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Journal of Income & Wealth (The)
Year : 2016, Volume : 38, Issue : 2
First page : ( 236) Last page : ( 250)
Print ISSN : 0974-0309. Online ISSN : 0974-0295.

Recent Trends in Income Distribution and Sources of Income Inequality in India

Mishra Aswini Kumar1,*, Parmar Viral M2

1Faculty and Head, Department of Economics, BITS-Pilani, K.K. Birla Goa Campus, Goa, India

2Student, M. Sc. (Hons.) Economics, BITS-Pilani, K.K. Birla Goa Campus, Goa, India, viral1101rst@gmail.com

*Corresponding author email id: aswinimishra1@gmail.com

JEL Classification Codes: D63, E25, R12

Online published on 27 July, 2017.

Abstract

The paper based on India Human Development Survey-a nationally representative survey conducted by researchers from the National Council of Applied Economic Research and the University of Maryland for the year 2004–2005 and 2011-2012-tries to address the question how unequal is India in terms of income distribution. The paper examines the trends, levels and sources of income inequality in India between 2005 and 2012. Our examination of income and income sources emphasises some dimensions of economic well-being that have received less attention. The paper uses Gini as a measure of inequality and finds that income inequality in rural India has increased from 0.50 to 0.54 between 2005 and 2012. On the other hand, income inequality in urban India has increased from 0.48 to 0.49 during the same period. The paper finds that the affluent receive 62–63 per cent of income but constitute only 24–25 per cent of all households, the middle-income group receives only 33–34 per cent of household income in spite of constituting 55–56 per cent of all households. On the other hand, the poor income group receives only 4 per cent of household income in spite of constituting 20–21 per cent of all households in both these two periods. More importantly, amongst sources of income inequality, the contribution of farm income in total inequality has decreased from 35 per cent in 2005 to 21 per cent in 2012 in rural India. On the other hand, the contribution of salaries in total income inequality has plummeted drastically from 65 per cent in 2005 to 16 per cent in 2012 in urban India.

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Keywords

Income Inequality, India, Decomposition measures, Gini Coefficient, Income Class, Kernel Density Function, Social Protection.

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