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Working Paper

The estimate of Gross National Income (GNI) per capita (PPP US$) for India is taken from the Human Development Report 2010 (UNDP, 2010). Its distribution across states is worked out as per the distribution profiles of average per capita personal consumption obtained from the National Sample Survey for the year 2004/5 (Government of India, 2006a). This approach would underestimate income inequality, however, since it ignores savings and dis-savings of rich and poor people, respectively. An alternative approach could be to use estimates of state domestic product (SDP). However, it has a major limitation that it refers only to income generated; it does not include inter-state/national remittances and actual income distribution; in addition, some of its components are based on intra/extrapolations. Consistent with the profile on income distribution across states, estimates of intra-state personal income inequality (Atkinsons inequality indices) are estimated using the National Sample Survey unit record data on personal consumption distribution for the year 2004/5. Such consumption inequality estimates are generated after truncating the top 0.5-percentile of the distribution and replacing zero expenditure with minimum value of expenditure of the bottom 0.5-percentile group, as UNDP does (2010).6

The dimension index on education is based on (i) mean years of schooling; and (ii) expected years of schooling (school life expectancy). Mean years of schooling of the adult population (aged 25 years and above) are estimated using the unit-level information from the National Sample Survey data on Educational Status and Training in India (Government of India, 2006c). The same data source is used to estimate Atkinson inequality indices in levels of education. To overcome computational problems in estimating inequality when there are observations with zero years of schooling, following UNDP (2010), one is added to all valid observations on years of schooling. Estimates of expected years of schooling are made based on the National Sample Survey on Education in India (Government of India, 2010).

Estimates of life expectancy for 16 major states are obtained from SRS Based Abridged Life Tables 20022006 (Government of India, 2008). Estimates of life expectancy for the three states formed in 2000Chhattisgarh, Jharkhand and Uttarakhandand the state of Jammu and Kashmir are obtained from the Population Projections for India and States 20012026 (Government of India, 2006b).7 The same report also provides estimates of life expectancy for the seven states of northeast India (i.e. excluding Assam), and the same has been used as a proxy for all seven states. The data sources for estimating inequality (Atkinsons index) in life expectancy are the tables on life expectancy across age intervals for the Indian states (Government of India, 2008).8 Since the tables are available only for 16 major states, the inequality index could only be computed for them. The inequality index for Chhattisgarh, Jharkhand and Uttarakhand is assumed as the same as that of their respective parent state; for the seven states in northeast India it is proxied by that of Assam; and for the state of Jammu and Kashmir we have assumed it to be same as that of West Bengal.9