Poor does not remain poor in India
According to recent World Bank data, India has demonstrated remarkably better income equality compared to G7 and G20 countries. Here’s a breakdown of the report and its implications:
Key Findings of the World Bank Report:
- High Ranking in Income Equality: India ranks fourth globally in income equality with a Gini Index of 25.5. This places it among the most equal societies worldwide, trailing only the Slovak Republic (24.1), Slovenia (24.3), and Belarus (24.4).
- Outperforming G7 and G20 Nations: India’s Gini Index score is significantly lower than that of major economies like China (35.7), the United States (41.8), and all G7 and G20 countries. Many of these are considered advanced economies, making India’s achievement particularly noteworthy.
- For context, a Gini Index of 0 represents perfect equality (everyone earns the same), while 100 represents maximum inequality (one person earns all the income). A lower score indicates greater equality.
- Steady Improvement Over Time: India’s Gini Index has improved consistently, dropping from 28.8 in 2011 to 25.5 in 2022. This indicates a sustained effort and progress in bridging income gaps.
- Poverty Reduction as a Key Driver: A significant factor contributing to India’s improved income equality is its success in reducing extreme poverty. The World Bank’s Spring 2025 Poverty and Equity Brief highlights that:
1. Around 171 million Indians moved out of extreme poverty between 2011 and 2023.
2. The extreme poverty rate (based on the global poverty line of $2.15 per day) sharply declined from 16.2% in 2011 to just 2.3% in 2022-23.
3. Even with a revised extreme poverty threshold of $3.00 per day, the poverty rate for 2022-23 would be a modest 5.3%.
Elaboration and Explanation:
The World Bank’s report suggests that India’s economic growth is being shared more equitably across its population. This is a departure from the common narrative that rapid economic growth in developing countries often exacerbates income disparities. The report attributes India’s success to a consistent policy focus on several fronts:
- Poverty Alleviation Programs: The massive reduction in extreme poverty directly contributes to better income equality. When a large segment of the population moves out of the lowest income brackets, it naturally shrinks the gap between the poorest and the rest.
- Financial Inclusion Initiatives: Schemes like the PM Jan Dhan Yojana, which has led to the opening of over 55 crore (550 million) bank accounts, have significantly expanded financial access for the previously unbanked population. This enables more people to participate in the formal economy, access credit, and build assets, thus reducing financial exclusion.
- Efficient Welfare Delivery through Digital Infrastructure: The Aadhaar national digital ID system, now covering over 142 crore (1.42 billion) people, has enabled highly efficient Direct Benefit Transfers (DBT) of welfare payments. This minimizes leakage and ensures that government support reaches the intended beneficiaries directly, significantly impacting the incomes of vulnerable populations. Reports indicate that this has saved Rs 3.48 lakh crore (approx. $42 billion USD) by March 2023.
- Targeted Social Safety Nets and Support Schemes:
- Ayushman Bharat: Provides health coverage of Rs 5 lakh (approx. $6,000 USD) for families, improving healthcare access and reducing out-of-pocket expenses for millions.
- Stand-Up India: Supports entrepreneurs from Scheduled Castes/Tribes (SC/ST) and women with loans and assistance, fostering inclusive economic participation.
- PM Vishwakarma Yojana: Offers support, training, and loans to artisans, helping traditional craftspeople integrate into the modern economy.
- PM Garib Kalyan Anna Yojana (PMGKAY): Provides free food grains to over 80 crore citizens, ensuring food security and alleviating immediate economic burdens for a vast population.
Comparison with G7 and G20 Countries:
The fact that India has a lower Gini Index than all G7 and G20 nations is particularly significant. These are often the world’s largest and most developed economies. While they may have higher average incomes, their income distribution tends to be more unequal. This suggests that India’s model of prioritizing inclusive growth and direct welfare interventions is proving effective in achieving a more equitable society, even as it continues its economic development journey.
In essence, the World Bank report portrays India as a country that has successfully coupled economic growth with a substantial improvement in income distribution, a feat that many developed nations struggle to achieve.
