Deconstructing Income Inequality: A MultiMetric Analysis of Regional Disparities in India

By Prof. L.C. Mallaiah, Abhishek Kumar Kushwaha, Asha Prasuna

Despite three decades of sustained economic growth, income inequality across Indian states has widened, with persistent ruralurban disparities. Paper argues that inequality is fundamentally a legal and institutional problem, not merely an economic one. Using a multimetric empirical framework integrating the Gini coefficient, percentile ratios, Generalized Entropy (GE) indices, and the Atkinson index we analyse income inequality across High, Moderate, and Low Net State Domestic Product state groups, identified through Zscore standardisation, supplemented by OLS regression and Theil index decomposition. Moderate NSDP rural areas record the highest inequality (Gini 0.4849; p90/p10 15.656; A(1) 0.394), while High NSDP urban areas exhibit rising topend wealth concentration (GE(1) 0.1969). Financial inclusion emerges as the strongest predictor of reduced inequality ( 0.31, p 0.01). Theil decomposition reveals that 58% of total inequality is intrastate, rendering interstate fiscal transfers insufficient as a standalone remedy. The paper recommends targeted reforms to the Direct Benefit Transfer framework, labour law, agricultural market regulation, and progressive taxation to address India’s structural inequality.

To read full article click here.