Context:

• The article critically analyses the ongoing debate on inequality in India, especially in light of the claim that India is among the most equal societies in the world based on the Gini index of consumption.
• The controversy highlights significant misinterpretations and inconsistencies among the Government of India, World Bank, media, and independent researchers regarding how inequality is measured.
• This discussion on measuring inequality in India (whether through consumption, income, or synthetic data), is particularly relevant due to its implications on data integrity, policymaking, and socio-economic analysis.

Understanding the Gini Index:

• The Gini Index is a simple yet powerful way to understand how equally income, wealth or consumption is distributed across households or individuals in a country.
• It ranges in value from 0 to 100. A score of 0 means perfect equality. A score of 100 means one person has all the income, wealth or consumption and others have none, hence absolute inequality.
• The higher the Gini Index the more unequal the country.

Misinterpretation of India's Inequality Ranking - Claim vs Reality:

• According to the Observer Research Foundation (ORF), India is the world’s “4th most equal society.”
• In fact, India had the lowest consumption Gini (25.5) in 2022–23, making it the most equal in terms of consumption, not fourth.
• India has no official data on income inequality, hence no global ranking in that category.
• Distinction between income Gini and consumption Gini is critical in socio-economic analysis.

Government and Media Missteps - Faulty Endorsement:

• Government agencies and political parties endorsed the false claim of India being the 4th most equal, confusing social equality with consumption equality.
• Critics rightly pointed out this misinterpretation, but many fell into similar traps.

Flawed Data Sources and Comparisons:

• The critics question the government for flawed comparisons based on WID (World Inequality Database) synthetic data, which is based on assumptions, not official surveys.
• WID data is widely questioned in top academic circles for its reliability, as survey data (like those used in Poverty Inequality Platform – PIP) are considered more credible.

Role of the World Bank and PIP Database:

• Credible data via PIP:
  • The World Bank’s Poverty Inequality Platform (PIP) compiles verified official survey-based consumption and income data across 167 countries.
  • India’s consumption Gini (25.5 in 2022-23) is the lowest globally, while South Africa’s (63.0) is the highest.
• No official income data: India and South Africa lack official income surveys, hence no income Gini is reported by PIP.

Contradiction and Credibility Crisis:

• World Bank’s paradox: Despite publishing official consumption Gini data, the World Bank quotes WID's synthetic income Gini (62 for India in 2023), leading to a paradoxical portrayal of India as both highly equal (consumption) and highly unequal (income).
• Credibility questioned: This contradiction raises serious questions about data interpretation, credibility of global institutions, and their methodological consistency.
• Historical benchmark: Earlier World Bank research indicated that income Ginis are typically 6 points higher than consumption Ginis, yet the current 36-point gap for India (62 vs 26) defies this precedent.

 Conclusion - A Lesson in Data Discipline:

• There is an urgent requirement for India to conduct official income surveys to ensure meaningful comparisons.
• The episode reflects the significance of data transparency, methodological rigour, and accurate socio-economic assessment.