Professional Documents
Culture Documents
Research Firm
www.indicus.net
By
Laveesh Bhandari
Indicus Analytics
Introduction
Box 1: Definitions
Gross Domestic Product: Total value of goods and
services produced by a nation.
Income Distribution
Indicus Estimates
Source: Author Estimates from NSSO 1993-94 and 2004-05 Employment &
Unemployment Rounds.
Notes: Since survey data typically under-report incomes and expenditures the
reported incomes have been appropriately adjusted using the ratio of reported
aggregate expenditures in NSSO and total household expenditures in NAS, as the
adjustment factor. The percentage change pattern is not affected significantly due to
this adjustment though the quantum is. All figures are in 2004-05 prices calculated
on the basis of CPI-AL for rural and CPI-UNME for urban, at the state level. RQI/UQ1
refers to bottom-most quintile in rural/urban areas and RQ5/UQ5 refers to upper-most
quintile in rural/urban areas.
The point being made is that increasing inequality does not
mean that poverty is rising, there is incrotovertible evidence
that poverty levels in India have been falling in almost all the
states. Currently, among the larger states, J&K, Punjab and
Himachal have the lowest poverty levels. Among the smaller
states, Meghalaya, Manipur and Mizoram follwed by
Arunachal tend to have poverty levels in the single digits.
Orissa, Bihar, UP and MP have amongst the highest poverty
levels amongst the larger states. Note that these states also
tend to have low inequality levels, indicating that overall
these states are poor with high levels of deprivation.
WB
7
Kar
HP
Guj Har
6
AP
Raj Ker
Mah
5
TN
JK Bih
Ori
Pun
MP UP
4
Asm
3
0 5
10 15 20
Percentage point reduction in poverty
Notes: Bihar includes Jharkhand, Madhya Pradesh includes Chhattisgarh and Uttar
Pradesh includes Uttarakhand.
The above data use state level insights. (See Debroy and
Bhandari (2007)) But if we bring occupation also into the
analysis, a highly interesting set of insights are derived.
There is an interesting link between the percentage
reporting themselves as self-employed and the level of
inequality. This is partly obvious from the following figures.
About 52% of the Indian work force reports itself as self-
employed. Table 6 below shows Gini coefficients across
employment categories. Gini coefficients are lower for the
self-employed category. Stated differently, self-employment
is a dampener on inequality and it is also probably the case
that in countries where inequality has not shot up, a
facilitating environment has been created for self-
employment to thrive and foster. This is also true of India in
the inter-State comparison, a proposition reinforced by
Figure 2, which plots the percentage of self-employed in
States against the level of inequality. In States where self-
employment is high, inequality tends to be lower. In other
words, higher levels of inequality are observed when there is
greater dependence on wage based occupations.
40.00
35.00
Gini (expenditure based)
30.00
25.00
20.00
30.00 35.00 40.00 45.00 50.00 55.00 60.00 65.00 70.00 75.00 80.00
% Indiv. in Self Employed Households
This Volume
certain locations are among the best to reside in, but are not
necessarily the best to invest in. Such ratings and rankings
make it easier for the decisionmaker to prioritise their
actions.
Per CapitaIncome&Savings
300
Amount (Rs.Thousand)
250
200
150
100
50
0
14
21
28
34
40
46
53
59
66
72
78
84
90
96
1
-50
Household Percentiles based on economic status
Per Capita Income Per Capita Savings
700000
600000
(Rs.Thousand)
Expenditure
500000
400000
300000
200000
100000
0
14
21
28
34
40
46
53
59
66
72
78
84
90
96
1
Percentiles
Per Household Expenditure
500,000,000,000
400,000,000,000
Amount (Rs.)
300,000,000,000
200,000,000,000
100,000,000,000
0
41
46
51
56
61
71
76
96
11
16
21
26
31
36
66
81
86
91
1
Household Percentiles
Cons. Services, taxes, entertainment, rent, fuel, toiletries andother misclleneous expenses
Education
Medical
Clothing &Footwear
Durables
High Value Food
Basic Food
100%
80%
%shareof expenditure
60%
100%
40%
20%
0%
1
7
13
19
25
31
37
43
49
55
61
67
73
79
85
91
97
Household Percentile