Explain "Gini Coefficient"and ways to measure it. Discuss the reasons for continuous rise in India's Gini coefficient.
The Gini coefficient is a statistical measure of distribution used as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population.
The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality.
Measurement of Gini co-efficient:
The graph on which the cumulative percentage of total national income (or some other variable) is plotted against the cumulative percentage of the corresponding population (ranked in increasing size of share). The extent to which the curve sags below a straight diagonal line indicates the degree of inequality of distribution.
Gini co-efficient is defined as a ratio of area between 45deg line/line of equality and Lorentz curve to area below line of equality.
Gini co-efficient: A/A+B
Causes for Continuous rise in India’s Gini coefficient
- Overdependent agricultural sector: Indian agricultural sector is over employed. About 48% of population are dependent on agriculture for livelihood. Underemployment and disguised unemployment in agricultural sector has made the agricultural sector economically stressed.
- GDP contribution: Agriculture has 50% of people dependent on it for Its contribution to GDP is around 15%. But the service sector which has around 20% of population dependent on livelihood contributes more than 50% to GDP. This is increasing the drift between the populations.
- Jobless growth: Indian growth story is led by the information and communication technology sector which is capital intensive. As a result Indian growth story is often referred as Jobless growth leading to increase d gaps between the people.
- Crony capitalism: Even though India opened for liberalisation after the 1991 reforms there were shortfalls which led to crony capitalism tendencies which resulted in rich getting richer and poor remained poor.
- Corruption: Widespread corruption in implementation of the welfare schemes has led to leakages. This leakage is captured by the powerhouses.
- Rigidities: Lack of access to capital and financial inclusion has resulted in large chunk of population unable to avail the benefits of the growth trajectory of India.
Recognising the lopsided growth the five years plans in the post reform period has concentrated on inclusive and sustainable growth. But lack of implementation mechanisms has led to failure in achieving the desired objectives.
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