Income inequality declines, says SBI research unit countering K-shaped eco recovery claims

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Last Updated10/01/2024

The Economic Research Department of the State Bank of India recently reported a decline in income inequality in India.
It attributes this decline to a higher tax base and a shift in taxpayers from lower to higher income tax brackets.

36.3% of taxpayers have moved from lower to higher income tax brackets, resulting in a 21.3% increase in additional income.
Income-tax returns filed by individuals earning between Rs 5 lakh and Rs 10 lakh increased by 295% between AY 2013-14 and AY 2021-22.

Top 2.5% of taxpayers' contribution in income declined from 2.81% in FY14 to 2.28% in FY21.
Share of combined income of top earners with over Rs 100 crore income decreased from 1.64% in FY14 to 0.77% in FY21.

19.5% of small firms transitioned into larger ones through MSME value chain integration.
Consumption of the bottom 90% of the population increased by Rs 8.2 lakh crore post-pandemic.

The report dismisses claims of a K-shaped recovery as "flawed, prejudiced, and ill-concocted."
- The concept of K-shaped recovery came to light during the covid 19 pandemic.
- It signifies a diverging economic scenario where certain sectors of the economy will be thriving while other sectors will continue to decline or struggle to recover.
Growth is seen in all income classes but its skewedness has been decreasing with convergence of income towards the middle, indicating a positive economic trend.

Gini coefficient of taxable income declined significantly from 0.472 to 0.402 during FY14-FY22.
Decline in two-wheeler sales is attributed to a shift towards four-wheelers and not rural distress.
Female tax filers constitute around 15% of individual tax filers.
Consumption data from platforms like Zomato suggests rising experience-centric income groups, refuting claims of distress.