According to the World Bank report, India is the 4th most equal society globally with a Gini Index of 25.5, indicating broad-based sharing of economic growth despite its large economy.

• India ranked behind Slovak Republic (24.1), Slovenia (24.3), and Belarus (24.4) in equality.

Key Highlights from the Report

• Global Ranking: India is more equal than all G7 and G20 countries, including China (35.7), USA (41.8), and the UK (34.4).
  • The term “most equal country” describes a nation where income and consumption are distributed more evenly among its population
• India’s Position: Out of 167 countries assessed, India falls into the “moderately low” inequality category — and is very close to the “low inequality” group.
• Inequality Category: Globally, just 30 countries fall into the “moderately low” inequality category, including several European countries with strong welfare systems.
• Significance: This is a significant achievement for a country of India’s size and diversity, reflecting policies focused on reducing inequality and poverty.
• Poverty Reduction: India lifted 171 million people out of extreme poverty.
• Decline in Extreme Poverty: The share of the population living on less than $2.15/day dropped from 16.2% in 2011–12 to just 2.3% in 2022–23.

Structural Causes of Inequality

• Uneven Economic Growth: High growth in services & technology; low in agriculture/rural sectors.
• Pandemic-Driven Divide: Billionaires up from 102 (2020) to 166 (2022); hunger doubled.
• Tax System Bias:
  • Corporate tax reduced from 30% to 22%.
  • Bottom 50% pay ~64% of GST; top 10% pay ~4%.
• Limited Access to Health, Education: Weak public infrastructure entrenches intergenerational poverty.
• Neglect of Informal Sector: Most of the workforce is trapped in low-paying, insecure jobs.
• Colonial Institutional Legacy: Many regulatory and fiscal systems still replicate colonial hierarchies.

• Unequal Access to Health and Education: Ayushman Bharat covers hospitalization, but primary and preventive care gaps persist.

• • Out-of-pocket expenditure remains high for poor families.
  • Quality of education and job access are still highly unequal across caste, gender, and rural-urban divides.
• Savings Skew Impact: Higher-income groups consume less and save more, which masks inequality in consumption surveys.

Reasons behind India’s progress towards Greater Income Equality:

• PM Jan Dhan Yojana: Financial inclusion has been at the heart of India’s social equity push. As of June 25, 2025 over 55.69 crore people hold Jan Dhan accounts, giving them direct access to government benefits and formal banking services.
• Aadhaar and Digital Identity: Aadhaar has enabled the creation of a unique digital identity for residents across the country. 
• Direct Benefit Transfer (DBT): The DBT system has streamlined welfare payments, reducing leakages and delays. Cumulative savings have reached ₹3.48 lakh crore as of March 2023, reflecting its efficiency and scale.
• Ayushman Bharat: Access to quality healthcare is key to improving social equity. The Ayushman Bharat scheme provides health coverage of up to ₹5 lakh per family per year. 
• PM Vishwakarma Yojana: Traditional artisans and craftspeople are vital to India’s economic and cultural fabric.

• Inclusive Growth: Mahatma Gandhi National Rural Employment Guarantee Yojana, Pradhan Mantri Awas Yojana, Skill India Mission etc., for employment and rural upliftment.

  • As per World Bank’s Spring 2025 Poverty and Equity Brief, India has lifted 171 million out of extreme poverty.
  • The World Bank recently revised its threshold poverty line to $3 a day (daily consumption of less than $3) from the earlier $2.15 a day. With the revised poverty line, the extreme poverty rate for India declines sharply to 5.3 per cent in 2022-23 from 27.1 per cent in 2011-12.

• Social Security: Atal Pension Yojana, Pradhan Mantri Suraksha Bima Yojana (Accident Insurance), Pradhan Mantri Jeevan Jyoti Yojana etc., provide risk coverage.

• Women Empowerment: Beti Bachao Beti Padhao, SWADHAR Greh, Matru Vandana Yojana target gender justice.

• Sustainable Development: National Mission on Sustainable Agriculture, National Action Plan on Climate Change, etc., promote equitable growth.

Challenges Undermining India’s Claim of Rising Income Equality

• Data Quality and Measurement Issues: Consumption-based Gini Index used by the government underestimates inequality compared to income-based measures.

• • • Most global comparisons are based on income data, making India’s consumption-based figure non-comparable.

• Rising Income Inequality: As per the World Inequality Database:

• • • India’s income-based Gini Index rose from 52 (2004) to 62 (2023).
    • The top 10% earn 13 times more than the bottom 10% in 2023–24.
      • This reflects widening disparity, especially at income extremes.
  • Survey Limitations and Missing the Rich: Richest households are often left out of national surveys due to:
    • Non-response bias – higher refusal rates among wealthy individuals.
    • Sampling gap – low probability of extremely rich being captured in surveys.
      • Hence, the top 1%—main driver of inequality—remains underrepresented.

• Ineffectiveness of Gini in Capturing Extremes: The Gini Index is less sensitive to inequality at the top and bottom of the income pyramid.

• • • Experts advocate alternatives like the Palma Ratio, which show:
      • India’s inequality now exceeds colonial-era levels, with the top 1% earning disproportionately more than the bottom 50%.

• Palma Ratio: Measures income inequality by comparing the top 10% income share to the bottom 40%. Higher values indicate greater disparity.

• Inadequate Policy Responses Due to Flawed Data: Relying on inaccurate or partial data risks misguided policymaking.

• • Policies might focus on middle-tier upliftment, while neglecting extreme disparities.
  • This can worsen inequality, fuel social unrest, and threaten inclusive growth.

Way Forward

• Improve the Quality of Inequality Data: Shift focus from consumption-based to income-based surveys to reflect true disparities.

• • • Acknowledge and incorporate data limitations highlighted by global institutions like the World Bank.
    • Use multiple sources of data (surveys, tax records, corporate filings) for a comprehensive inequality picture.

• Integrate Income Tax Data with Surveys: Combine household survey data with income tax records to better capture the earnings of the top 1%.

• • • Follow international best practices (UK, US) where tax data helps correct survey underestimation.
    • Institutionalize data-sharing frameworks between tax authorities and statistical agencies.

• Adopt Better Inequality Metrics: Supplement the Gini Index with more distribution-sensitive indicators like Palma Ratio.

• • • Use multi-dimensional inequality indices to reflect disparities beyond income (education, health, gender, etc.).

• Ensure Transparent and Comparative Benchmarking: Avoid misleading global rankings by comparing like with like – income-based Gini with income-based, not with consumption-based.

• • Clearly disclose methodology and limitations when publishing data in public releases.
• Strengthen Policy Responses: Design targeted welfare policies informed by accurate inequality diagnostics, especially addressing the top-bottom divide.
  • Enhance redistributive mechanisms (e.g. progressive taxation, universal basic services) to bridge income gaps.
  • Focus on job creation, quality education, and health access to reduce structural inequality in the long run.
• Institutional Reform and Capacity Building: Strengthen statistical institutions like the National Statistical Office (NSO) and NITI Aayog to ensure autonomy and credibility.
  • Train officials in advanced inequality analytics, tax-gap analysis, and cross-country comparison frameworks.

Conclusion

A falling Gini Index based on consumption does not automatically mean rising equality. To claim to be “one of the most equal societies,” India must adopt richer metrics, better data practices, and stronger redistributive policies that address rising wealth concentration at the top.

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