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Disparity in income getting sharper, NSSO data shows-Asit Ranjan Mishra
-Live Mint
Inequality
In urban India, the ratio of the top and bottom 10% of the economic group increased to 10.9% from 10.1%

Economic growth is increasing the income and consumption levels of the average Indian faster than before, but income disparity is getting sharper, especially in the country’s villages, which may require a greater effort aimed at creating jobs in the non-farm sector in rural areas.

The increase in inequality is evident from the 68th round of consumption expenditure survey carried out by the National Sample Survey Office (NSSO), which was released on Wednesday. The survey comes amid slowing growth and a deficient monsoon, putting the Indian economy under further pressure.

Inequality is measured by comparing how income is growing in the upper and lower income segments of the society. The ratio of the top 10% of the economic group and the bottom 10% of the economic group in rural India rose to 6.9 in the 68th round of the survey carried out in 2011-12, from 5.8 in the earlier 66th round in 2009-10. In urban India, the ratio of the top and bottom 10% of the economic group increased to 10.9% from 10.1%.

India’s statistics department decided to carry out the consumption expenditure survey again in 2011-12, two years after it did the survey in 2009-10, because the latter was a drought year. The survey is usually carried out once in five years. India changes its base year for national income, inflation and factory output to coincide with the year when such expenditure surveys are carried out by the statistics department, because the weights in such indices are determined by the outcome of this survey. Because such a base year has to be a normal year, the statistics department decided to carry out the survey again in 2011-12 to weed out the impact of the drought.

In the absence of any official income survey, India relies on consumption surveys by its statistics department to gauge household income levels. Based on monthly per-capita consumption expenditure (MPCE) data, the Planning Commission calculates the poverty level in the country.

In the two-year period between 2010 and 2012, compounded MPCE grew 8.6% in rural India from 1.6% recorded in the 2009-10 survey. Similarly, average compounded MPCE for urban India grew at a faster 6.4% in the 68th round compared with 3.4% in the earlier survey.

However, Himanshu, assistant professor of economics at Jawaharlal Nehru University and a Mint columnist (he uses only one name), cautioned against comparing the 68th round data with the 66th round one. The 66th round significantly suppressed consumption levels because it was a drought year, he said.

“The right way to measure growth in consumption expenditure is by comparing the 68th round with the 61st round,” he said.

Compounded MPCE calculated for the seven-year period starting in the 61st round (2004-05) stands at 3.4% and 3.7% for rural and urban India, respectively.

Pronab Sen, principal adviser in the Planning Commission, said these numbers are still higher than the usual average consumption expenditure growth numbers of 2-2.5% every year.

Sen, however, admitted that increasing inequality in rural India is a cause of concern. “This could be because of the stark divide in land ownership in rural India. Because the terms of trade are shifting towards agriculture, landowners are getting better off,” he said.

The focus has to be on increasing rural non-farm employment, he said, adding that the rural employment guarantee scheme cannot be a permanent solution and more skill training needs to be imparted to rural youth for better-paying jobs.

Himanshu said the data may lead to a significant decline in poverty levels when the data is released. NSSO said in a statement that it expects to publish detailed results on consumer expenditure from the 68th round of the survey next year.

The survey results seem to indicate that the income gap between rural and urban India is declining. While the 66th round survey carried out in 2009-10 showed MPCE in urban India was double (100.3%) that in rural areas, it came down to 92.3% in the 68th round survey.

In value terms, while rural MPCE picked up from Rs. 927.70 in the 66th round to Rs. 1,281.45 in the 68th round, urban MPCE increased from Rs. 1,781.81 to Rs. 2,401.68 during the same time period.

The provisional results of the latest survey are based on a sample comprising 7,391 villages (59,070 households) and 5,223 urban blocks (41,602 households) in nearly all the states and Union territories.