India now 4th most equal country globally, says World Bank

This progress has helped narrow the income gap across the population.

India has emerged as the fourth most equal country in the world, according to a new World Bank report that highlights a significant reduction in income inequality and extreme poverty between 2011-12 and 2022-23.

The report places India just behind Slovak Republic, Slovenia, and Belarus, and far ahead of countries like the United States, United Kingdom, and China in terms of equality. The Gini Index, a standard measure of income inequality, now stands at 25.5 for India, improving from 28.8 in 2011-12.

What is the Gini Index?

The Gini Index measures how evenly income or wealth is distributed in a country. A score of 0 indicates perfect equality, while 100 reflects maximum inequality. India’s score of 25.5 places it in the 'moderately low inequality' category, a group that includes many high-income European nations.

In comparison, China’s Gini Index is 35.7, while the United States stands at 41.8, indicating significantly higher inequality in those countries.

Extreme Poverty Falls From 16 percent to 2 percent

One of the biggest drivers of India’s improved equality is the sharp fall in extreme poverty, defined globally as living on less than $2.15 per day. According to the World Bank, extreme poverty in India dropped from 16.2 percent in 2011-12 to just 2.3 percent in 2022-23, lifting 171 million people out of poverty.

Rural poverty fell from 18.4 percent to 2.8 percent, while urban poverty dropped from 10.7 percent to 1.1 percent, narrowing the rural-urban poverty gap from 7.7 to 1.7 percentage points.
Key states drive poverty reduction

Five populous states, Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh, accounted for 65 percent of India’s extreme poor in 2011-12. By 2022-23, they contributed to two-thirds of the total poverty reduction, though they still host 54 percent of the remaining extremely poor population.Non-monetary poverty also down

Beyond income, multidimensional poverty, which considers access to healthcare, education, and living standards, has also declined. According to the World Bank:

MPI fell from 53.8 percent in 2005-06 to 15.5 percent in 2022-23

Government schemes like PM Jan Dhan Yojana, Direct Benefit Transfer (DBT), and Stand-Up India were key drivers of this progress

Formal jobs still Limited, Gender Gap Persists

Despite positive gains, the report flags persistent challenges:

Only 23 percent of non-farm paid jobs are formal
Most agricultural employment remains informal
Self-employment is rising, especially among rural women
Female employment rate stands at 31 percent, with 234 million more men in paid work than women
Youth unemployment also remains a concern, at 13.3 percent overall, and 29 percent for those with tertiary education.

India’s economic transition underway

The report also notes that India is transitioning into a lower-middle-income economy. Using the $3.65/day poverty line, poverty fell from 61.8 percent to 28.1 percent, lifting another 378 million people out of poverty over the last decade.

With revised thresholds of $3.00 (extreme) and $4.20 (low-middle income), India’s 2022-23 poverty rates would be adjusted to 5.3 percent and 23.9 percent respectively.

Stronger jobs growth since 2021

Employment growth has outpaced the working-age population since 2021-22. Urban unemployment dropped to 6.6 percent in Q1 FY25, the lowest since 2017-18. Male migration from rural to urban areas has resumed for the first time since the pandemic, while rural female employment in agriculture has seen a noticeable rise.

The bigger picture

While India still faces challenges in formal job creation, youth unemployment, and gender disparities, the World Bank report recognises the country’s success in combining rapid economic growth with declining inequality.

India now joins a select group of 30 countries with moderately low inequality, including Norway, Finland, Iceland, and Belgium, and is on the verge of moving into the 'low inequality' category.