We investigate the nature and extent of reallocation occurring within the Indian income distribution, with a particular focus on the dynamics of the bottom of the distribution. We argue that income evolution is appropriately modelled using Geometric Brownian Motion (GBM). Specifically, we use the mechanism of GBM with a reallocation parameter that quantifies the extent and direction of reallocation in the distribution, as proposed by Berman et al. We find that since the early 2000s reallocation is negative, meaning that incomes are exponentially diverging and that there is a perverse redistribution of resources from the poor to the rich. It is well known that inequality has been rising in India in the recent past, but the assumption has been that while the rich benefit more than proportionally from economic growth, the poor are also better off than before. Our work refutes this as we find that India has moved from a regime of progressive to regressive redistribution , where continued impoverishment of the poor is directly spurring multiplicative income growth of the rich. Outcomes from the model suggest that income shares of the bottom decile (~1\%) and bottom percentile (~0.03\%) are at historic lows  . We characterize these findings in the context of increasing informalization of the workforce in the formal manufacturing and service sectors, as well as the growing economic insecurity of the agricultural workforce in India. Significant structural changes will be required to address this phenomenon.
We investigate the nature and extent of reallocation occurring within the Indian income distribution, with a particular focus on the dynamics of the bottom of the distribution. Specifically, we use a stochastic model of Geometric Brownian Motion with a reallocation parameter that was constructed to capture the quantum and direction of composite redistribution implied in the income distribution. It is well known that inequality has been rising in India in the recent past, but the assumption has been that while the rich benefit more than proportionally from economic growth, the poor are also better off than before. Findings from our model refute this, as we find that since the early 2000s reallocation has consistently been negative, and that the Indian income distribution has entered a regime of perverse redistribution of resources from the poor to the rich. Outcomes from the model indicate not only that income shares of the bottom decile (~1\%) and bottom percentile (~0.03\%) are at historic lows , but also that real incomes of the bottom decile (-2.5\%) and percentile (-6\%) have declined in the 2000s. We validate these findings using income distribution data and find support for our contention of persistent negative reallocation in the 2000s . We characterize these findings in the context of increasing informalization of the workforce in the formal manufacturing and service sectors, as well as the growing economic insecurity of the agricultural workforce in India. Significant structural changes will be required to address this phenomenon.
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We argue that income evolution is appropriately modelled using Geometric Brownian Motion (GBM).
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the mechanism of GBM
a stochastic model of Geometric Brownian Motion
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quantifies the extent
was constructed to capture the quantum
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reallocation in the distribution, as proposed by Berman et al. We find that since the early 2000s reallocation is negative, meaning that incomes are exponentially diverging and that there is a perverse redistribution of resources from the poor to the rich.
composite redistribution implied in the income distribution.
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Our work refutes this
Findings from our model refute this,
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India has moved from
since the early 2000s reallocation has consistently been negative, and that the Indian income distribution has entered
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progressive to regressive redistribution , where continued impoverishment of
perverse redistribution of resources from the poor to
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poor is directly spurring multiplicative income growth of the
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suggest
indicate not only
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, but also that real incomes of the bottom decile (-2.5\%) and percentile (-6\%) have declined in the 2000s. We validate these findings using income distribution data and find support for our contention of persistent negative reallocation in the 2000s