Is income inequality rising in Modi’s India?

October 31, 2024

It is true that the rich are getting richer! The sale of posh houses has increased by more than twice within 2 years. The sale of houses worth 1 crore rupees and above has risen by 125%. But this is an extremely small percent of the whole population. These rich or super rich people are also going abroad more as they get more opportunity and some of them are surrendering Indian citizenship.

Now let’s look at the bulk of the population who are segmented into lower middle class and poor.

There has been a cumulative 74.2% decline in income disparity coverage for those earning upto Rs 5 lakh annually between fiscal years 2013-14 and 2022-23, as per a State Bank of India (SBI) report. To paraphrase the ‘often myth of worsening inequality’ in India, the research report from the Economic Department of SBI has analysed the income disparity curves of assessment years (AY) 2014-15/FY14 and AY24/FY23.

A comparison of disparity in income during AY15 and AY24 shows that there is a clear rightward shift in the income distribution curve, signifying people in lower income brackets are increasing their income to converge towards their share in population. SBI analysis shows that there has been a cumulative 74.2% decline in income disparity coverage for those earning upto Rs 5 lakh. This shows the continuous efforts of Govt are reaching the bottom of pyramid - that is leading to increase in income of 'lower income group' people, said the report titled 'How Tax Simplification has given a necessary fillip to ITR Filing'.

For people with income up to Rs 3.5 lakh, the share in income disparity has reduced from 31.8% in FY14 to 12.8% in FY21, signifying share of this bucket group has increased by a sharp 19% income in comparison to their population, it added. Lower income group (less than Rs 5.5 lakh) has registered a positive growth rate for all years in last decade (except AY20 - due to Covid pandemic). The SBI study further said that with an increasing alignment with progressive taxation regime, contribution of direct taxes to total tax revenue reached 56.7% in AY24 (54.6% in AY23), the highest in 14 years.

The Govt giving free grain to 80 Cr people and has extended it till 2029 when corona is long gone. Farmers are given Rs 6k per annum. These are freebies given to the lower middle class and poor people. Recent Haryana and Maharashtra election promise of ruling BJP had many freebie schemes to attract poor voters.