The Spatial Organization of Consumption Inequality in India: Evidence from Annual Decompositions 2014-2024
L. C. Mallaiah1, Abhishek Kumar Kushwaha2, Asha Prasuna3
1Prof. L.C. Mallaiah, Department of Economics, University of Hyderabad, Hyderabad (Telangana), India.
2Abhishek Kumar Kushwaha, Department of Economics, University of Hyderabad, Hyderabad (Telangana), India.
3Prof. Asha Prasuna, Department of Management, SIES School of Business Studies, Navi Mumbai (Maharashtra), India.
Manuscript received on 22 June 2026 | First Revised Manuscript received on 01 July 2026 | Second Manuscript Accepted on 07 July 2026 | Manuscript Accepted on 15 July 2026 | Manuscript published on 30 July 2026 | PP: 1-12 | Volume-12 Issue-11, July 2026 | Retrieval Number: 100.1/ijmh.K188712110726 | DOI: 10.35940/ijmh.K1887.12110726
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: India’s federal redistribution targets state averages. But most consumption inequality in India sits inside states, not between them. This paper measures exactly how much, and whether that split moves over time. We use the Consumer Pyramids Household Survey (CPHS), which includes 16.8 million household-year observations across 28 states from 2014 to 2024. Inequality is measured using the Theil index GE (1). It decomposes without residual into within-state and between-state parts. A nested version separates within-state inequality into rural dispersion, urban dispersion, and rural-urban gaps. The NSS 75th Round validates results. Three results stand out. First: within-state inequality accounts for 79.1 percent of total inequality, averaged over 2014-2024. Between-state differences explain only 20.9 percent. This holds every year — no exceptions across 28 states. Second: the spatial structure barely moves. Its coefficient of variation is 0.043. Total inequality fluctuates by a factor of 3 (CV = 0.133). Demonetization, GST, COVID-19 — none shifted the 79 21 split. Third, rural-urban mean gaps account for only 17.6 percent of within-state inequality. Within-rural and within-urban dispersion each contribute 41.2 percent. Inequality is generated within sectors, not between them. These facts change how India’s redistribution problem should be framed. Finance Commission transfers reduce the 21 percent that is interstate. They leave the 79 percent inside states largely untouched. Addressing that requires stronger state-level fiscal tools, expanded urban social protection, and redistribution aimed at households rather than state governments. JEL Codes: D31, D63, H77, O15, R12
Keywords: Spatial Inequality, Inequality Decomposition, Fiscal Federalism, Within-State Inequality.
Scope of the Article: Social Sciences