Income Inequality in India's Labour Market (2017-2024)

Between 2017 and 2024, India's labour market witnessed nuanced changes in income inequality despite rising GDP per capita. This analysis, using GDP per capita, inequality indices, income thresholds, and employment composition based on PLFS data, highlights persistent income disparities.

Key Findings

• GDP and Inequality Indices:
  • GDP per capita rebounded from $1,907 in 2020-21 to $2,480.79 by 2023-24.
  • Gini index was 0.42 in 2017-18, peaked at 0.43 in 2019-20, dipped during COVID, but returned to 0.42 by 2023-24.
  • Theil index followed a similar trajectory, peaking at 0.34 in 2018-19, declining to 2021-22, then rising to 0.33 by 2023-24.
• Income Distribution:
  • Median income increased from ₹1,02,000 (2017-18) to ₹1,44,000 (2023-24) with a 5.92% annual growth rate.
  • Top 1% income grew from ₹50,000 to ₹75,000 (6.99% CAGR).
  • Top 10% income rose from ₹25,000 to ₹32,000 (4.20% CAGR).
• Ratios:
  • Top 1% to bottom 50% income ratio widened from 5.89 to 6.25 (2017-24).
  • Bottom 10% to bottom 50% ratio decreased from 0.37 to 0.33.

Employment Composition Changes

• Casual Labour:
  • Share fell from 24.9% to 19.8%, with income share nearly unchanged at 11.63% (2023-24).
• Regular Salaried Employment:
  • Worker share declined from 22.8% to 21.7%, but income share was highest at 44.3% (2023-24).
• Self-Employment:
  • Share grew from 52.2% to 58.4%, contributing 44.03% to aggregate income (2023-24).

Income Growth Patterns

• Casual Labourers:
  • Highest overall income growth at 6.87% CAGR.
  • Lowest-paid (first decile) grew fastest at 8.82% CAGR, yet earned ₹9,585/month in 2023-24.
• Regular Salaried Workers:
  • Income grew steadily at 4.77% CAGR.
  • Gini for this group was highest at 0.41 in 2023-24.
• Self-Employment:
  • Overall growth at 4.55% CAGR.
  • Poorest deciles saw income decline, showing a widening divide.

Policy Recommendations

• Expand formal employment opportunities to mitigate low wages and job vulnerability.
• Increase access to credit and skill development for marginalized entrepreneurs.
• Focus on upskilling, quality education, and fostering large-scale innovation.
• Encourage state-specific initiatives for labour market improvements.
• Boost sectors like food processing and exports to enhance rural incomes.