Revisiting the urban-rural welfare gap in India: evidence from 2012–2023

We study the urban-rural welfare gap, measured by spatially adjusted real consumption expenditure, in India over 2012 and 2023 using the recently available 2023 consumer survey from the Indian National Sample Survey. Using unconditional quantile regression decomposition, we assess the factors responsible for the urban-rural gap across the entire distribution in 2012 and 2023, as well as the changes observed in the urban-rural gap over 2012–2023. We find that differences in characteristics contribute more than half of the gap observed in both years. Moreover, the contribution of the characteristics is higher at the higher quantiles. Further decomposition of the change in the gap over 2012–2023 suggests that although urban areas’ advantage in tertiary education increased over time, there is evidence of some convergence in returns between urban and rural areas, leading education to reduce the gap. The increase in interstate differences over time widens the urban-rural gap.