Why in NEWS?
India, now the world’s fourth-largest economy, has also emerged as one of the most equal societies. According to the World Bank, India’s Gini Index is 25.5, ranking it 4th most equal globally in terms of income distribution. This challenges earlier perceptions of high inequality in India.
Key Concepts and Definitions
| Term | Description |
|---|---|
| Gini Index | A statistical measure of income inequality ranging from 0 (perfect equality) to 100 (maximum inequality). |
| Lorenz Curve | A graphical representation of income distribution; Gini Index is derived from the area between the Lorenz curve and the line of perfect equality. |
| World Bank Poverty Line (2025) | Revised from $2.15/day to $3/day (2021 prices) to reflect realistic cost of living in developing countries. |
India’s Gini Index Performance and Global Ranking
| Indicator | Data |
|---|---|
| India’s Gini Index (2022) | 25.5 |
| Earlier (2011) | 28.8 |
| Category | Moderately Low Inequality (25–30) |
| Global Rank (Equality) | 4th most equal country |
| Compared With | China (35.7), US (41.8) |
| Significance | More equal than all G7 and G20 nations |
Key Drivers Behind India’s Equity Success
| Driver | Details |
|---|---|
| Poverty Reduction | 171 million Indians lifted out of poverty since 2011 (World Bank, 2025) |
| Extreme Poverty Rate (2022–23) | 5.3% at $3/day line, down from 27.1% (2011–12) |
| Financial Inclusion – Jan Dhan Yojana | Over 55.69 crore accounts opened (June 2025) |
| Digital Identity – Aadhaar | 142 crore Aadhaar cards issued (July 2025) |
| Direct Benefit Transfer (DBT) | Rs 3.48 lakh crore saved; ensures leak-proof delivery |
| Ayushman Bharat | 41.34 crore Ayushman cards issued; ₹5 lakh coverage/family |
| Digital Health Mission | Over 79 crore health IDs created |
| Stand-Up India | Rs 62,807 crore sanctioned to 2.75 lakh applications (July 2025) |
| PMGKAY | 80.67 crore beneficiaries receiving free food grains |
| PM Vishwakarma Yojana | 29.95 lakh registrations; supports artisans with loans, training |
Challenges and Structural Concerns
| Challenge | Explanation |
|---|---|
| High Poverty at $3.65/day Line | 28.1% population still in poverty; ~300 million poor |
| Wage & Wealth Inequality | Top 10% earn 13× more than bottom 10%; richest 1% hold 40% wealth |
| Outdated Poverty Line | Based on 2014 data; does not reflect current cost of living |
| Unequal Access | Persistent gaps in education, healthcare, jobs, digital access |
| Income vs Consumption | Gini (consumption-based) is low, but income Gini at 0.410 shows wider disparities |
Way Forward
| Strategy | Suggested Measures |
|---|---|
| Update Poverty Line | Recalibrate using 2024–25 cost benchmarks |
| Labour Market Reform | Ensure fair wages, social security for informal sector |
| Education & Health Investment | Boost schemes like PM SHRI, NHM, Mid-Day Meals |
| Digital Equity | Expand BharatNet, promote affordable digital tools |
| Gender Inclusion | Value unpaid labour, ensure credit, land, education for women |
In a Nutshell
Memory Code: GINI-REAL
G – Gini Index improvement to 25.5
I – Inclusion via Aadhaar, Jan Dhan, DBT
N – New poverty line needed
I – Inequality in income and opportunity persists
R – Rise in equitable access to services
E – Empowerment via schemes like Stand-Up India
A – Ayushman Bharat strengthens social protection
L – Low Gini, but long road ahead
Prelims Practice Questions
- The Gini Index is used to measure:
A. Consumer Price Index
B. Income Inequality
C. Gender Disparity
D. Environmental Degradation - Which of the following schemes is directly linked with financial inclusion in India?
A. PM SHRI
B. PM Jan Dhan Yojana
C. PM Gati Shakti
D. PM SVANidhi - Consider the following statements:
- A lower Gini Index score means higher inequality.
- India’s Gini score is lower than that of China and the USA.
Which is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Mains Practice Questions
- GS2 (Welfare Schemes):
To what extent have digital infrastructure and welfare schemes contributed to income equality in India? Discuss with reference to recent Gini Index data. (10 marks) - GS3 (Inclusive Growth):
Despite a low Gini Index, India continues to face deep-rooted structural inequality. Examine this paradox and suggest policy solutions. (15 marks)
Answer Key with Explanation
| Q No. | Answer | Explanation |
|---|---|---|
| 1 | B | Gini Index measures income inequality |
| 2 | B | Jan Dhan is India’s flagship financial inclusion scheme |
| 3 | B | Statement 1 is incorrect; lower Gini = more equality; India’s score is indeed lower than China/USA |
