Gini Coefficient: Meaning, Latest News, Calculation, Principles & UPSC Notes

The Gini index or Gini coefficient is a statistical measure of the economic inequality across the population in a country or between countries. It measures the dispersion of income or wealth distribution among the members of a population. It helps to gauge the rich-poor wealth divide in a country. 

In an economic context, it is important to understand the Gini coefficient, how it is measured, and what is India’s current status from the perspective of the UPSC IAS Exam. 

This article will explain in detail the Gini coefficient which will help solve questions in the IAS Exam.

World Bank Ranks India #4 Among World's Most Equal Societies [GINI Score - 25.5]

India has achieved a notable milestone, ranking 4th globally in income equality with a Gini score of 25.5 for 2022–23, as per the World Bank’s Spring 2025 Poverty & Equity Brief. This places India just behind the Slovak Republic (24.1), Slovenia (24.3), and Belarus (24.4), and ahead of all G7 and G20 nations, including China (35.7) and the United States (41.8). The Gini improvement—from 28.8 in 2011–12 to 25.5—is attributed to lifting 171 million Indians out of extreme poverty; the rate of people living under the $2.15/day threshold dropped from 16.2% to 2.3% during this period. This progress reflects targeted policies centred on poverty reduction, financial inclusion, welfare delivery, and economic growth distributed across diverse demographics.

What is Gini Coefficient?

The Gini coefficient is also known as the Gini ratio. It is the measure of the demographic distribution of a country with the aim of projecting the income of the country’s population. It measures the equality of distribution of income or wealth within Nations or States. It is the most frequently used measure of economic inequality. The Gini Coefficient is named after Italian statistical and sociologist Corrado Gini, who developed the coefficient in 1192.

History of Gini Coefficient

The Gini coefficient was developed by the Italian statistician Corrado Gini. It was first published in his 1912 paper titled "Variability and Mutability." Gini built upon the work of American economist Max Lorenz. He proposed using the difference between a hypothetical line representing perfect equality and the actual income distribution as a measure of inequality. The Gini coefficient gained popularity as a widely used measure of income inequality and wealth distribution.

Calculation of Gini Coefficient

Its value varies anywhere from 0 to 1. A value of zero indicates perfect equality, where everybody has the same wealth income, and 1 indicates perfect inequality that is where one person owns all the wealth in a country. Practically, No Country is a perfect inequal or perfect equal full stop. The value for every country falls between 0 and 1. Countries with high inequality would have a value which is closer to 1; similarly countries with higher quality would have a value closer to zero.

Generally, a value below 0.4 is considered to be within the tolerable limits.

The Gini coefficient can be measured by two methods, which are based on the following:

• pre-tax (market) income and
• disposable income

The second method takes into account the taxes and social spending as well. The difference in both methods is an indicator of the efficacy of an economy’s fiscal policy in bridging the gap between the rich and poor by means of social spending and taxation.

Check out the article on the Wholesale Price Index here!

GINI Index Full Form

The term Gini coefficient (also known as the Gini index or Gini ratio) is not an acronym—it is named after Italian statistician Corrado Gini, who introduced it in 1912 as a measure of statistical dispersion. It quantifies inequality by comparing the area between the Lorenz curve (which represents actual income distribution) and the line of perfect equality, scaled as A / (A + B)—where 0 indicates perfect equality and 1 indicates total inequality. The coefficient can also be expressed as a percentage (0–100%), commonly used in economics, sociology, public health, and other fields to assess how evenly income or resources are distributed across a population.

Principles of Gini Coefficient

The Gini coefficient is a commonly used measure of economic inequality. It follows these simple principles:

• Anonymity: It doesn't reveal who is rich or poor in a population.
• Scale of Independence: The Gini coefficient is not affected by the size of the economy, how it's measured, or a country's wealth. Both rich and poor countries can have the same coefficient if they share a similar income distribution.
• Population Independence: The coefficient doesn't change based on the population size.
• Transfer Principle: It shows what happens when income is moved from a rich person to a poor person.

Check out the article on Navratna Companies for the UPSC IAS Exam.

