Muslims in Bihar and for Hindus in Gujarat<sup>20</sup> . Interestingly, as the appendix documents, poverty rates for both Hindus and Muslims decline in both states at Lakdawala between 2004-05 and 2009-10.

# **10. Inequality**

Although the focus of this paper is on poverty, we find it useful to briefly report the evolution of inequality at the state and national levels in rural and urban areas. At the outset it is important to note that the issue of inequality is complex in part because it can be measured in numerous ways.<sup>21</sup> The potential list of measures is almost endless and there is no guarantee that these different measures will move in the same direction. Therefore, it is quite easy to show simultaneously that inequality has risen as well as fallen depending on the choice of measure.

In this paper, we use one measure of overall inequality based on the same expenditure survey data we have used to report the poverty measures in the previous sections: the Gini coefficient of household expenditures in rural and urban areas in the 17 states and in India as a whole using URP expenditures in 1983, 1993-94, 1999-2000, 2004-05 and 2009-10. Table 17 and Table 18 report the Gini coefficient in rural and urban areas, respectively. As before, we arrange the states in descending order of population.

An immediate observation from Tables 17 and 18 is that with rare exceptions, rural inequality is lower than urban inequality. At the national level the Gini in 2009-10 was 0.291 in rural areas and 0.382 in urban areas. These values reflect a difference of 9 percentage points. This is not surprising. The vast majority of the villagers are small farmers or wage laborers. As a result, variation in their incomes and therefore expenditures are not large. In contrast, cities serve as home to much of the industry and formal sector services as well as to a large informal sector, which attracts migrant workers. This results in greater variation in incomes and expenditures.

The tables show no clear trend in the Gini in rural areas but a tendency for it to rise in urban areas. At the national level, the rural Gini fell between 1983 and 19992000, rose between 1999-2000 and 2004-05 and fell again by 2009-10 with a small net decline over the entire period. In contrast, the urban Gini has climbed up steadily. This is hardly surprising since rapid growth, which can produce increased inequality, is concentrated in urban areas. In the Indian case, a dualism of sorts exists within urban areas. Output growth has been concentrated in the formal sector while employment has been disproportionately concentrated in the informal sector. Unlike South Korea and Taiwan, China in the 1960s and 1970s and China more recently, employment in the formal sector has not grown in India due to the poor performance of labor-intensive sectors. Growth in India has concentrated in skilled-labor- and capital-intensive sectors.

> 20 Panagariya and More (2013) show that these unexpected trends were reversed in 2011-12, netting a large net decline in poverty between 2004-05 and 2011-12.

> 21 For instance it could be measured as the ratio of the top 10 to bottom 10 percent of the population, the ratio of rural to urban per-capita incomes, the ratio of skilled to unskilled wages (or formal and informal sector wages), the Gini coefficient (nationally or across states).

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