The Demography of Changing Economic Inequality in India

Shreya Singh, University of Bamberg
Srinivas Goli, International Institute for Population Sciences (IIPS)

Concerns over rising economic-inequality have been thrust back into the limelight. Against this backdrop, India presents an unparalleled scenario where the levels of income-inequality seem to be declining. Consequently, economic-inequality literature points towards the widening gap between the richest-rich and other economic classes in the country. This paradoxical nature of economic inequality trends in India needs to be understood with an additional layer of demographic composition of the country. The economic manifestations of changing household age-structure in the country are shifting and indicate towards two pertinent questions; How does one reconcile the parallel trends of falling Gini index and rising economic share of the rich? What is happening to the Middle Class? This paper tackles these questions through the assessment of observed inequality against ideal levels of inequality using the inequality possibility frontier. The results indicate that although the divergence between economic classes is increasing, this is taking place in clusters. The upper middle-income class is moving closer to the lower middle-income shares thereby creating a perceived sense of equality as reflected within the fall in the Gini-indices. The demographic contributions to changing economic-inequality indicate towards the pertinent role essayed by the household age-structure typologies, especially the grown-up dominant households.

Keywords: Population and Development, Decomposition analysis, Longitudinal studies

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