State of the Indian economy: Unequal, uneven distribution of wealth

The income gap between states is growing and the pain of inflation is worse for those falling behind

Thomas Piketty’s seminal work Capital in the Twenty-First Century bared the growing inequality in Europe and the United States since the 18th century. He argued that when the rate of return on capital outstrips economic growth, it results in unequal distribution of wealth.

The coronavirus pandemic made unequal wealth distribution worse, leading to a debate on K-shape recovery.

An analysis of data shows that the per capita income (net state domestic product per person) of the top five Indian states was 3.3 times higher than the bottom five in 2021-22.
 

The gap has increased in the last decade. In 2012-13, the ratio of per capita income of top and bottom five states was 3.1. States were exhibiting a K-shape trend before the pandemic. Between 2012-13 and 2019-20, the average per capita income of the top five states increased at a CAGR of 10.2 per cent, whereas the five with lowest per capita income grew at 9.5 per cent. The pandemic widened the gap, as the top five states grew at a CAGR of 8.2 per cent between 2019-20 and 2021-22. The bottom five grew 6.8 per cent.
 

Add inflation to the mix, and the average consumer prices for the bottom five states increased faster than the five with the highest per capita income between March 2013 and March 2022. While the consumer prices of the bottom five states incre-ased at a CAGR of 3.1 per cent, the top five states witnessed a 2.9 per cent.