Graphical Representation of The Gini Index

The Gini index is often represented graphically through the Lorenz curve, which shows the income distribution by plotting the population percentile by income on the horizontal axis and relative income on the vertical axis. The Gini coefficient is equal to the area below the line of perfect equality minus the area below the Lorenz curve, divided by the area below the line of perfect equality. In other words, it is double the area between the Lorenz curve and the line of perfect equality. Thus, the further a Lorenz curve deviates from the perfectly equal straight line, the higher the Gini coefficient and the less equal the society.

Also, check the article on the Consumer Price Index for UPSC Exam.

Global Gini Coefficient

The Gini coefficient experienced sustained growth during the 19th and 20th centuries. In 1820. The Global clinic Coefficient Store at 0.50 while in 1980 and 1992, it was 0.657. Some of the world’s poorest countries have some of the world’s highest Gini coefficients, while many of the lowest Gini coefficients are found in wealthier European countries. However, the relationship between income inequality and GDP per capita is not one of perfect negative correlation, and the relationship has varied over time.

Nations with High Gini Coefficient

Top 10 Countries with the Highest Gini Coefficients (%) – World Bank:

GINI Coefficient of India [Latest News]

India’s Gini coefficient—a measure of income or consumption inequality on a 0–100 scale—stood at 25.5 for 2022‑23, one of the lowest globally, indicating notably even income distribution . Over the past decade, the figure declined from 28.8 in 2011‑12 to 25.5 in 2022‑23. According to the World Bank’s Poverty & Equity Brief, this improvement coincided with a sharp reduction in extreme poverty—from 16.2% to 2.3%, lifting 171 million people above the $2.15/day threshold. While the Gini coefficient reflects greater equality in consumption, some alternate data (e.g., World Inequality Database) suggests income inequality may be underestimated in official measures.

Also, check out the article on the World Bank Group here.

Significance Of Gini Coefficient

Here's why the Gini coefficient is significant:

• The Gini coefficient provides a numerical value that represents the level of income inequality in a country. 
• High levels of income inequality can lead to various social problems. It can create divisions between different social groups and contribute to social unrest. 
• The Gini coefficient helps policymakers test the effectiveness of their policies aimed at reducing income inequality. By monitoring changes in the coefficient over time, they can assess whether their efforts are making a positive impact.
• The Gini coefficient allows for comparisons of income inequality between different countries. It helps researchers understand how a country's income distribution compares to others globally. 
• Research suggests that extreme income inequality can hinder economic development. Monitoring the Gini coefficient can help policymakers ensure that economic growth benefits a wider section of the population.

Also, Read about the Minimum Support Price for the UPSC Exam here.

Limitations of Gini Coefficient

Despite its numerous advantages, such as universality and scalability, there are some limitations to the Gini coefficient. For example, it samples people at random points, which means that those whose financial futures are reasonably secure cannot be separated from those who do not have prospects.

• Sample Bias: The validity of Gini coefficient calculations can be dependent on the size of a sample. For example, countries with less economic diversity or small countries frequently tend to Show Low coefficients, while economically diverse countries usually demonstrate high coefficients.
• Data Inaccuracy: the Gini coefficient is prone to systematic and random data errors for the stop; therefore, inaccurate data can distort the validity of the coefficient.
• Does not reflect the structural changes in a population: One of the drawbacks of the coefficient is that it does not take into consideration the structural changes in a population. Such changes can significantly influence the economic inequality in a population. Generally, the situation arises because young people tend to earn less relative to older people.
• Does not show demographic variation: Though using the Lawrence curve as a supplement can provide more information, it does not show demographic variations among subgroups within the distribution, such as the distribution of income across age, race or social groups.

Also, study the Features and Criticism of the Kuznets Curve here.

Way Forward

However, the imbalance usually only lasts a short while since investors and workers quickly catch up, which raises their salaries.

• However, given that government welfare programmes are geared toward lower-income groups, it is entirely likely that India’s post-tax Gini Coefficient is lower.
• Additionally, the discrepancy might be reduced by the progressive income tax bracket rates used in India.

We hope all your doubts regarding the Gini Coefficient are addressed after going through this article. You can also download the Testbook App. Testbook provides comprehensive notes for different competitive examinations. It has always assured the quality of its products like content pages, live tests, GK and current affairs, mocks and so on. Ace your UPSC preparation with Testbook.