ANALYSIS OF WEALTH DISPARITY IN INDIA

Group 10
Shrirang Jadhav (09FT-064) Jasvir Singh (09FT-067) Lakshey Bhalla (09FT-074) Sameer Mahajan (09FT-078) Naval Jain (09FT-093) Rahul Aggarwal (09FT-111)

INTRODUCTION

INDIA Among the fastest growing economies at annual GDP rate of 5.8% for last two decades.

MACROECONOMIC INDICES
LORENZ CURVE - Lorenz curve plots the cumulative percentage of total income received against the cumulative number of recipients.

Graph showing the proportion of the distribution assumed by the bottom y% of the values. It is often used to represent income istribution, where it shows for the bottom x% of households, what percentage y% of the total income they have.

MACROECONOMIC INDICES
0.7000

0.6000

0.5000 Year 1951 0.4000 Year 1961

0.3000

Year 1970

Year 1983 0.2000 Year 1990 0.1000

0.0000 0 0.2 0.4 0.6 0.8 1 1.2

MACROECONOMIC INDICES
Gini Coefficient measure of statistical dispersion developed
by the Italian statistician Corrado Gini. Measure of inequality of income or wealth. Range from 0 to 1. A value of 0 represents perfect equality, a value of 100 perfect inequalities. G=A/(A+B).

MACROECONOMIC FACTORS
GROSS DOMESTIC PRODUCT- product from the year 1951-2004 has been steadily increasing. The growth has been very sharp in the 1990s during the postliberalization period. Ginis Coefficient = 59.8581 + -2.16938 loge(GDP)
1400000 1200000 1000000 800000 600000 400000 200000 0 1940 -200000

GDP

1960

1980

2000

2020

OBSERVATIONS AND ANALYSIS

MEASURES OF WEALTH TOTAL HOUSEHOLD ASSETS -The NSS defines total household assets as comprising physical assets like land, buildings, livestock etc. NET WORTH : Net worth is defined as the total household assets net of the indebtedness of households (also provided in the surveys).

OBSERVATIONS AND ANALYSIS

PROBLEMS WITH THE DATA

The sampling methodology followed by the agencies does not follow a twostage sampling process where the first stage units were the census rural and urban blocks and the second, was the households. So, this methodology does not over sample the wealthy because a large concentration of wealth is at the top end of the population and this is problematic since a few large values can impact the summary measures like the mean and the median. Generally all the respondents under-report their wealth holdings. So, inequality in asset holding is underestimated in the survey. Difficulty in obtaining the market prices for various kinds of assets. To counter these problems : consumption based deflators were used.

Consumer Price Index (CPI) - for agricultural workers in order to deflate

wealth data and for urban workers to deflate urban data.

OBSERVATIONS AND ANALYSIS

SUMMARY MEASURES

OBSERVATIONS AND ANALYSIS

The following observations can be made: Overall Per Capita assets have increased by 35%. Overall net worth has increased by 39%. Ratio of average per capita assets in urban areas to average per capita assets in rural areas is relatively constant at 1.5. If we analyze per capita net worth in the same segment i.e. rural and urban, we find that growth is faster in urban areas reflecting greater

reported in debt in rural areas.

OBSERVATIONS AND ANALYSIS

INEQUALITY MEASURES
The observations that can be made Gini coefficient has seen an increase of about 2 percent

for per capita net worth as well

as about 1 percent for per capita assets. From the values of per capita shares and per capita loans we

see that tremendous focus is given to the health of stock

market and the movement of corporate asset.

OBSERVATIONS AND ANALYSIS

So as to answer the wealth concentration levels, examination
of shares and cumulative shares by decile for both total per capita assets and per capita net worth. From the table below we find that 10 percent of the individuals possess a little over half of the total countrys wealth. Bottom 10 per cent possess a mere 0.4 per cent of the total wealth.

ANALYSIS

ANALYSIS
The cumulative share of net worth per capita in 1991 is higher than (although close to) the corresponding figure for 2002. This would indicate that if we construct Lorenz curves based on deciles, the Lorenz curve for 1991 would be close to but lie above the Lorenz curve for 2002. we can observe that the absolute Lorenz curve for 1991 lies above the same for 2002. This indicates an unambiguous increase in inequality from 1991 to 2002 according to all standard absolute inequality measures.

We can also note that the difference across these two points in time
between the absolute Lorenz curves is much more pronounced compared to the difference between the standard Lorenz curves.

ANALYSIS

It is interesting to note too that growth in asset holdings has been fastest in the urban areas of the middle income

states, regions which include

dynamic urban centers such as Hyderabad and Bangalore.

CONCLUSIONS
Two patterns in Indian wealth distribution:
Majority of the population, witnessed increase in its absolute wealth levels during the period of liberalization.

Impressive increases in wealth levels have been unequal across

different groups.

Reason behind the increase in inequality probably is due to a

number of factors:
notably includes technological change. In addition, increased international trade and the declining role of labour unions as other, probably lesser contributing factors.

CONCLUSIONS
Effects of wealth inequality :
It may itself limit the growth potential of economies by not allowing all economic agents to fully exploit the new opportunities. Greater inequality makes a greater proportion of the population

vulnerable to poverty.
if not addressed can also lead to a backlash against economic liberalization and protectionist pressures, limiting the ability of economies to benefit from the globalization.

CONCLUSIONS

Increasing trade and financial globalization have had

separately identifiable and opposite effects on income

distribution.
Trade liberalization and export growth are found to be

associated with lower income inequality

increased financial openness is associated with higher

inequality.

CONCLUSIONS

The disequalizing impact of financial openness mainly

felt through foreign direct investment (FDI)and

technological progress appear to be working through

similar channels by increasing the premium on higher

skills, rather than limiting opportunities for economic

advancement.

CONCLUSIONS

For a given level of technology, greater access to

education would be expected to reduce income

inequality by allowing a greater share of the population

to be engaged in high-skill activities.

Increase in the relative productivity of agriculture is

expected to reduce income disparities by increasing the

income of those employed in this sector.

CONCLUSIONS
In many developing countries a lot of the poor are still employed in the agricultural sector, so that an improvement in the export prospects of this sector tends to reduce inequality. The share of agriculture employment tends to increase inequality, while the share of industry employment reduces it. This is consistent with the idea that labour shifts from agriculture to industry raise the productivity of the agricultural sector where most

poor are employed and decrease productivity in industry.

CONCLUSIONS
Wealth levels rise with the educational level of the head of the household.
Individuals from the households with a graduate head have about twice the average wealth as those from one with a head who has a secondary school certificate

They also earn nearly five times that of individuals from a household
with an illiterate head.

There is also large differences in wealth holdings among religious groups.

Thank You !!!