India logs fall in inequality between 2011-12 and 2022-23, says govt report

Inequality in both rural and urban areas of India fell between 2011-12 and 2022-23, according to a full report on Household Consumption Expenditure (HCE) released on Friday by the National Sample Survey Office (NSSO). The findings contradict independent studies claiming that inequality in India has increased and the economy has had a K-shaped recovery post-pandemic.

While the HCE’s findings are likely to be used to update several economic indicators, including GDP series and poverty estimates in India, the report has only given information on consumption expenditure. Independent economists, however, raised questions on the comparability of findings derived from the 2022 HCE report with its previous version because of a change in the survey design.

The HCE report provides detailed information on consumption expenditure trends after more than a decade, with the last report released in 2011-12. A 2017-18 survey and report were prepared but junked by the government after media leaks suggested a fall in average spending between 2011-12 and 2017-18. The latest survey was delayed due to the pandemic, the report said.

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To be sure, summary findings of the 2022 HCE report were released in a 27-page fact sheet on February 24, which HT reported in detail. The key takeaway then was a rise in average real spending, a further fall in the share of food spending in overall expenditure and a reduction in the rural-urban differential in average spending.

The full report released Friday shows a fall in the Gini coefficient, a commonly used measure of inequality, for both rural and urban spending between 2011-12 and 2022-23. The Gini coefficient ranges from zero to one, with zero representing perfect equality and one representing perfect inequality.

For rural areas, it fell from 0.283 to 0.266. For urban areas, it fell from 0.363 to 0.314.

The report also shows that the top 10% of rural and urban households account for just 22.7% and 25.7% of overall consumption expenditure in the country and this share has actually fallen in comparison to 2011-12. The share was 24.6% and 29.7% for rural and urban areas in 2011-12.

The share of the bottom 50% in overall consumption is 31.8% and 28.6%. This too has increased compared to 2011-12. The share of the bottom 50% was 30.9% and 25.9% for rural and urban areas in 2011-12. As these shares and the gini coefficient suggest, inequality has decreased less in rural areas than in urban areas.

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These numbers are likely to underestimate the exact extent of consumption inequality because NSSO surveys tend to undercount the rich. For example, the report says that the average monthly per capita expenditure for the top 5% of rural and urban households is just ₹10,501 and ₹20,824.

Himanshu, an associate professor of economics at Jawaharlal Nehru University, cautioned against making intertemporal comparisons due to a significant change in survey design. “The only way to resolve this problem is to conduct a bridge survey, which is exactly what the NSSO used to do when survey designs were changed earlier,” Himanshu said.

The report also gives data on consumption expenditure for 18 major states, showing Kerala as the richest state in rural areas, with a per capita consumption expenditure of ₹5,924 per month; and Telangana as the richest in urban areas, with a per capita consumption expenditure of ₹8,158 per month.

Chhattisgarh is the poorest state in both rural and urban areas. The per capita consumption expenditure in rural and urban areas in the state in 2022-23 was ₹2,466 and ₹4,483 per month.