World Bank’s Inequality Report: Real News Or Data-Driven Fiction?

World Bank's data glosses over deep divides, while Bihar's voter purge puts democracy to the test.

11 July 2025 6:00 AM IST

The Gist

The Prime Minister of Israel has stolen a march over all other national leaders who have been trying to curry favour with US President Trump. Benjamin Netanyahu, while visiting the US president at the White House, handed him a copy of the letter he had written to the Norwegian Nobel Committee, nominating Trump for the Nobel Peace Prize.

Trump is thrilled, quite a few national leaders are kicking themselves for not having done this themselves. They should not be so hard on themselves: it is not given to everyone to believe in six impossible things before breakfast, as the White Queen had boasted to Alice she could.

Belief in the ability of people to believe impossible things is more widespread than you might think.

Inequality Mirage

The World Bank is afflicted by this, apparently. It put out a policy brief recently, which claims that India is today the world’s fourth least unequal country. This, at a time when valuations on India’s stock markets are rolling out new dollar millionaires and billionaires on a regular basis, entry level cars do not sell and mass consumption goods stall, even as every marketer worth his salt is trying to go premium to tap into the purchasing power of those who still have the capacity to splurge, whether on residences or on imported cosmetics.

Unlike politicians whose celebrity and popularity can be counted on to carry conviction when they make tall claims to credul...

The Prime Minister of Israel has stolen a march over all other national leaders who have been trying to curry favour with US President Trump. Benjamin Netanyahu, while visiting the US president at the White House, handed him a copy of the letter he had written to the Norwegian Nobel Committee, nominating Trump for the Nobel Peace Prize.

Trump is thrilled, quite a few national leaders are kicking themselves for not having done this themselves. They should not be so hard on themselves: it is not given to everyone to believe in six impossible things before breakfast, as the White Queen had boasted to Alice she could.

Belief in the ability of people to believe impossible things is more widespread than you might think.

Inequality Mirage

The World Bank is afflicted by this, apparently. It put out a policy brief recently, which claims that India is today the world’s fourth least unequal country. This, at a time when valuations on India’s stock markets are rolling out new dollar millionaires and billionaires on a regular basis, entry level cars do not sell and mass consumption goods stall, even as every marketer worth his salt is trying to go premium to tap into the purchasing power of those who still have the capacity to splurge, whether on residences or on imported cosmetics.

Unlike politicians whose celebrity and popularity can be counted on to carry conviction when they make tall claims to credulous voters, the World Bank has to marshal some data to support its reports. On inequality, it has put forward the Monthly Per Capita Consumption Expenditure (MPCE) figures for 2022-23 and 2023-24, released mid-2024 and early 2025, respectively.

Even with the most accurate data, inequality measures based on consumption would show a remarkably less adverse picture, as compared to inequality measures of income. The rich would certainly consume much more than the poor, but also save a great deal more, so that the gap between consumption patterns would be far smaller than the gap between incomes at the top and the bottom of the social pyramid.

But this is not what makes the MPCE data such a bad guide to measuring inequality in India. The rich reveal only a fraction of their actual consumption to surveyors who come knocking, and seek intricate details of what all they had consumed. The aggregate consumption, computed from the data reported in the MPCE survey, amounts to only 49% of the total private final consumption reported in the national income accounts.

The MPCE Survey puts the per capita monthly consumption expenditure of the richest 5% of the population to be Rs 20,824 in urban areas. This is a ridiculous underestimate. The rich would spend as much on pet care in a month. None of the scintillating vignettes of their existence that the rich capture for posterity on Instagram — foreign visits, fancy cocktails at fancy bars, Hermes bags, destination weddings, desi designer chic — would be accommodated by that lowly figure for monthly expenditure.

Fake data yield fake inequality measures and loud claims of governance achievements.

When the news that the World Bank has come out with a report of inequality being low in India is real, but the World Bank’s findings are fake, does this amount to fake news? We could have checked with that authority on fake news, president Trump, had he not been so busy shooting off letters threatening heavy tariffs to the leaders of Japan, South Korea and other nations, and pushing back from July to August 1 the deadline for his so-called reciprocal tariffs to take effect. Luckily, India has not crumbled proactively before Trump, and is determined to utilise the extra time it now has to negotiate a deal with the US to secure better terms.

Revival Or Illusion?

If you trust the Purchasing Managers’ Index for economic activity in India, the Indian economy is finally about to regain vigour. The Index of Industrial Production for May had registered a weak growth of 1.2%. Bank credit growth remains sluggish, although banks are flush with funds, and will have even more money on their hands, as the phased 100 basis point reduction in the proportion of their deposits they are obliged to keep as a reserve with the central bank, called the cash reserve ratio (CRR), commences in September.

The RBI’s Weekly Statistical Supplement Report of July 4 presents data as of June 13 to report credit growth of 9.6% over a year ago, and deposit growth of 10.4%. At the same time, the outstanding value of corporate bonds rose by nearly Rs 5 trillion, over June ‘24-Mar ’25, dwarfed by the bank loan growth, in absolute terms, of Rs 16 trillion over the 12 month period to June.

The continued underdevelopment of the bond market is one factor holding back private investment in infrastructure. The tenure of bank deposits is way too short, compared to the gestation period of infrastructure projects, leading to serious asset-liability mismatches when banks lend to infrastructure projects.

If stunting is the problem with the bond market, gigantism is the problem with the stock market, at least its stock equities derivatives segment. Before the Securities and Exchange Board of India (SEBI) introduced measures to curb retail participation in equities derivatives, retail investors were active in the market, only to be ripped off by sophisticated algo traders like Jane Street.

The SEBI has clamped down on this Wall Street trader, which has made handsome profits in India, at the expense of retail investors. Plain arbitrage, says the trader, is perfectly legal. SEBI suspects manipulation of the sentiments of unwary retail investors to make a killing by the trader. A final picture would emerge only after lengthy court cases.

Asking The Impossible

There is greater clarity on the controversy surrounding the Special Intensive Revision of the Electoral Roll underway in Bihar, in which the Election Commission has been seeking proof of bona fide citizenship to include a resident of Bihar in the voters’ list.

The court has asked the commission to accept Aadhaar, a previous voter ID card (EPIC) and the ubiquitous ration card as valid proof of eligibility. But a final verdict on the cases challenging the EC’s ham-handed electoral roll revision exercise — involving the Election Commission issuing personalised enumeration form to everyone on the latest available electoral roll, complete with the voter’s picture, requirement to provide 11 identity documents, and submit the filled form in duplicate — would be available only on July 28, the next date for hearing the case, if then.

If the Election Commission is allowed to have its way, a sizeable proportion of the residents of Bihar are likely to be stripped of their franchise. While those whose names were present in the 2003 electoral roll would not have to prove anything beyond such inclusion, everyone else is supposed to provide proof of their parentage, and their parents’ birth details.

In a land where registration of births became universal only after 1989, many people lack functional literacy, and the means of securing identity documents in the face of floods and landslides that take away all material possessions, asking people to prove their parental lineage is to ask for the impossible.

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