A 2024 World Inequality Lab (WIL) paper, 'Economic Inequality in India: The 'Billionaire Raj' is Now More Unequal Than the British Colonial Raj', found that the top 1%'s share of pre- tax income reached 22.6% in 2022-23, exceeding the inter-war colonial peak. The same framework yields a Gini coefficient of 0.61. At that level, India would rank among the most unequal societies on the planet, worse than Brazil and not far from South Africa.
Yet, India's consumption Gini, derived from large-scale NSO household surveys, stands at roughly 0.25. By that measure, India is more equal than the US, China and most of the developed world.
Can the same economy be both? The conventional explanation is that wealthier households save more, compressing the consumption distribution. But savings alone cannot plausibly account for a gap of more than 30 Gini points. Something else is at work, namely what these indices actually measure, and what they leave out.
WIL's figure captures pre-tax, pre-transfer income. By construction, it excludes the two principal mechanisms through which modern states reduce inequality: taxation and redistribution. It also embeds measurement distortions at both ends of the distribution. At the bottom, incomes for lower deciles are partly modelled rather than directly observed. At the top, undistributed corporate profits and imputed returns on assets are attributed to individuals even when these never arrive as disposable income. The result is a pre-government distribution that no household experiences.
WIL correctly labels its methodology. The problem arises when this number travels as the headline measure of Indian inequality in global comparisons. It presents a picture of inequality that does not exist on the ground.
In advanced economies, redistribution occurs primarily through cash transfers and tax credits that show up in income data. India's welfare system is structurally different. A large share of redistribution is delivered in kind: foodgrain through PDS, housing under PMAY, healthcare through Ayushman Bharat, subsidised cooking fuel, employment through MGNREGA, and access to public education, sanitation and piped water. These interventions raise real living standards directly, yet they register as zero in conventional inequality statistics.
Measuring inequality while ignoring them is like weighing someone with their backpack still on, then concluding they need to lose weight. Where redistribution is delivered in cash, it reduces measured inequality. Where it is delivered in kind, it disappears from measurement. Few countries are penalised by this methodological blind spot as severely as India.
A more complete picture requires putting the state back into the distribution. India's pre-fiscal market income Gini stands at about 0.348, already well below the widely cited figure because it reflects realised household income rather than national accounts aggregates inflated by retained profits.
An April 2026 SP Jain Institute of Management and Research study, 'Post-Fiscal Inequality in India: Constructing a Lived Income Gini, 2014-2025', by Surabhi Mukhopadhyay and myself, adjusts this market income by adding the monetised value of welfare transfers, finds that inequality falls sharply to around 0.27. Our approach combines household survey data for the bottom 90% with I-T returns for the top 10%, valuing welfare benefits conservatively using actual expenditure, and accounting for delivery efficiency rather than headline entitlements.
This post-fiscal estimate lies close to the consumption Gini of 0.25, suggesting it captures the distribution households actually experience.
Over the past decade, per-household welfare transfers have nearly tripled and new programmes such as PM-Kisan, Ayushman Bharat, Jal Jeevan Mission (JJM) and Ujjwala have widened the scope of redistribution. The poorest 10th of households receive welfare transfers of roughly ₹1.07 lakh a year, raising their effective purchasing power by close to 80%.
None of this should be confused with affluence. India's per-capita income remains far below that of Germany or the US. Absolute living standards at the bottom are still 'modest' by global benchmarks. Yet, despite far lower income, India achieves a level of post-fiscal equality comparable to many advanced welfare states, because of deliberate fiscal intervention, supported by Aadhaar, Jan Dhan and DBTs.
The real story of Indian inequality is not the 0.61 that makes headlines. It's the figure closer to 0.27 that reflects how people actually live. Global inequality frameworks that ignore taxation and in-kind welfare produce a distorted understanding of what India has achieved, and risk misdirecting policy attention that follows. It's time the metrics caught up with reality.
Yet, India's consumption Gini, derived from large-scale NSO household surveys, stands at roughly 0.25. By that measure, India is more equal than the US, China and most of the developed world.
Can the same economy be both? The conventional explanation is that wealthier households save more, compressing the consumption distribution. But savings alone cannot plausibly account for a gap of more than 30 Gini points. Something else is at work, namely what these indices actually measure, and what they leave out.
WIL's figure captures pre-tax, pre-transfer income. By construction, it excludes the two principal mechanisms through which modern states reduce inequality: taxation and redistribution. It also embeds measurement distortions at both ends of the distribution. At the bottom, incomes for lower deciles are partly modelled rather than directly observed. At the top, undistributed corporate profits and imputed returns on assets are attributed to individuals even when these never arrive as disposable income. The result is a pre-government distribution that no household experiences.
WIL correctly labels its methodology. The problem arises when this number travels as the headline measure of Indian inequality in global comparisons. It presents a picture of inequality that does not exist on the ground.
In advanced economies, redistribution occurs primarily through cash transfers and tax credits that show up in income data. India's welfare system is structurally different. A large share of redistribution is delivered in kind: foodgrain through PDS, housing under PMAY, healthcare through Ayushman Bharat, subsidised cooking fuel, employment through MGNREGA, and access to public education, sanitation and piped water. These interventions raise real living standards directly, yet they register as zero in conventional inequality statistics.
Measuring inequality while ignoring them is like weighing someone with their backpack still on, then concluding they need to lose weight. Where redistribution is delivered in cash, it reduces measured inequality. Where it is delivered in kind, it disappears from measurement. Few countries are penalised by this methodological blind spot as severely as India.
A more complete picture requires putting the state back into the distribution. India's pre-fiscal market income Gini stands at about 0.348, already well below the widely cited figure because it reflects realised household income rather than national accounts aggregates inflated by retained profits.
An April 2026 SP Jain Institute of Management and Research study, 'Post-Fiscal Inequality in India: Constructing a Lived Income Gini, 2014-2025', by Surabhi Mukhopadhyay and myself, adjusts this market income by adding the monetised value of welfare transfers, finds that inequality falls sharply to around 0.27. Our approach combines household survey data for the bottom 90% with I-T returns for the top 10%, valuing welfare benefits conservatively using actual expenditure, and accounting for delivery efficiency rather than headline entitlements.
This post-fiscal estimate lies close to the consumption Gini of 0.25, suggesting it captures the distribution households actually experience.
Over the past decade, per-household welfare transfers have nearly tripled and new programmes such as PM-Kisan, Ayushman Bharat, Jal Jeevan Mission (JJM) and Ujjwala have widened the scope of redistribution. The poorest 10th of households receive welfare transfers of roughly ₹1.07 lakh a year, raising their effective purchasing power by close to 80%.
None of this should be confused with affluence. India's per-capita income remains far below that of Germany or the US. Absolute living standards at the bottom are still 'modest' by global benchmarks. Yet, despite far lower income, India achieves a level of post-fiscal equality comparable to many advanced welfare states, because of deliberate fiscal intervention, supported by Aadhaar, Jan Dhan and DBTs.
The real story of Indian inequality is not the 0.61 that makes headlines. It's the figure closer to 0.27 that reflects how people actually live. Global inequality frameworks that ignore taxation and in-kind welfare produce a distorted understanding of what India has achieved, and risk misdirecting policy attention that follows. It's time the metrics caught up with reality.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Vidhu Shekhar
Vidhu Shekhar is associate professor, finance, SP Jain Institute of Management and Research, Mumbai