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Monday, July 29, 2013

Income disparity between rich and poor growing rapidly

NEW DELHI: Everybody knows that there is a chasm between the rich and the poor. But can it be measured? And, more importantly, is this disparity between the rich and poor growing or coming down? 

New data based on consumption expenditure surveys shows that incomedisparity is growing and at a rapid clip. Spending and consumption by the richest 5% zoomed up by over 60% between 2000 and 2012 in rural areas while the poorest 5% saw an increase of just 30%. In urban areas, the richest segment's spending increased by 63% while the poorest saw an increase of 33%. The effect of inflation was removed while making these comparisons. 

Here's another way you can look at these disturbing results: in 2000, the average spend (or income) of the richest group in urban areas was 12 times that of the poorest group; in 2012, it had increased to 15-fold. In rural areas, the disparity between the haves and the have-nots increased from 7 times to 9 times in these 12 years. 

These stark findings emerge from a comparison of data on household spending patterns for 1999-2000 and 2011-12. These are collected by the National Sample Survey Organization(NSSO). Consumption spending — that is, all possible expenditure done by an individual in a household on all aspects of life — is the closest measure of incomes available in the country. 

Many experts argue that spending and hence income of the uppermost 5% is not completely reflected in NSSO surveys because those who do their surveys hardly manage to meet and fill out questionnaires of the super-rich households. In other words, the incomes of the super-rich are probably more than what is reflected in this data. 

Growth highest for richest 10%, lowest for poorest 10% 

The richest 10% of Indian society have seen highest growth while the poorest 10% have seen the slowest increase in incomes. The remaining 80% of the people have seen roughly the same levels of growth ranging between 35% and 40% in rural areas and between 40% and 50% in urban areas over 12 years. That means that for 90% of people, annual growth in income was just over 3% in rural India, and just over 4% in urban India. 

Clearly, economic policy that resulted in high GDP growth for most of this period has not trickled down to the neediest. Rather, it appears to be benefitting the already affluent sections more. 

In 2012, a person of the poorest segment in rural areas was spending just Rs 521 per month. So, a family of four would spend about Rs 2,084 per month. In the richest segment, a person spent Rs 4,481 per month which would translate into a monthly spend (or income) of Rs 17,925 for a family of four. In urban areas, monthly spending by the poorest segment was Rs 700 per person or Rs 2,802 for a family of four and for the richest group it was Rs 10,282 per person or Rs 41,128 for a four-member family. 

Details of spending on different items provided by the report show that in urban areas, monthly expenditure per person on food was less than Rs 1,000 for 50% of the population while in the richest segment every person on an average spent Rs 2,859. Some of the food items showing vast disparity between rich and poor included vegetables, fruits, eggs, fish and meat, and milk products. The data blows the myth that poorer sections are consuming more of fruits, eggs, etc. 

A similar multi-fold difference is seen in other key items of expenditure like education, medical and durable goods. 

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