What lies behind income inequality and income mobility in India? Implications and the way forward

Abstract

Purpose The purpose of this paper is to examine income inequality and income mobility, which have been central to understanding India’s recent economic development. Design/methodology/approach This paper uses the first two waves of the India Human Development Survey data for the year 2004–2005 and 2011–2012 to analyze income inequality and income mobility using longitudinal data, and is the first to do so at a nationally representative level. In this research paper, we address three related research questions: How have been the patterns of income mobility in India? What are the trends, levels and sources of income inequality in India? and finally And What is the structure of household income mobility? Findings The paper examines the trends, levels, sources and factors of income inequality and income mobility in India between 2005 and 2012. The results further show the case for high persistence at the top of income distribution but lower persistence at the bottom. Research limitations/implications Because of the chosen research approach, the research results may lack spatial analysis. Therefore, researchers are encouraged to test the proposed propositions further. Practical implications The paper suggests that, in the end, the nature of longer-term well-being is crucial to designing policy interventions to effectively tackle inequality, and economic mobility can be seen as an avenue to long-term equality. Social implications This study can further be extended to look at polarization issues at the national and sub-national levels. Originality/value This paper shows the analytical framework of additive decomposition of income mobility out of two sources, namely mobility due to the transfer of income within given structure and mobility due to economic growth or contraction in rural and urban India.