Solving the Income Data Puzzle
Comparison of Results
Pattern of Income Distribution 1999 / 2004 Income Shares * %
| |
Quintile 1 (lowest) |
Quintile 2 |
Quintile 3 |
Quintile 4 |
Quintile 1 (Highest) |
| NDSSP adj 2004 |
4.8 |
8.7 |
13.2 |
20.5 |
52.8 |
| NSS 1999 |
4.0 |
7.9 |
12.2 |
20.6 |
55.3 |
| NCAER MISH 1999 |
6.3 |
10.5 |
15.3 |
22.2 |
45.7 |
| IRS 2005 |
4.8 |
9.0 |
13.7 |
21.4 |
51.1 |
Source: Bhalla, Surjit Singh. (2004), Reforming Personal Income Tax in India, Oxus Research & Investments, New Delhi, India.. NACER, NDSSP: National Data Survey on Saving Patterns, NSS: National Sample Survey, NCAER-MISH: National Council for Applied Economic Research - Market Information Survey of Household and Indicus Estimates, IRS: Hansa Research conducted for MRUC
* Household income shares for NDSSP, NSS, IRS Per Capita income shares for NCAER.
** NDSSP adjustments have been made based on Indicus Analysis, to derive income and savings of the total household, based on the data of one earning member, and the demographic profile of other members of the household, using the survey data of members interviewed with similar profiles in other households. For details, see www.indicusanlytics.com
All sources of survey data, especially the NDSSP adjusted and IRS, have almost identical percentage distributions of what the income share of each income quintile is, thus showing the data to be reliable and robust in percentage distribution terms, even if not comparable on the absolute incomes.
For the rest of this analysis, we have decided to adopt the NDSSP survey distributions on income and savings as the standard survey data to use and not the IRS or NCAER, because IRS data is available only by quintiles, not deciles; and NCAER data is too dated.
Household income and savings distribution, from NDSSP (adjusted), 2003 -4, and expenditure distribution
from NSS
| Deciles |
Income Distribution(%) |
Saving Distribution(%) |
Expenditure Distribution(%) |
| 1 (lowest) |
2.0 |
0.6 |
2.5 |
| 2 |
3.2 |
1.4 |
3.8 |
| 3 |
4.1 |
2.2 |
4.7 |
| 4 |
5.4 |
3.6 |
6.0 |
| 5 |
6.2 |
4.5 |
6.8 |
| 6 |
8.8 |
7.3 |
9.3 |
| 7 |
8.4 |
7.1 |
8.9 |
| 8 |
11.9 |
11.1 |
12.2 |
| 9 |
15.8 |
16.8 |
15.5 |
| 10 (highest) |
34.1 |
45.3 |
30.4 |
| Total |
100 |
100 |
100 |
| Top 20% |
49.9 |
62.1 |
45.9 |
| Top 5% |
22.7 |
31.4 |
19.9 |
| Top 1% |
8.6 |
12.6 |
7.3 |
The higher the income per capita per household, the higher their savings as well. 34% of total income is earned by top 10% of the households. When we look at the saving pattern across economic status, it is found that as high as 45.3% of the savings comes from the richest 10% of the households.
The poorest 20% of the households contribute just 5% to India's total personal disposable income. In case of household saving also, only 2% of the savings come from these households, and to apply these distributions to all macro data, so that we can get a distribution of macro indicators across income deciles - thus bridging the gap between the more valid macro numbers with no distribution available, and the less valid survey numbers which have a distribution available. |
