India has made substantial progress in reducing multidimensional poverty, with the share of its population living in such conditions dropping from 25% to 15% between 2015-16 and 2019-21. However, the country continues to grapple with significant income inequality, ranking among the top countries with high income and wealth disparities. These insights are part of the 2024 Asia-Pacific Human Development Report recently launched by the United Nations Development Programme (UNDP).
The report, titled ‘Making our Future: New Directions for Human Development in Asia and the Pacific,’ offers a nuanced perspective on the country’s long-term progress and the challenges posed by persistent disparities. While India’s economic growth has been remarkable, it has not translated into equitable wealth distribution.
Several factors underpin this persistent wealth divide. Globalization and technological advancements have created new opportunities for certain segments of the population, leaving others behind. This scenario typically results in capital owners securing a more substantial share of the national income, contributing to income inequality. Labour income in Asia and the Pacific lags behind the global average, making it more challenging for workers to save and invest. The informal sector, particularly female workers, is the most vulnerable in this cycle. Additionally, corruption, weak tax policies, and administrative challenges, coupled with a lack of effective social safety nets, further exacerbate income inequality.
Despite significant economic achievements, poverty remains concentrated in specific Indian states that are home to 45% of the country’s population but house 62% of its poor. Vulnerability to poverty also persists, especially among groups slightly above the poverty line. Women, informal workers, and inter-state migrants are at a higher risk of falling back into poverty.
One notable statistic that underscores income inequality is the income distribution: the top 10% of the population receives 57% of the national income, and the top 1% claims 22%, making India one of the most unequal countries in terms of income distribution. Wealth disparities are equally concerning, with the top 10% controlling 65% of the nation’s total wealth. Recent evidence suggests a substantial increase in wealth inequality, particularly after 2000.
The report highlights that India is playing a significant role in global middle-class growth, contributing 24% to the expansion of the global middle class, defined as individuals earning between USD 12 and USD 120 per day. This growth is estimated to encompass 192 million people.
While the Asia-Pacific region is expected to contribute two-thirds of global economic growth, the report emphasizes that income and wealth disparities are worsening. The wealthiest 10% in South Asia now control over half of the total income, accentuating the pressing need for new directions to enhance human development and reduce income inequality.
