Income Inequality in India 2004-2012: Role of Alternative Income Sources

Abstract

This paper examines the contribution of different income sources to overall income inequality in India, and how the relative importance of each income source has changed between 2004 and 2012. The paper finds that income inequality has increased marginally between 2004 and 2012. Most importantly, the marginal increase is observed in both urban and rural areas. In urban areas, regular salaried income contribute the most in total income and income inequality. In contrast, farm income is the major component in both rural income and rural income inequality followed by salaried income. Regular salaries has an inequality increasing effect while wages from agriculture and non-agricultural casual work has an inequality decreasing effect.

Keywords: Gini decomposition, income inequality, income sources, India

JEL Classification: D31, D63, I32