Gini Coefficient

The Gini coefficient condenses an entire distribution of income or wealth into one figure between 0 and 1. A reading of 0 means perfect equality (everyone earns the same); a reading near 1 means near-total concentration (one person holds almost everything). Most real economies sit somewhere in the middle.

How it works

The Gini is derived from the Lorenz curve, which plots the cumulative share of income earned by the cumulative share of the population, from poorest to richest. If income were perfectly equal, the curve would be a straight diagonal line.

The Gini measures how far the actual curve sags below that line of equality. The bigger the gap, the higher the coefficient and the more unequal the society. It is often quoted as a percentage (0 to 100) too.

In India

India's income Gini is moderate by global standards, but its wealth Gini is far higher, wealth (assets like land, shares and gold) is far more concentrated than annual income. This gap is a recurring theme in policy debates and in reports from bodies like the World Bank and Oxfam.

Government schemes, progressive income tax, subsidised food, rural employment guarantees and direct benefit transfers, are partly aimed at moderating inequality. Yet rapid growth has lifted incomes broadly while still allowing wealth at the top to compound quickly through equity and property markets.

Why it matters

Inequality shapes the investing landscape. High and rising inequality can fuel premium "K-shaped" consumption, luxury and aspirational brands boom while mass-market demand lags, a pattern visible in Indian consumer stocks.

It also feeds policy risk: persistent inequality invites higher taxes on capital gains, wealth or the rich, which directly affects investors. Reading the Gini alongside growth helps you judge whether prosperity is broad-based.

Common mistakes

Treating the Gini as the whole story is the main error, two countries with the same Gini can have very different distributions. It also says nothing about *absolute* poverty: a society can grow richer overall while its Gini barely moves, and vice versa.