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Inequality Index: India Fares Better Than China

India's Gini index stood at around 31 in 1994, and rose to almost 34 by 2010. It has however, declined marginally from there in 2012, which is a silver lining

Photo Credit : Reuters

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Despite success in poverty reduction, income inequality is still on the rise. While speaking at the India IMF summit, Christine Lagarde, Managing Director, IMF said that "income inequality has worsened since 1990" and further added that it has "increased in 15 of 22 Asian economies".

The latter statement is based on a recent IMF Working Paper "Asia's quest for Inclusive Growth Revisited"; which finds that developing countries in Asia, save Central Asia, are the only ones among all developing countries that have seen an increase in inequality since the early 1990s. The region of East Asia and Pacific has seen the biggest jump in inequality, on account of countries like China and Indonesia.

While India is not explicitly mentioned in the inequality discussion in the paper, World Bank estimates indicate the same trend for India as well. Inequality, here, is measured with the Gini index, which ranges from 0 to 100. A value of 0 implies perfect equality and a value of 100 implies perfect inequality. Countries normally do not have either of these extreme values in actual fact.

India's Gini index stood at around 31 in 1994, and rose to almost 34 by 2010. It has however, declined marginally from there in 2012, which is a silver lining. Further, India's inequality index is still lower than that seen in China and Indonesia at 37 and 38 respectively, in 2011.

It also needs to be noted that while Asia's developing countries have largely experienced rising inequality in comparison with those in regions like Latin America, Europe and Africa; which have experienced declines, absolute inequality levels among the latter are still higher.

Considering India's popularly considered peer set - the BRICS - all show higher Gini indices than India, and even China. Inequality in South Africa is highest at 65, as of 2011, followed by Brazil at 53 in 2012 and Russia at almost 40 in 2009.

In sum therefore, while inequality may have risen in Asia, they still fare better on the ground than peers in other regions.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Manika Premsingh

Economist and Founder, Orbis Economics

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