Working Paper
Inequality, urbanization, and the Kuznets process

We provide annual estimates of inequality in monthly per capita household earnings in India over the period 2017/18 to 2022/23 based on analysis of India’s Periodic Labour Force Surveys. 

Over the six years, the estimate of inequality as measured by the Gini coefficient is in the range of 0.40 to 0.44 and, as measured by the Mean Log Deviation, between 0.28 and 0.34. We find that a 1 percentage point increase in the level of urbanization may increase the Mean Log Deviation by 0.5 to 0.7 per cent. 

Our analysis suggests that inequality will start declining only when India’s urbanization rate is in the region of 63 to 74 per cent. Further, after accounting for variation in sectoral means and inequalities, we find that the development of the inequality–urbanization relationship at the sub-national level conforms to the Kuznets process.