Consumption inequality increased in rural areas of 11 states

News Excerpt:

Contrary to national trends, consumption inequality increased in rural areas of 11 states as the Gini coefficient of total consumption spending increased between 2011-12 and 2022-23, according to a newly released Household Consumption spending Survey (HCES).

Gini coefficient:

  • The Gini coefficient measures inequality on a scale of 0 to 1. In this index 0 represents perfect equality and 1 represents perfect inequality.
  • This can sometimes be shown as a percentage from 0 to 100 per cent as the Gini Index. 
  • Gini Coefficient = Area between the ideal line and Lorenz curve / Total area under the ideal line.
  • A higher Gini index indicates greater inequality, with high-income individuals receiving much larger percentages of the population’s total income.
  • The rise in Gini coefficient was the sharpest in Nagaland (0.244 from 0.192), followed by Jharkhand (0.255 from 0.206), Maharashtra (0.291 from 0.253), Rajasthan (0.283 from 0.248), Meghalaya (0.223 from 0.19) and Chhattisgarh (0.266 from 0.234).

More about News

  • Out of the 25 states included in the analysis, Bihar, Chhattisgarh, Jharkhand, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Himachal Pradesh, and Rajasthan have observed increases in the Gini coefficient in rural areas.

  • Additionally, the data reveals that in three states, the Gini coefficient for consumption expenditure has increased in urban regions as well. These are Meghalaya (0.266 from 0.226), Himachal Pradesh (0.311 from 0.29) and Manipur (0.221 from 0.209).

National Trend of inequality

  • This rise in Gini coefficient in rural areas comes on the back of a general decline seen in the coefficient of total consumption expenditure over this time period at the national level.
  • At the all-India level, the Gini coefficient has gone down to 0.266 in 2022-23 from 0.283 in 2011-12 (rural areas).
  • For urban areas, it has gone down to 0.314 from 0.363 during the same period. This fall in Gini coefficient shows a decline in spending inequality in the country.

Rationale behind this Paradox

  • According to the Chairperson of the Standing Committee on Statistics, the current HCES dataset, which shows a drop in national consumption inequality, is an exception. This is due to the fact that the rise in income disparity in India over the last three decades has been a generally acknowledged and verified phenomena.
  • Because affluent households do not disclose their spending accurately, the likelihood of data errors has increased.

Read more about Household Consumption spending Survey

Measurement of Income inequalities 

Lorenz Curve

  • The 'Lorenz Curve' is a graphical representation of wealth distribution in which a straight diagonal line portrays perfect equality of wealth distribution, while the Lorenz curve rests beneath it, demonstrating the reality of wealth distribution.
  • The difference between the straight line and the curved line is the amount of inequality of wealth distribution.
  • The curve is used to show what percentage of a nation’s residents possess what percentage of that nation’s wealth.

Book A Free Counseling Session

What's Today

Reviews

Programs

Centres

Social Platforms

Useful Links

Main Menu