SBI Report Challenges Claims of Unequal Growth in India's Economy, Citing Positive Trends

In a counter to recent discussions on unequal economic growth in India, a report from the State Bank of India's Chief Economist, Soumya Kanti Ghosh, contends that the country's economic landscape is not marked by inequality. Released just two days after the first advance estimates of India’s 2023-24 GDP, which showed a robust growth of 7.3%, the report emphasizes a "great migration at the bottom of the pyramid."

The report relies on the Gini coefficient, a key indicator of inequality, calculated using income-tax returns (ITR) data. The analysis reveals a decline in individual income inequality from 0.472 in the 2015 assessment year to 0.402 in AY2023, with a projected further decrease to 0.402 in AY2023.

According to the report, 36.3% of individual ITR filers with an income less than ₹3.5 lakh in AY2015 have moved up the income ladder. Notably, 15.3% transitioned into the income group of ₹3.5 to 5 lakh, and ₹5 to 10 lakh, while 4.2% moved to the ₹10 to ₹20 lakh bracket.

The study also points out a significant transformation in the income pattern of micro, small, and medium enterprises. Approximately 19.5% of micro firms with gross income up to ₹10 crore between 2013-14 to 2020-21 have progressed to become small, medium, and large firms.

The report argues for the consideration of new indicators, such as the rise in disposable incomes, to gauge the well-being of the non-rich. It challenges conventional metrics, suggesting that the popularity of food delivery platforms in smaller cities indicates diminishing inequality, citing Zomato as a case study.

Contrary to conventional beliefs, the report questions the use of two-wheeler sales as a metric for measuring the economic well-being of the non-rich. It asserts that the decline in two-wheeler sales is not indicative of rural distress, emphasizing the increasing preference for four-wheelers over two-wheelers since 2018-19.

Overall, the report encourages a nuanced examination of economic indicators to present a more accurate picture of India's economic landscape.