Income Inequality in India - 2023

In 2023, India's income inequality remains higher than in the 1950s, despite some post-pandemic improvements, as indicated by a working paper from the People Research on India’s Consumer Economy (PRICE).

Key Findings

• The Gini coefficient for India in 2023 is 0.410, an increase from 0.371 in 1955. In 2021, it had peaked at 0.528 due to the pandemic.
• The Gini coefficient measures income distribution inequality; 0 indicates perfect equality, 1 indicates perfect inequality.
• Rural Gini coefficient rose to 0.405 in 2023 from 0.341 in 1955, while urban areas saw a slight decline from 0.392 to 0.382.
• The bottom 10 per cent households saw their income share decrease from 3% in 1955 to 2.38% in 2023.
• The bottom 50 per cent households saw a slight increase in income share, from 22% to 22.82% in the same time frame.

Recommendations

• Investment in education, healthcare, and infrastructure, especially in rural areas, is crucial.
• Implementing social safety nets and progressive taxation is necessary for equitable growth distribution.

Social Welfare Impact

• Programs like the Mahatma Gandhi National Rural Employment Guarantee Act and direct benefit transfers have improved the income share of the bottom 50 per cent.

Challenges and Observations

• Despite improvements, a "seesaw" pattern of inequality persists, influenced by external disruptions and policy shortcomings.
• Adaptive policymaking is essential for sustained progress post-pandemic.
• Model-based synthetic estimates, such as those by the World Inequality Database, often overstate inequality by over-relying on top income earners’ data.
• According to WID, the top 1 per cent controlled 22.6% of national income, while surveys indicate they controlled only 7.3%.

Demands from Central Trade Unions

Central trade unions have put forth several demands to the government to address issues related to employment, social security, and taxation.

Key Demands

• 8th Pay Commission: Immediate constitution to review and adjust salaries of central government employees.
• Job Creation: Fill existing vacancies in central government departments and PSUs to boost employment.
• MGNREGA Enhancement: Increase allocations for MGNREGA to ensure 200 days of work per family.
• Income Tax Rebate: Increase income tax exemption limit to Rs 10 lakh per annum.
• Social Security for Gig Workers: Introduction of a social security scheme.
• Old Pension Scheme: Restoration of the old pension scheme for government employees.
• EPFO Minimum Pension: Raise to Rs 5,000 per month.

Labour Codes

There is division among trade unions regarding the new labour codes:

• Support for Codes: Bharatiya Mazdoor Sangh (BMS), National Front of Indian Trade Unions (NFITU), and Trade Union Coordination Centre (TUCC) support the Code on Wages and Code on Social Security.
• Opposition to Codes: Other central TUs demand scrapping all four labour codes, advocating the restoration of the repealed 29 labour statutes.
• Recommendations: Notify Code on Wages 2019 and Code on Social Security 2020, while removing anti-worker provisions in other codes.

Economic and Taxation Proposals

• Funding for Startups and Gig Economy: Increase budget allocation to support growth and skilling in these sectors.
• Corporate and Wealth Tax: Propose higher taxes on corporations and wealthy individuals, introduce inheritance tax, and reduce GST on essential goods.
• Privatisation: Demand to halt privatisation of PSUs.

Social Security and Worker Status

• Unorganised Workers: Establish a government-sponsored social security fund.
• Domestic Workers: Grant worker status and social security benefits, involving contributions from resident welfare associations.

Summary of Demands

• Boost rural job scheme to provide 200 workdays per family.
• Raise income tax exemption limit to Rs 10 lakh.
• Create a universal fund for unorganised workers.
• Increase EPFO minimum pension to Rs 5,000; set minimum wage at Rs 26,000.
• Remove GST on essential items like food and medicines.