealth inequality.

·       It ranges from 0 (perfect equality) to 1 (perfect inequality), where higher values indicate higher levels of inequality.

·       A Gini Coefficient of 0.402 for AY 2022-23 suggests a move towards a more equitable income distribution in India.

 

 

  • The share of top earners, particularly those with incomes exceeding Rs 10 crores and Rs 100 crores, has seen a decrease over the period from 2013-14 to 2020-21.
  • A significant factor contributing to the reduction in income inequality is the observed upward mobility.
  • More than 36% of individuals who were initially in the lowest income bracket in FY14 have transitioned to higher income levels. This transition resulted in a notable 21% increase in their earnings from FY14 to FY21.
  • The report indicates a positive trend in the rising participation of females in the labour force. This contributes to a more inclusive and diverse workforce.
  • The report points out evident changes in income levels for Micro, Small, and Medium Enterprises (MSMEs).
  • Additionally, evolving consumption patterns post-Covid-19 challenge the conventional notion of K-shaped growth, suggesting a more nuanced economic landscape.
K-shaped Recovery 

·       It occurs when an economy recovers unevenly and there’s a separate trajectory for two segments of the society.

Examples:

·       Industries like technology, retail, and software services have recovered while the travel, entertainment, hospitality, and food services industries have continued to decline.

·       India’s stock market is healthy while millions have lost their jobs and private consumption has collapsed.

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