Exploring the nexus between income inequality and financial indicators: endemic to the Indian economy?

The dynamic, globally integrated and increasingly complex socio-economic landscape prevalent around the world today gives rise to intriguing questions about the relationships between disparities in human and economic development and factors that affect their magnitude. It is well acknowledged that circulation of wealth and its equitable distribution is necessary for the proper realization of public policy objectives of socio-economic welfare. Nonetheless, the growing complexities and instabilities in regimes around the world, seem to aggravate the poverty gap and pose challenges in policy reforms for effective redressal of income inequalities. Thus it is imperative to analyse the indicators of economic disparities such as income inequality and past trend of poverty reduction and aggravation, so as to better appreciate whether it is the quantum of ‘growth’ or quality of sustainable development that would chart the way towards greater socio-economic equity. This paper is a humble attempt at using econometric techniques for investigating a causal nexus between income inequality and financial indicators, with special reference to India, an economy with several endemic challenges.